Cisco Systems (A): Evolution to E-Business
"We view the Internet as a prototype of how organizations eventually will shape themselves in a truly global economy. It is a self ruling entity." —John Morgridge, Annual Report, 1993 Cisco Systems, says president and CEO John Chambers, is “an end-to-end networking company.” Its products and services enable the construction of corporate information superhighways, a driving concern of today’s CEOs, seeking to become “e-business” leaders in their industries. Defining “e-business” can prove more difficult than embracing it, however. In executive programs at the Tuck School, Professor Phil Anderson frequently asks participants, “How will you know when you have seen the first e-business within your industry?” Typically, there is little consensus. Is it mass customization? Streamlined production processes? Oneto-one marketing? Cisco’s Internet Business Systems Group (IBSG), an internal consulting group, advises senior executives on information technology investment strategies. The group is closer to major corporate buying decisions than anyone at Cisco. As advocates for Cisco’s equipment, group members’ main struggle is identifying the benefits of becoming an e-business, which are wide, varied, and difficult to quantify. Additionally, the initial infrastructure investment is large enough to prompt many CEOs to wonder whether it’s really worthwhile to become an e-business. Trying to build a business case (calculate an ROI) for making a major IT investment can be an exercise in frustration. Says Sanjeev Agrawal, a director within the IBSG, “Can you show me the ROI of going to sixth grade? The amount of time it is going to take to try to go through the logic of that is not worth it.” The IBSG hopes that potential customers will look to Cisco as an example of how a company can make the most of information technology. In fact, Cisco has evolved successfully from a Silicon Valley garage startup to arguably the most sophisticated eThis case was prepared by Professors Philip Anderson, Vijay Govindarajan, and Chris Trimble, and by research assistant Katrina Veerman T’01 of the Tuck School of Business at Dartmouth. It is intended as a basis for classroom discussion rather than to illustrate effective or ineffective handling of an administrative situation. The authors gratefully acknowledge the support of the William F. Achtmeyer Center for Global Leadership and the Glassmeyer/McNamee Center for Digital Strategies, which funded the research and development of this case. Version: June, 2001. © 2001 Trustees of Dartmouth College. All rights reserved. For permission to reprint, contact the Center for Global Leadership at 603-646-0898, or the Center for Digital Strategies at 603-646-0899.
Cisco Systems (A)
business in the world. As of September 2000, nearly 90 percent of all orders were placed on Cisco’s website, the Cisco Connection Online (CCO),1 and nearly 80 percent of all products were built and shipped from a supply partner.2 The CEOs with whom the IBSG works generally have two questions about investing heavily in IT: 1. Can my corporation benefit from being an e-business to the same extent that Cisco does, or, perhaps, to a greater extent? 2. What can I learn from Cisco’s transformation to an e-business that will help me transform my own corporation? This case gives a brief overview of Cisco as it exists today, and then traces its history, focusing in particular on its evolution to an e-business.
Cisco Systems provides products and services that enable the sharing of information (including data, text, voice, and video) across disparate networks. Its goal is to provide customers with a complete set of tools to help them build the most appropriate network for their needs. Cisco identifies four major segments within its customer base: Enterprises are large organizations with 500 or more employees and complex networking needs, usually spanning...