Management during an ERP implementation
Systems such as Enterprise Resource Planning (ERP) are used to coordinate the sequencing, flow and interaction of activities between divergent business units. In the reviewed case study of Cisco, it was imminent that the in-house legacy systems utilized by the various business units could no longer support the scale at which the company operated and the competitive environment that existed in the industry. These legacy systems may have been effective at the early stages of Coco’s existence when few changes were required during the manufacturing/ordering process or when competitors did not offer similar products.
With Increased competition in the industry, higher customer expectations and numerous companies migrating to the just-in-time supply method, the need for ERP systems in Cisco shifted from being an option to a necessity.
There are many reasons for adopting ERP systems but majority focus on the potential reduction in long-term costs, although in the short-term they end to be higher because of the costs of implementation and staff training involved. Making a particular ERP system work effectively for an organization often requires significant resources, particularly time and people.
The amount of resources depends on how well the ERP system fits with existing (or planned) business processes (Hong & Kim, 2002): if business processes are closely aligned with the best practices model built into the ERP system the need for extra resources will be minimized. If there is not a close match, however, a process of mutual adaptation is needed in which the many may need to adapt some of its business processes to align with those of the ERP system, and have the ERP system adapted to existing processes that cannot be changed.
The numerous legacy systems that individual business units within Cisco utilized did not interface well with each other. The need for the output of one system to be converted Into another Doormat Tort Input Into ten next system was one AT ten many problems that they were faced with.
Attempts to salvage them were futile and the need to replace the entire legacy became necessary when the legacy system crashed.
An evaluation of Coco’s ERP implementation; processes employed, challenges faced and recommendations for future endeavors is discussed in the sections below, along with how this case study was approached by a team of IT management students. Method of approach Participants Six graduate students with educational and professional backgrounds in different fields ranging from communications, electrical engineering to information technology, participated in this case study research. The participants met weekly to discuss their research findings and fine tune the final presentation of the review.
Each member as tasked with researching different sections of IT Acquisition with a focus on ERP implementation. Materials This paper utilizes materials from print, verbal interviews and individual experiences in IT project participation or management.
The main text used is the assigned course material; Corporate Information Strategy and Management: Text and Cases by Lynda Applegate, Robert 3 Austin and Deborah Souls. Other cases of ERP implementations were reviewed in companies like Wiper and Hershey. Finally, Cisco Systems Inc. As contacted to discuss the value of the pillars of IT (Applegate, Austin and McFarland). Procedure An overview of the IT processes in Cisco was initially developed. The problems encountered were listed in view of the business environment which the company operated in.
The system acquisition life cycle approach was used to evaluate the Cisco ERP implementation case study and the gaps were identified. Finally a summary of the case is drawn and a recommendation is provided for implementing a similar solution in today’s dynamic IT environment.
Problem- Binary Decision Cisco system’s unreliability and outages brought into question the dependability of trying to modify the current system for their growing needs. The current company system software package supported their need however an upgrade was made available to Cisco. This upgrade was a solution that offered more reliability and redundancy without maintainability or room for growth.
CIO Pete Solving did not initially want to undertake a huge accompanied ERP project, but in January of 1994, a system failure halted nearly the entire business for two days.
This problem could no longer be ignored so Pete, along with other managers, put together a plan to take on replacing all the faulty legacy applications into a single ERP project that would revive a common data architecture throughout each business area. Cisco has been a leading organization in the information and technology world. It was founded in 1984 and became biblically traded in 1990. The primary product of CISCO was ten “route r” CISCO was ranked among ten top Tell companies In Torture 500.
It was considered the third dominant company to shape the digital revolution. Don Valentine, vice chairman of CISCO was the first person to invest into CISCO.
John Mirroring was the CEO in 1988 ND maintained the organization’s centralized management structure. Only the product marketing and research and development departments were decentralized into three lines of business: enterprise, small/medium and service provider. Other departments such as manufacturing, customer services, finance, human resources, information and technology and sales remained centralized. When Cisco became biblically traded, Leonard Backs and Sandra Learner -who? Old their stocks and left the Cisco because of clashes with the management policy of Mirroring. Pete came into CISCO as chief information officer minion.
CISCO was a $500 billion company in 1993. CISCO was using UNIX based software packages for its core transactional processing. The functional area supported by the software packages were financial, manufacturing and order entry systems. All the functional areas were using common databases. CISCO was rapidly growing and its products were being shipped all over the world. The traditional structure of CISCO was not enough to support its growth.
Pet’s experience and the company’s significant growth prospects convinced him that Cisco needed a change. This change involved keeping with 4 Coco’s strong tradition of standardization, nevertheless, all functional areas would be required to use common architecture and databases. This approach was consistent with the organizational and budgetary structures that Pete had installed upon his arrival. Pete was not inclined towards the ERP solutions Pete felt strongly that budgetary decisions on IT expenditures be made by functional areas while the IT organization reported directly to him.
Randy pond, director of the manufacturing put the dilemma that there was difficulty in replacing the functional areas of legacy systems of the company with its growth. Product shortcomings and system outages have become the routine.
In January 1994, Coco’s central database corrupted due to the unauthorized method to access to the common database and its legacy system went down because of excessive product shortcomings and system outages. CISCO remained closed for two days because of this large shut down.
Pete, Pond and other mangers of CISCO came to the conclusion that an alternative approach was required as the autonomous approach utilized previously was not sufficient The software package supported the finance, manufacturing, and order entry applications. Pete did analyze the current UNIX-based software package being used, and he found that it did not provide the level of redundancy, reliability, and maintainability that Cisco needed to keep up with their current business practices. While analyzing the current software vendor of the company, Pete realized that this could not suffice their needs and a change was needed.
In 1993 management from each functional business area made its own decisions regarding the future of IT so a representative was appointed to provide Pete a expense report. Each representative knew that the current system was not going to keep up with the company’s growth UT ah to cost AT replacing ten legacy system no one was ready to approach TN board. So Cisco had little to no change in the software support system nor did they add new and updated packages to the system. Instead, they kept on operating by fixing the existing legacy systems.
In late 1993, Randy Pond confirmed that Just fixing the existing system was pointless as it could not serve the growing needs of the company. In January 1994, Coco’s legacy system failed entirely.
This became the tipping point as a number of managers came to the conclusion that they needed to place or upgrade the system for it would be able to succeed with the growth of the company. To avoid too much time in integrated separate projects in different areas, Carl Redefined, the senior vice-president of manufacturing took the lead in getting a single integrated replacement system of all the applications at Cisco.
A team was formed to investigate the best possible replacement for the existing software support system. The factors that would govern the implementation of the new system were decided to be less time, low customization, and a high priority. The company had two options to consider: Option 1 Purchase a single ERP system, which would be expensive to acquire, time consuming to implement and would replace each department’s autonomous structure. Option 2 Upgrade the existing legacy system Cisco chose option 1 which is to purchase a single ERP because of the need for a much larger system to support the company’s growing needs.
Pete initially wanted to avoid an ERP solution, which he saw as taking too long to implement as well as tremendous expenditures. Pet’s plan was to allow each department to make their own decision regarding software applications as long as they used a common architecture and database for standardization within the company. Since 5 the departments had no new and updated package to the software in the year to follow they carried on by fixing the existing systems. This process worked until the failure of the legacy system. At this point Cisco had a binary decision to make of whether to Buy vs.
Coco’s decision to buy a system instead of making was successful in terms of overall performance. The implementation of the system worked well after resolving the issues, so Cisco valued their decision a success by rewarding bonus distributions for the ERP team. Business Model Pre-Binary Decision There was not much distinction in Coco’s business concept before the binary decision of deciding to continue to add on to a system versus replace it with one that would match the desired growth of the company. The current system would eventually pigeon hole the company into remaining a sub-$500 million company.
Cisco perceived their goal of going to a multimillion dollar enterprise within a short duration of time.
Also, Cisco determined that they needed to provide a solution for a company that was as big as Cisco or bigger. The importance of choosing a solution hat was bigger was to have a system that the company could grow into, not grow out of. Before the decision to proceed with a new system, Coco’s business concept revolved around maturating steward Ana unaware resulting In ten product AT routers. Cisco was still in its early stages, but was providing high value and return on investment to its investors.
After six years of Coco’s inception, the company went public, and any long term investors would have benefit from initial PIP investment in 1993 when the binary decision was made.
“If you had bought 1,000 shares of Cisco Systems Inc. Urine the company’s initial public offering in February 1990 for $18,000, today the stock would be worth $432,000. ” (Carlson, Clifford. ) This is a clear and concise picture of the value that Cisco was providing within its infrastructure producer market. The software and hardware sales were from an infrastructure revenue perspective.
Maintenance and update fees were associated with the customer support that Cisco provided via its updates to the software on the routers.
Costs were associated with the employees that Cisco hired, the materials and supplies to build routers, labor hours to develop software, and costs associated with Coco’s suppliers. Cisco had begun to develop some key relationships, and the technical knowledge passed down from the founders was all intangible assets that could not be measured. Cisco was able to fulfill and exceed the expectations of the company’s founders with limited resources.
The founders had not taken into account the growth that they would meet in their short duration with the company. The company had a strategy of mass producing equipment with suppliers of several components that made up the router. Cisco did not take into account exponential growth from their customers and ere barely able to keep up with expectations from a customer service aspect.
6 “In 1985, the company started a customer support site through which customers could download software over FTP and also upgrade the downloaded software.
It also provided technical support through e-mail to its customers… By 1991, Coco’s support center was receiving around 3,000 calls a month. This figure increased to 12,000 by 1992.
In order to deal with the large volume of transactions, the company built a customer support system on its website. ” (Scribe. ) This statement demonstrates Coco’s lack of concept and preparation for growth as a small company. The databases that contained the bug report and supported the call center were other systems that needed revamping.
These systems would eventually be impacted by tying into the ERP system solution. The small scale customer service IT system represented Coco’s small capabilities in terms of IT systems resources.
The bulk of the manufacturing process was done within Cisco, proving that Cisco had a concept of make versus buy for certain parts of the router. Cisco was limited on human capital as well and begun to recruit talent from smaller companies and outsource manufacturing of hardware to suppliers. The growing size of the company had necessitated larger office space.
The company’s workforce had grown from 1,451 in July 1993 to 2,262 in July 1994, as Cisco hired talent from smaller, struggling networking companies which were laying off personnel. ” (Funding Universe.
) The lack of human capabilities, lead to a hiring of more technical knowledge and the acquisition of other companies. The philosophy of Cisco was changing, not only from an Internal unman Doctor, out also Trot a growing company Tanat wanted to Deign competition with other infrastructure producers such as Locate, Caballero, and Juniper.
Cisco not only began swallowing smaller companies for human capital, but also to gain experience within the industry. Cisco had ideas of expanding and enhancing its evolving business model that was in parallel to the evolving technology that was growing at exponential rates. Around the time of the decision (to go to an ERP system), Cisco was beginning to immerse itself into international geographic markets.
Cisco was beginning to solidify itself as an international MEMO, while penetrating new technological markets. “Most of Coco’s international sales were through distributors, whereas in the United
States the majority of sales (65 percent in early 1994) were made directly to the end users. International sales became an important part of Coco’s business. Subsidiaries were established in Japan and Australia, and a European Technical Assistance Center was established in Brussels, Belgium. In March 1993, Cisco Systems (HECK) Ltd. Became a new subsidiary in Hong Kong.
International sales steadily increased, accounting for 35. 6 percent of sales in fiscal 1991, 36 percent in fiscal 1992, 39 percent in fiscal 1993, and 41. 9 percent in fiscal 1994. (Funding Universe. ) Cisco not only was expanding its enterprise to international and new geographic markets, but the company was extending and enhancing its core business of producing IP routers to new technologies. IP and ATM technologies are both prevalent in the Internet Service provider markets.
Most telecommunication companies were still taking advantage of ATM based 7 networks that were the best technology implementation of cost savings and higher bandwidth, before the now IP over Ethernet solutions that are taking over the telecommunications industry. In February 1993, Cisco announced a strategy to include ATM among the protocols supported by its products. In fiscal 1994, Cisco introduced its first ATM switch. ” (Funding Universe. ) Enhancing the functionality of Cisco routers and expanding into new international markets, with a customer support system that involved a web site and correspondence via e-mail was not going to produce the forecasted results that Cisco anticipated. Needless to say, Cisco desperately needed to have a dramatic shift in IT capabilities, to match the dramatic shift in business market and demand.
Post-Binary Decision After the paradigm shift to thinking bigger and better, Coco’s decision to buy versus sake ultimately affected other systems and opened the doors to become virtually integrated with its customers and suppliers. The business concept for Cisco changed as well, by beginning to retain a business concept and strategy of acquiring other network companies, thus increasing its capabilities in terms of intellectual property. When Cisco wanted to add to its conglomerate of technical suites, the company would purchase a company which contained experts in that genre. Coco’s key wireless acquisition also came in late 1999 with the announcement of the $800 million purchase of Orient Wireless Communications, Inc. Maker of equipment that creates Lana without wires in small and medium-sized businesses – further clarification that Cisco was trying to lead in all technology fields. ” (Funding Universe.
) CISCO would not nave Eden addle to lead, engage, Ana change Dustless concept without the changes made to the IT systems. Cisco was able to create a robust system that not only delegated the supplier network, but also merged the customers via e- commerce web based systems.
Cisco was not only changing the business concept of their own enterprise, but Cisco was revolutionized the market by leading with this ewe philosophy of integrating suppliers and buyers. This new customer service system, fueled by the new ERP system was also capable of providing the feedback necessary for Cisco to make necessary and producing a networked operations enterprise. Feedback is an important concept, because if the company does not have a measure of how it is performing, then the company cannot know its weaknesses to adjust to market demands. Seven out of 10 customer requests for technical support are filled electronically–at satisfaction rates that eclipse those involving human interaction.
Using the network or tech support allows Cisco to save more money than its nearest competitor spends on research and development. “It has saved me 1,000 engineers,” gushes Chambers. “l take those 1,000 engineers, and instead of putting them into support, I put them into building new products. That gives you a gigantic competitive advantage. (Byrne, John A. ) Not only was this a result of an ERP system, but this statement reflects the change in ideology that Cisco was no longer Just an infrastructure producer, but was a borderline infrastructure portal by bridging the gap between suppliers and buyers for the hardware that Cisco 8 implemented its routing software.
Cisco had now outsourced nearly all of its hardware manufacturing by creating a seamless and integrated system that virtually merged suppliers and buyers.
The Infrastructure portal aspect was an applicable categorization of the “post-binary decision” Cisco that now focused on Research and Development rather than production. The concept of Coco’s business changed to focus on new technology and software that supported the new technology. Resources were needed for research and investigating new and improved ways of routing with various technologies involved. Re-allocating 1,000 engineers from customer support or manufacturing to innovative technology is a shift that Cisco only hoped for, in order to compete with other companies that had been well established.
It’s also the company’s mind-set and culture, its willingness to team up with outsiders to acquire and retain intellectual assets, its near-religious focus on the customer, and its progressive human resource policies. ” (Byrne, John A. ) Cisco had many adversaries including Microsoft that was compared to Coco’s growth and evolving business models. Cisco did not limit its virtual integration to suppliers ND buyers, but also its competition. Coco’s concept was not only merging its own buyers and suppliers, but to create relationships with the competition and other aspiring technical companies.
These relationships resulted in new lines of business and opportunity for more revenue streams.
“A good example is Coco’s partnership with Microsoft Corp.. (MIST), which last year resulted in a new technology to make networks more intelligent. The software lets networks know immediately a user’s identity and location and to respond differently to each one. The partnership allows Don companies to expand tons market together more rapidly. From Minimal Locutions to technology, it took 18 months to get the product out,” says Listen.
It would have taken us four years to get to where we are [without such a partnership], and it’s not clear we had the competence to get there alone. ‘” (Byrne, John A. ) Perceiving Cisco from an “Analyzing Financial Performance” (Applegate, Austin, Macmillan, p 291) perspective, the selling and marketing over an e-commerce system would save costs for Cisco, thus increasing the profit for the company. Investing is not always a financial measurement, nor is it always a financial investment that pays off manically.
The capability of Cisco to have a system that positioned Cisco co MIMIC and telecommunication companies resulted in an increase in profit and another key strategic alliance that was formed. In 1999 alone, Cisco was able to acquire 17 new companies, an accomplishment that would not have been possible without a robust IT system for merging processes, businesses and technology.
The value of Cisco was not only from a financial standpoint, but from a intellectual property aspect. The more alliances formed, the better the chances are at creating opportunities to increase revenue, reduce costs and increase profit.
Numbers don’t prove value and return on investment for all scenarios. A company that is seeking to be acquired will look for companies that are thriving and innovative. The acquisition of companies proved Coco’s value to not only its stakeholders, but stakeholders of acquired companies.
“Cisco also began to market its technology, especially its software, more aggressively to longstanding telephone companies, as the deregulation of U. S. Telephone carriers enabled these companies to provide more kinds of data communications products and services.
For example, 9 Cisco entered into a Joint marketing agreement with MIMIC International to integrate Coco’s routers into end-to-end data networks over telephone lines. Marketing – capabilities It seamlessly links Cisco to its customers, prospects, business partners, suppliers, and employees. This year, Cisco will sell more than $5 billion worth of goods–more than half its total–over the Internet, nearly three times the Internet sales booked by pioneer Dell. So successful has Cisco been in selling complex, expensive equipment over the Net that last year Cisco alone accounted for one-third f all electronic commerce. (Byrne, John A. ) Business Model Summary In summary, in support for Cisco to have a shift is business concept, increase and re- allocate capabilities, and positioning themselves to yield a higher return in value, the ERP system was pivotal point that became a turning point when Cisco was able to “pass the $100 billion mark” (Applegate, Austin, McFarland, p. 601) on July 17, 1998.
Cisco maintained the ability to work in a “small business environment”, but produce “big company results”, thus perfectly demonstrating a “networked management” (Applegate, Austin, McFarland, p. 37) approach.
The ERP system also improved customer service, while allowing Cisco to focus on research and development, continue to revolutionize the market with integrating buyers and suppliers, and cultivate the technology of the future via acquisition. Strategy and Strategic Planning Cisco NAS Eden a leaning organization In ten International Ana technology world CISCO has shaped the future of the Internet by creating extraordinary value and opportunity for our customers, employees, investors and ecosystem partners and has become the worldwide leader in networking – transforming how people connect, ammunition and collaborate (“CISCO the Network”, n. .
). The key business strategies and practices adopted to be the successful and leading firm in Information and technology world can be defined as follows. Implementing ERP product After the critical failure Unary 1994) in the central database system, it was very necessary for CISCO to implement the right strategy to compensate for the failures and continue growth of the business. After John Memorized (CEO in 1991) was hired, CISCO was rapidly growing and its products were being shipped all over the world. The traditional structure and internal software of CISCO was not enough to support its growth.
A month after the failure, CISCO management team together decided to bring the ERP system. The goal for Cisco IT was to design and ensure adoption of a new enterprise resource planning (ERP) platform for Coco’s quote-to-cash business process that would give customers and partners a world-class purchasing experience (“CISCO the Network”, n. D. ). Identifying potential managers and partners CISCO has chosen external partners to provide much of necessary competence in operations and customer services, coordinating a virtual organization that extends well beyond its own corporate boundaries.
0 Cisco System Inc. Started experiencing serious growth when its management was changed, and headed Mirroring. After the system failure in January 1994, Coco’s management realized that to meet the business requirements, they will need heavy involvement of the business community. They wanted the people in the organization who do not possess a “give up” attitude. CISCO was in need of strong business partners as its economic growth was booming in January 1993.
CISCO selected KEMP, a group of very experienced industry professionals, as an integration partner for implementing the new ERP system.
Then CISCO chose Oracle and another software vendor for developing software packages. The Oracle ERP software implementation was successful by using experienced managers and key business partners (Applegate et al. ,p. 604) (Schwartz ,2012).
Acquisition and integration for manufacturing An intrinsic part of Coco’s strategy was using acquisitions and partnerships to gain access to new technologies. This strategy was comparatively unique in the high-tech world.
CISCO viewed partnership and acquisitions as the most efficient means of offering customers an end-toned networking solution and developing next- generation-products. “Cisco had three primary objectives for acquisitions. In order of priority, the company measured the success of its acquisitions by: 1) employee retention; 2) follow-on new product development; and 3) return on investment.
Cisco viewed acquisitions as a means to ensure that it was offering the “best of breed” product technology’ (Keller et al. ,1998). “As of January 2001, Cisco had acquired 71 firms for over $34. 5 billion (it has made