Cisco Systems Inc.: Implementing ERP
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• Founded in 1984 by two Stanford computer scientists • Became publicly traded in 1990 • Primary product is “router” • By 1997, Cisco was ranked top five companies in return on revenues and ROA in Fortune 500 • In 1998, market capitalization was over $100 billion
• Cisco was a key infrastructure supplier for the “New Economy” in the mid-90s. • That market went through a period of amazing growth since Cisco formed. • This fast growth rate was directly reflected in Cisco’s sales figures. • The future was looking bright.
• Three functional divisions:
– Order Entry – Finance – Manufacturing
• Initial IT Strategy:
– Let division take care of themselves. – Overall architecture is shared, enabling sharing of data.
History of IT at Cisco
• UNIX-based software package to support its core transaction processing: – Functional areas supported: financial, manufacturing and order entry systems – Used common architecture and common databases
• Growth of Cisco resulted in scalability problems. • Cisco was the largest single costumer of that vendor, resulting in a strategic weakness.
• Would the software developed for a $300 million company fit the use of a $1 billion company?
• Why would a multi-million dollar company want to avoid ERP?
A Big Need
• Recognized the need for change, but left actions to each functional division: • Thus: – Little progress was made in the year – Each functional area was reluctant to replace the legacy system because of high risk involved – Systems outages became routine – Unauthorized method for accessing the core application database malfunctioned, corrupting Cisco’s central database
• Company was shut down for two days
Selecting an ERP product
• The planning was driven only by timing constraints and panic. – There was no business case
• Cisco emphasized the need for:
– – – – Strong team Strong partners Speedy decision making Getting Executive & Board approval
Project Team & Partners
– Know that very best people are needed – Pulled best business & IT people out of their current jobs at Cisco
– Important that partner could work on the selection as well as implementation of project – KPMG as integration partner – KPMG team of 20 (highly experienced; not “greenies”)
Teams selection strategy
• Teams strategy – use experiences of other companies and best practices to accumulate knowledge • Selected five packages within 2 days • After a week of high level evaluation – two packages selected: ORACLE and another major player in the ERP market • 10 days on request for proposals
• Is it wise to make a decision so quickly? Are there things that should be done to mitigate the risk? Did they do due diligence?
Team Selection Strategy Cont’d
• Oracle & other vendor given two weeks to respond to RFP • Current vendor customers were visited by the team during these two weeks • After response, received a 3-day software demonstration by each vendor (used Cisco’s sample data) • Goal is to show how software meets or does not meet Cisco’s requirements
Final Vendor Selection Criteria
• Three main criteria used:
– Manufacturing capability – Long-term development of functionality of package – Flexibility of Oracle’s being close by (location wise)
• Other motivations – Oracle’s first release of new ERP product – if Cisco project goes well, favorable product launch of Oracle ERP package
• Oracle chosen – team decision, no management approval at this point
• After 75 days from start of project, major TODOs are:
– Negotiations between Oracle & Cisco – Write up a Proposal to Board of Directors
• Time and non-interference with annual accounting as main considerations.
• Famous last words:...
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