Cisco Systems Architecture Class 3: IT and Internal Organization

Cisco Systems Architecture
07
Class 3: IT and Internal Organization
Richard L. Nolan
Case Summary by: Jonathan Cruz
Main Takeaways
1.
IT should be considered more than simply an expense within operations. Technology can
actually drive business from within an organization and provide productivity levels and
efficiencies to support the companys growth.
2.
The implementation of modern systems cannot be performed using an autonomous

approach but with integration between different processes and business groups.
3.
An internal network and the Web can support internal and external processes to drive
down costs and promote communication and information-sharing.
4.
The implementation of network and Internet-based infrastructures was vital to Ciscos

operations and to their primary business of providing networking products and services.
5.
The alignment of IT and business strategy.
6.
Emphasis on IT standards.
7.
IT and value disciplines.
Case Discussion / Digest Questions

1. How was the decision made to implement ERP? And how was the system selected?
Cisco Systems decided to implement an Enterprise Resource Planning (ERP) application after a
defining moment when their legacy system failed and became inaccessible for two days in
January 1994. Even before this dramatic failure, the CIO, Peter Solvik, realized he faced two
major challenges when he joined Cisco a year earlier. One, the IT department was treated as a
cost center and therefore, focused only on internal issues. Two, the existing system was not
scalable to support Ciscos tremendous growth.
Solvik oversaw three changes to address the issue of the traditional structure of Ciscos IT. First,
the company restructured the organization so that IT reported to the Senior Vice President of
Customer Advocacy. Second, the IT budget was largely determined by the individual functional
groups and not treated as General and Administrative expense so that IT application projects
could be client funded. Finally, the line organizations decided IT investments in application
projects but continued to be implemented by the central IT group.
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Richard L. Nolan
Still, these changes could not overcome the dramatic failure of the legacy systems. The
shutdown highlighted the issue that Cisco might witness total failure of their entire system.
Solvik and a group of Cisco managers concluded that they must consider a single integrated
solution to meet the requirements of all of the major business processes such as Order Entry,
Finance, and Manufacturing. The managers also concluded that the formation of a team
comprised of the most essential individuals from each business unit was required to meet the
business needs that the application must address. At the beginning stage, Cisco chose the
consulting firm, KPMG, as a partner to assist in the selection and implementation process of the
new application solution.
With the new formed team and new partner, Cisco used several approaches to identify the best
solutions available from the software market. The team requested information from large
corporations, the Big Six accounting firms, and organizations like The Gartner Group. They
also conducted a RFP process over approximately three weeks and spent time visiting reference
clients of each vendor. Soon, Cisco focused on two candidates and also concluded that the
eventual vendor must be at a comparable size to Cisco. Ciscos decision to select Oracle as the
vendor rested on three major decisions. First, the project concentrated on manufacturing and
Oracle had a strong manufacturing capability compared to competing vendors. Second, Oracle
agreed to long term development of the software package functionality. And, third, Oracles
proximity to Ciscos headquarters provided additional flexibility to the project. After the
selection, contract negotiations were performed and the team began to construct a proposal to
present to Ciscos board of directors for final approval which turned their attention to the length
of the project timeframe and the project cost.
2. Identify the main benefits of Cisco's web enablement (Internet and Intranet) strategy.
To take advantage of their implemented ERP system and IP-based open standards architecture,
Cisco began to integrate Internet and Intranet based applications. This web enablement allowed
the company to reap benefits both internally and externally.
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Richard L. Nolan
Through their Intranet, Cisco developed several components to drive business from within:
employee self-service, communication and distance learning, collaboration and workflow
management, web-enabled legacy systems, and Executive Information Systems (EIS) and
Decision Support Systems (DSS). For example, the corporate intranet Cisco Employee
Connection (CEC) provided a central resource to information, tools, and additional resources for
the 40,000+ employees to increase process efficiencies, provide a knowledge base, and
maximize productivity. Distance learning modules were available via the Intranet to enhance
employee training. Web-enabled legacy systems allowed internal users to access integrated data
and tools via a web browser as the primary user interface. The EIS and DSS systems provided
Cisco employees access to sales tracking and reporting data that supported all executive and
decision functions.
Cisco developed Internet applications that enabled the following components: extranet supply
chain management, customer self-service, net commerce, marketing, and external access to
Cisco resources via the web. Since Cisco outsourced most of its manufacturing to contractors,
Cisco formed partnerships from these relationships with suppliers and used the automated supply
chain to support five key areas: integrate these suppliers into its own production system,
therefore creating a single enterprise, address new product introduction (NPI) so that
unnecessary delays between the design and manufacturing stage could be avoided, create an
autotest environment whereby Cisco developed test cells and provided these standardized tests
so that testing could be performed by and quality issues addressed directly by the supplier,
direct fulfillment by the suppliers so that product was shipped directly to the customer from
the source, and dynamic replenishment whereby real-time demand and supply information was
made available to reduce inventory and minimize delays and errors. Cisco.com and registered
users of Cisco Connection Online provided users especially customer users access to an on-line
resource to answer questions, diagnose network problems and provide the necessary 24/7
customer support. Order placement and tracking over the Internet represented almost all of
Ciscos total revenue so that productivity gains were realized by Cisco, customers, and resellers.
Each of these examples represents the various methods that external users accessed Cisco
resources only via the Internet.
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Richard L. Nolan
(Also, think about these benefits using value disciplines (customer intimacy, operational
excellence, etc) or Porters five-force framework)
3. To what extent and how does IT contribute to the Cisco strategy?
CEO John Chambers created a four-part plan in 1993 with Ed Kozel, CTO, and John Morgridge
that explained Ciscos strategy. First, assemble a broad product line to serve as one-stop
shopping for business networks. We see that NPI and net commerce facilitated this element and
increased efficiencies in both areas. Second, systematize acquisitions as an efficient business
process. We find that about a third of Ciscos technology derived from partnerships and
acquisitions. Ciscos IT group handled speedy acquisition integration by eliminating nonstandard technology and integrating the acquired companys resources into the Cisco
architecture. Third, set industry wide software standards for networking. This element is in line
with Ciscos philosophy to incorporate standards-based technology throughout the organization.
Fourth, pick the right strategic partners. Currently, this initiative incorporates Internet and
network efforts by partnering with companies to develop standards for security, premium Internet
services, and Internet-based corporate computing systems. These areas further support Ciscos
focus on network-based and Internet-based access to resources to enhance the overall
productivity and efficiencies of this model. By presenting leadership in the area of Internetbased architecture, this further supports demand for Ciscos networking products and services.
4. What are the main take-aways from this case?

See first section above.

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Cisco Systems Architecture

Class 3: IT and Internal Organization

Case Summary by: Jonathan Cruz

The implementation of modern systems cannot be performed using an autonomous

The implementation of network and Internet-based infrastructures was vital to Ciscos

The alignment of IT and business strategy.

IT and value disciplines.

Case Discussion / Digest Questions