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Cisco Systems Inc.: Implementing Erp
Category: Business
Autor: tasha129082 10 January 2010
Words: 4210 | Pages: 17
Table of Contents
Introduction 2
ERP Implementation Process 3
Implementation Obstacles 8
Implementation Success Level Analysis 9
Suggestions for Improvement 10
Conclusion 10
References 12
Appendix 14
Introduction
To be successful in today’s competitive and continuous evolving information technology (IT) market companies must be able to utilise their skills, information and knowledge to the highest efficiency level possible. Utilisation of and control over these factors will aid companies in acquiring and maintaining competitive advantages over others operating in the same competitive IT market. The implementation of an Enterprise Resource Planning (ERP) system would be perfect to suit a business’ need for integration of skills, information and knowledge, which reside within the firm. The implementation of an ERP system will increase the speed with which information flows through the company, as a result of the integration of all of an organisation’s information system computing (Davenport, 1998).
This case study will discuss the implementation of an ERP system within Cisco’s business environment. "Cisco was founded in 1984 by a small group of computer scientists from Stanford University. Their hardware, software, and service offerings are used to create the Internet solutions that make networks possible-providing easy access to information anywhere, at any time" (Cisco, 2008).
The Essay on Cisco Implementation Of Erp
Cisco 1. The ERP implementation process provides several examples as to why Cisco is Information Age company as opposed to an Industrial Age company. Although Cisco's ERP vendor selection was driven by the manufacturing groups needs, this does not qualify them as an Industrial Age company proving that even a manufacturing focused company can still categorize itself as an information age company ...
The company soon became a dominant player in the markets in which it operated. By 1993 the company’s new CIO, Pete Solvik, recognised that the company’s significant growth perspectives would require the company to change their UNIX-based software package, that supported their core transaction processing, as it would not be able to support Cisco’s anticipated growth in core transaction processing.
This paper will continue first with explaining the most important elements in the process through which Cisco decided to choose for an ERP system implementation to efficiently deal with their future growth transaction processing problems. Related to this is a discussion about the theoretical approach for the ERP implementation and the fit between the implementation and Cisco’s (business) objectives. Secondly the study will discuss several of the obstacles and several of the success factors that Cisco faced during the implementation phase. Thirdly, the level of ERP implementation success will be analysed and related to success levels of other ERP implementations. At the end, some suggestions for improvement (when needed) will be given together with an assessment of whether this approach will be successful again in the future for Cisco as well as for other companies.
ERP Implementation Process
Significant growth expectations were the main driver for change within Cisco’s business processes. Cisco originally utilized an UNIX-based software package, which functional areas included financial, manufacturing and order entry systems. This specific software package would give rise to scalability issues, as Cisco is already by far the largest customer of this specific software vendor and it is planning to grow even larger. The software package will simply not provide the degree of redundancy, reliability and maintainability that is needed to accommodate Cisco’s growth (Cotteleer, 1998).
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... the pre implementation phase and then we will be focusing on the benefits of the ERP systems for both these companies. HISTORY The ... be affected by the ERP system. Integration and testing Testing the links between ERP packages and other corporate software links that have ... architecture Software would crash when large amounts of transactions were made The customer commitment fell from 95% to 75% Cisco ...
Customisation was seen a possible solution, but customisation was already used up to its maximum. Even more customisation would not result in a fit to Cisco’s business needs. The other solution, an upgraded system version, which the software vendor provided was also not seen as a good solution as this would result in scalability issues as well; the vendor is too small to deal effectively with the $ +5 billion company that Cisco wants to grow into.
Cisco needed a good and fast solution to its scalability problems, as more business interruptions started to take place, which would not have a good effect on the future growth expectations. However, Cisco’s new CIO at first decided against the implementation of an ERP system. His main argument was that these projects are too immense to be performed at Cisco within a critical short time span. The CIO might also have been influenced by the IT productivity paradox, which states that little or no performance effects are associated with increasing IT expenditures (e.g. Grover et al., 1998).
The original solution was that all of the main functional areas are allowed to make their own decisions regarding the application and timing of the move from the old to the new application. By giving autonomy to the functional areas, conflicts associated with centrally mandated changes are avoided and the functional areas will also be allowed to pursue their independent initiatives, while reducing the risk of implementation project failure (Olson, 2004).
Unfortunately, the functional areas showed resistance to change and Cisco’s legacy environment started to deteriorate. As a result, on one day the Cisco’s database was corrupted and business shut down for two whole days. It was now clear that the autonomous approach did not work and that a different approach was needed: the implementation of an ERP system.
ERP systems are designed for better longevity and claim to offer numerous options representing best practices. These attributes make an ERP system implementation very desirable but, at the same time, complex and expensive. Unfortunately many large companies rush into ERP system implementation projects, because of competitive pressures (Teltumbde, 2000).
Cisco’s urgency to solve their legacy environment issues was very high, as another company shutdown needed to be avoided. Time was a big issue for Cisco and as a result the ERP project implementation needed to be finished within fifteen months, which is a very short time period considering that on average an ERP implementation takes twenty-three months (Wheatley, 2000).
The Essay on Systems Development/Project Management and Outsourcing
The purpose of this assignment is engage in a discussion regarding Systems Development, Project Management, and Outsourcing. The seven phases of the systems development life cycle will be described. Relationships between the systems development life cycle and software development methodologies will be detailed. The phases in the SDLC, including activities associated with planning, analysis, ...
The time constraint also resulted in the decision against the development and use of a business case. An ERP system installation will, almost certainly, change the way in which Cisco is performing its daily business, and hence it would have been advisable to perform a business change to see how the ERP system would change to company’s processes.
Cisco’s new ERP system would have to meet the business needs and this will require heavy involvement from the business community. Cisco created a project selection team consisting of the very best people from the company, pulled away from their current jobs, and employees of KPMG, which was included in the project as a strong integration partner to aid the overall selection and implementation process. Within two days this new team, narrowed the field to five packages from different ERP vendors. The team has successfully looked at experiences of other companies implementing ERP systems and this will usually avoid many of the organisational, cultural and operational challenges that plagues the vast majority of initial ERP implementation projects (Beatty & Williams, 2006).
After another week, this choice was narrowed down to only two vendors: Oracle and another strong vendor in the ERP market. One of the main decision drivers was that the ERP vendor should be of equal size as Cisco, which was not the case with the UNIX-based software provider. Cisco needs to avoid future scalability issues, so they searched for an ERP vendor which had the capacity to suit Cisco’s goals of significant future growth.
After narrowing down the ERP vendor choice to only two vendors, the team started to write a Request for Proposals to send to each of the vendors. Cisco’s team members also visited other companies which implemented an ERP system, an option offered by the vendors. After a three-day software demonstration the team decided to go into business with Oracle. The project team recognized that Oracle would be motivated to make the ERP system implementation a success as it would be an opportunity for them to implement the new release of the Oracle ERP product. This new release would have major improvements for the manufacturing area, which is one of the main functional areas of Cisco. successful implementation of the new product at the Cisco company, would successfully launch the new product into the ERP system market. Through noticing the benefits for Oracle of a successful implementation, Cisco’s project team gained strong vendor commitment, which is vital to make the ERP project a success. The choice for Oracle would minimize any principal-agent problems because both firms will gain a lot of benefit from a successful ERP system implementation.
The Business plan on Understanding Erp System Implementation in Higher Education: a Grounded Theory Approach
Abstract This chapter addresses the problem of enterprise resource planning (ERP) implementation in Higher Education Institutions (HEI). It attempts to contribute to the understanding of ERP implementations in this kind of organizations by identifying and analyzing the major factors that affect this type of projects. Special attention has been paid to contextual influence and to organizational ...
After the vendor had been selected it was time to convince the Board to approve the choice to select Oracle as the ERP system vendor. As the team did not perform a business case, it did not have a worked-out, carefully thought about, project scope. The Board demanded that the project would be finished in less than the anticipated fifteen months, and as a result the team committed themselves to an ERP implementation time-span of nine months (see this in contrast with the average of twenty-three months mentioned before), within a budget of $15 million. Cisco’s CEO made sure that everyone in the company became aware of the fact that the ERP system implementation was one of the seven top priorities of that year, so that everyone would be motivated to participate in the overall processes of the implementation.
After the choice for Oracle was approved by the Board and communicated throughout the company, the original project team was extended to five times its original size. This new team decided to employ the implementation strategy of �rapid iterative prototyping (RID)’. Iterative development allows the developer to take advantage of what he has learned in previous stages and constantly improve the system (Chaffey & Wood, 2005).
The Research paper on Cisco Systems Implementing ERP
... Cisco’s requirements. Initially Solvik did not want to implement an ERP system, as he had concerns about the types of “mega-projects” such implementations ... the “router”. This is a combination of hardware and software that acts as a traffic cop on the complex ... clients offered by each vendor. Ultimately Oracle was chosen, based on three decisions. Oracle offered better manufacturaing capability, made a ...
Iterative prototyping is a part of the Spiral Model for software implementation. This model was developed for software projects involving high levels of risk. As already explained, Cisco need to implement an ERP solution in order to solve problems with the current legitimacy environment. When the ERP implementation fails, Cisco’s business will suffer severely and hence, Cisco faces a high level of risk when implementing an ERP system. The Spiral Model consists out of several cycles, of which each begins with an identification of the objectives, development of alternative means of implementing the particular stage of the product and consideration of constraints. Each cycle also involves a risk analysis, identification of possible problem areas, and a plan to effectively deal with problems when they arise. After all these factors are carefully thought through, prototypes are developed and used, to demonstrate what the system can do at this stage. Simulation then determines risk and benchmarks to test system modules. This is then followed by design considerations (Olson, 2004).
The implementation team broke the implementation into a series of phases called �Conference Room Pilots (CRP)’. The purpose of each CRP was to build on previous work in developing a deeper understanding of the software and how it functioned within the business environment (Cotteleer, 1998).
The CPRs can be seen as the cycles within the Spiral Models, each of which has its own goals and results.
The Spiral Model of software implementation can be seen in contrast with the traditionally used framework for software projects, the Waterfall method. This method does not allow the developer to constantly refine the whole process. One can only make changes in a stage right before the stage that one is currently at; this severely limits the flexibility of changes throughout the implementation process and it also consumes more time to finish as one constantly has to go back and forth between specific stages. The RID methodology has the advantage of making changes at once for more than one specific stage and also completes the implementation project within a shorter time span, which suits perfectly with Cisco’s business needs of a fast remedy for their current legitimacy environment problems. Iterative prototyping also suits Cisco’s business needs because the users’ needs and benefits of the system were not really assessed before the ERP project started; Cisco did not use a business case. Prototyping is a perfect way to let the system’s final users to get a first taste of the system, while still having the ability to suggest some modifications which can then again be used in a new prototype of the system/process.
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The decision to use the RID methodology for ERP system implementation, resulted in the need of strong end-user involvement. Without end-user input, prototypes cannot be assessed in terms of effectiveness, as a result the final system will not suit the end-users’ needs and the system will not be used in the way that it should (user system use resistance).
Strong end-user involvement was also emphasised by the fact that these users received intense training from Oracle. These trainings served the goal to gain a deeper understanding of Oracle and the system applications that their ERP system provided, so that the users knew what they were dealing with and how to approach it effectively.
End-user suggestions were used to design new prototypes, but not all of the suggestions were used. The aim of Cisco was to implement the new ERP system with the least amount of changes as possible. Customization in the past has driven Cisco into the situation in which it currently is. By focusing on the long-term effectiveness of the newly implemented ERP system, through and limiting customization while still meeting user requirements, any future problems in maintenance or upgrading will be prevented. As this would be a very difficult process, the decision was made to change the processes to the ERP system instead of changing the ERP system to suit the business processes. Hong and Kim (2002) also mention this point in their paper, by posing that aligning the process itself to the ERP system and promoting organizational change leads to greater performance improvement than customizing the ERP system itself.
Once Cisco’s legitimacy environment was cut over to the Oracle ERP environment, several issues conflicted with the initial business objectives of the implementation. Customization should have been limited to a minimum amount, but through some errors in the testing phase of the system, more customizations as wished for were essentially needed. This might result in some constraints in future system upgrades and also result in some more complicated maintenance issues than anticipated. Cisco also wanted to grow without scarifying control (Cotteleer, 1998).
This might also have been a misfit between the new ERP system and the business’ needs. Cisco incorporated two strong vendors, KPMG and Oracle, to aid them in their ERP selection and implementation processes. This could have given the two vendors some control over the Cisco business, but especially in the case of oracle this did not occur as they also had a lot at stake while implementing their new ERP system within the Cisco legitimacy environment. Given that Cisco operates in a very competitive environment, the transfer of this legitimacy environment to the new ERP environment will aid them in maintaining a long-term strong competitive position in the market. This fits nicely with Cisco’s long-term business objective of significant growth. Even though it was clear that the ERP system would provide many benefits for Cisco, the company was still faced with several obstacles during the implementation phase. The next section will discuss these obstacles and will also present the factors which turned out to be implementation success factors.
Implementation Obstacles
During the implementation of Oracle’s ERP software problems had to be solved. In the first phase of the iterative prototyping approach (CRP0) the Cisco implementation team had to change their minds regarding “vanilla” implementation. While discussing the hundreds of parameters embedded in the oracle software it soon became clear that changes had to made to the ERP system. To better cope with the modification the Team classified the modifications as red (extremely critical), yellow (critical) or green (moderate).
In the following three months 30 developers spend all their time adjusting the software to better fit the needs of Cisco. According to the vast amount of literature on the topic of ERP implementation, customization is strongly not recommended. However, as Hong and Kim found out in their empirical study on the success factors for ERP implementation, adaptation of ERP software is positively correlated to ERP implementation success, if a certain degree of fit between the organization and the ERP software is not achieved. Therefore were the later modifications like the inclusion of a new package to support the after sales support and the switch to data communication via a data warehouse just necessary step to make the implementation a success. The increase in the project scope definitively created an extra challenge for Cisco’s implementation team. Unfortunately the Biggest implementation obstacle became visible after Cisco had implemented Oracles software. During the testing phase for the ERP software the system was not tested on a full scale basis. Instead of testing the system by running all processes simultaneously, as it would happen in reality, the process were run in an sequential order.
As Cisco had to learn bitterly, the system was not capable of handling all processes simultaneously. This obstacle steamed from two sources: 1st the hardware architecture proved to be troublesome and 2nd the software itself was not capable of handling the volume of data. However, Cisco was lucky and had negotiated a contract with the hardware vendor stating, that the hardware vendor promises to deliver hardware capable of running Oracle’s software. Therefore it was his responsibility to supply Cisco with the appropriate hardware. The problem with the software was more cumbersome to solve, but fortunately a joined effort of Cisco, Oracle and the KPMG consultants was able to fix the problem, so that in the end business interruptions were kept to a minimum. Another Important success factor for ERP implementation was not a topic for Cisco at all, namely User Resistance. People at Cisco were highly motivated especially in the implementation team and as Elizabeth Fee has put it:” People did it, because it was something different , it was THE opportunity…” (Cisco Systems Inc., 1999).
Analysis of Success
Through using the “Rapid Iterative Prototyping” Approach Cisco was able to get the ERP System running within nine months. The Approach they were using is a mix which inhabits:” the stability of the Iterative nature of ERP implementation and the dynamics of Rapid Application Development.” (Avimanyu,D., 2005) Furthermore Cisco has put the implementation on the list of the company’s top seven goals for the year. Therefore Top Management support can be considered as very high, which is one of the keys to successful ERP implementation.(See Appendix1).
The combination of high Top management support and giving the project a top priority within the company has also been a factor why user resistance was minimal. Further the initial planning and analysis of requirements was one of the most critical points for the success of the entire project. Small mistakes were made in terms of the capacity the hardware and software have to offer, but those problems could be solved, in the case of the hardware with some luck. Additionally Cisco hired for the project team only the best employees internally, who saw the participation in the project as “THE opportunity”, and was supplied by KPMG with the most experienced consultants. This fact coupled with the unusually high support by Oracle provided a perfect basis for the diffusion of knowledge and experience being clearly a driver for the projects success. But overall one of most, if not the single reason, why the project has been a success was the selection of the ERP Software itself. It has been very efficient, because it took the project team only 75 days to select an appropriate system. Furthermore the hiring of KPMG consultants, the big team of 20 for the selection of the software, the site visits of users using Oracle and the in-house vendor presentations ensured that the selected ERP system fitted well to the needs of Cisco.
But luck played also its part in the success of the implementation effort at Cisco. At the time Oracle won the contract the North American market was dominated by SAP and therefore Cisco had a huge incentive to supply Cisco with everything necessary to make the implementation a success. A successful implementation at Cisco would put Oracle in a very favourable marketing position, so that by the time Cisco needed extra capacity from the software, they were in a very good bargaining position with Oracle. In addition the contract negotiated with the hardware vendor was, as mentioned before, match wining. All the changes made after the implementation regarding the hardware had to be made out of the hardware vendor’s pocket.
In the end Cisco was extremely successful considering the overall performance of the system and the implementation team. Only few customizations were needed to implement a system that was running well in the end. The only big trouble which plagued the Cisco was the capacity constraint of the hardware and software, which was solved through the “match winning contract” with the hardware vendor. The software capacity constraint was rectified because of the strong cooperation between Oracle, Cisco and the KPMG consultants. Therefore the cost expectations and time schedule was met in the end.
A similar success story of ERP implementation can be found at Tata Refractories. Tata wanted to replace its current legacy system with a new ERP system to push itself ahead of the competition. Finally they decided to implement Baan IV C4, because Baan met most of the requirements needed by Tata and could be localized to the Indian taxation and duty structure.
The success at Cisco and Tata is attributable to some factors both have in common. First of all both spend considerable time to identify an ERP system that showed the highest fit with organizational processes, because both wanted to avoid a lot of customizations to the project. Moreover both implementation projects received Top management support from the very beginning and change management was done early via trainings. In the end Tata and Cisco decided upon a big bang implementation.
Conclusion & Recommendation: Can the Cisco Experience be Replicated?
It would be a mistake to view Cisco’s successful ERP implementation from the perspective of a stand-alone IT project. By the time the ERP implementation project was undertaken in June of 1994, the “Big Bang” approach was really necessary at Cisco, they were forced to do it in order to stay in business.
The key success factors in Cisco’s ERP implementation were: 1) maintaining a focus on core business objectives and integrating ERP implementation with overall business strategy; 2) selection of the “hungry” and financially strong vendors; 3) compilation of the best staff on Steering Committee, and put the “best people” on team; 4) full support of top management from the very early beginning, but threat to fire CIO upon failure; 5) ERP project was the top priority; and 6) perfect diffusion of consultancy and vendor
Cisco represents the classic, accelerated Enterprise Resource Planning implementation approach. They managed to have implemented ERP in nine months for $15 million, in comparison to the competitors where the average implementation time was 24 months. There is no question of the fact that Cisco’s ERP implementation was an unqualified success. There is also no question of the fact that ERP implementation not only contributed to the company’s growth and success over the next several years, but actually served as the foundation for Cisco’s strategy. Cisco had many advantages as they embarked on their initiative. They were much smaller then than they are now, and had a relatively simple legacy environment. However, at the time Cisco was also experiencing exponential growth and the failure of their legacy information systems. The management team made right decision at right time to get the system selected, implemented and stabilized in a relatively short period of time.
Other business can use Cisco as a benchmark in their own implementation of ERP. Whether or not other businesses would then meet with the same success, however, is questionable. Luck and timing circumstance also factored into Cisco’s success. The economy was strong and the Internet down-turn had not yet occurred when Cisco was implementing ERP. It was also fortunate in finding highly motivated partners who were ready for the project. There are also a number of practical and organizational factors which might make it difficult for other companies to replicate Cisco’s success. Firms outside of the technology field probably lack both the internal resources and the capacity to gather external resource assistance (i.e., competent partners) to carry out the more technology-intensive aspects of the implementation. Finally, many firms have moved away from the centralized organizational structure that was critical for Cisco’s successful implementation.
References
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