PGP 2014, AY 14-15

InformationSystemsforManagers
Session 3

Professor Madhukar Dayal, IIM Indore

Cisco Systems, Inc.: Implementing ERP

How did 'Cisco' get its name?

Who founded and started Cisco ?

(two Stanford scientists)
What / who is a venture capitalist /
angel investor ?
When the company went public, what
happened to those scientists?

Who do you think looks like an

angel ?

What measures did Don Valentine (VC &

VC) take to protect his ($2.5m) investment in
Cisco ?
What happened to both the founders after
the company went public in 1990 ?
* VC: Vice-chairman, VC: Venture capitalist

What is a centralised / de-centralised

organisation ?
And, a functional organisation ?

...are all others non-functional ?

Organisational structure charts

Cisco:
1993: USD 500 m
In Fortune 500, in top 5 on RoR and RoI.
Growth: is it organic / inorganic ?

Organic growth

In-organic growth

Merger
Acquisition

Cisco under Morgridge hybrid (part

centralised, part decentralised).

What convinced Solvik that Cisco needed a

change ?
(see next slide)

System outages became a routine (pg 3, para 2).

A workaround to access the core database (because
earlier the system was not performing) malfunctioned.
Company shutdown for TWO days (revenue loss =
USD 12, 233, 709 or $ 12+ m, see Exh-1).

Pete Solvik (CIO), Randy Pond (Dir-Mfg), Carl

Redfield (SVP-Mfg).
...not going to do a phased implementation, we
would do it all at once. - Redfield (pg 3, para 7)
Class to read on from: There is ... ... intended them.
Explain: why BPR is an embedded essential
exercise in ERP.

What type of professionals do you expect to

be working in an IT Company like Cisco ?

Is such 'management' of systems expected

from professionals ?
What would happen to Cisco's reputation if
this information leaks out ?
An IT company's IT system crashed !

Situation in 1994:
Struggling HW and SW companies.
Very few IT success stories.
People consider it a fad.
Y2K problem in media.

Did Cisco choose a 'Big Bang' or a 'phased'

implementation approach ?
(refer to pg 3, last para)
Is it an incremental / radical or turbulent
change?
Did they decide to make it an 'IT only'
initiative ?
What happens when it is implemented as an
'IT only' initiative ?
(refer to pg 4, para 1)

How did they select whom do they want

from a particular department ?

They chose to even cripple every

department so that the ERP project is a
success !
(
)
They hand picked the best and the brightest
for this team.
(pg 7, para 2)

Can you identify salient features of choosing

KPMG as a partner ?
Note: The set up of 'teams' for ERP
implementation (see Exh 4).
A team member from every discipline
business (domain) lead, IT member,
consultant, external IT consultant, and user.

What was the 'due diligence' approach followed

for selecting the right ERP vendor ?

Consulted the best: Gartner, Big Six.

a) Arthur Andersen (no longer in existence)
b) Coopers & Lybrand (merged with PW in 1998)
c) Deloitte & Touche
d) Ernst & Young
e) KPMG Peat Marwick
f) Price Waterhouse
Within 2 days: they narrowed their search to 5
best packages ! And, in 1 week: shortlisted 2
prime candidates.

RFP: completed in 10 days.

3-day demo by each vendor, using sample
data.
Selection of 'Oracle', for whom it is a big
opportunity to establish market reputation !
(pg 5, para 2)
Proximity of offices 20 miles away!
Do or die situation for Oracle too!

Was Cisco's ERP implementation an

incremental / radical / turbulent change ?
Is this project from 'top down' or from
'bottom up' ? (all to read in class pg 6, para
5-8)

What were the challenges in 'project

timing' ?
What did they finally choose, if not 12, then
15 or 9 months ? !!
(see Exh 2, pg 13)

What was the problem with current system's

vendor ?
(pg 6, para 2, line 2)
( ) + likely to be bought by
another company, a rival of Cisco !

What is the largest element of an ERP

project's cost ?
(pg 14, Exh 3)

What detail in analysis is needed for ERP ?

(see Exh 5: example of one process's
analysis, step by step, in detail)
(see Exh 6: Tracking of progress of ERP)
(see Exh 7: Red urgent modifications)
Same is needed for 000s of processes !!
Why did they have CRPs (Conference room
pilots) ?

Handling large projects...

...need interim celebration of achievements!
To celebrate achievements so far,
communicate to all others, refresh the
importance of the project, keep the spirits
high.

How has Cisco negotiated the contract with

hardware vendor and Oracle ?
'Performance based contract negotiation'
The vendors lost 'big time' !

How much reward is Pete Solvik

recommending (at beginning and end of
case) ? $ 200,000 (in 1995)!
A huge sum even today!
Even when performance has dipped from
96% to 75% timely order compliance?
(to realise a much higher performance in
future: see Exh 1, from a $ 2+ bn company
to a $ ~8.5 bn company)
Was it possible without the ERP?

What else has Pete Solvik achieved ?

(Many of the senior managers washed their
hands off the project, having heard the
'failure' stories of ERP projects!)
A new organisational capability to embrace
new technology!
Now, whenever a new technology comes
(SCM, CRM, DW/DM and BI), Cisco is ready
for it !!

What is leadership ?
Do IT projects need leaders or only hi-tech
persons ?
Can it work without either ?

What is: rapid iterative prototyping (pg 7,

last para).
Fast + 'return / looping' + 'small test'.

SDLC: Waterfall model

SDLC: Spiral model

Many other models:

Rapid prototyping by Cisco.
Cowboy coding (development of games) !