Cisco ERP Case Study Cisco

Cisco ERP Case Study

Cisco Systems, Inc. - Implementing ERP

Cisco quickly grew to be one of the most profitable and successful high tech manufacturers of networking equipment and services in the Silicon Valley during the early 1990s, averaging 80% annual growth during the period of the case study. Their rapid and unexpected growth as a company quickly obsoleted the traditional approach of managing Information Technologies (it) in general and Enterprise Resource Planning (ERP) specifically by aligning these resources to functional departments. The Cisco CIO, Pete Solvik, had envisioned the company having dedicated and exclusive it systems, networks and resources aligned by line-of-business, a common practice in the early and mid-1990s. This siloing or isolating of it systems and services by line-of-business however drastically impacted the companies' ability to function effectively.

In January, 1994 the legacy systems that had been defined by line-of-business became so overburdened that the main database that Cisco operated on ceased to function and became corrupted. Legacy systems were definition those pricing, production scheduling, material planning and master scheduling enterprise software applications that had been continually added to over time and had in many cases become very difficult to support. Legacy systems are often designed and developed to only meet a specific set of highly unique process needs, and therefore have little if any ability to integrate with other applications. As a result, the line-of-business systems often stay disconnected from larger enterprise systems, further leading to inefficiencies. What has exacerbated Cisco's attempts to keep its main database free of errors and over-writes which caused chaos in January, 2004 was the lack of integration pre-planning in legacy systems. Cisco had grown so rapidly that it failed to update the underlying MRP, production scheduling, and fulfillment processes the legacy systems had ironically been developed to automate. The legacy system problem, now exacerbated by the lack of integration across lines of business, was creating chaos in the main database responsible for managing the entire company.

Cisco's senior executives had been in previous manufacturing companies and realized that an Enterprise Resource Planning (ERP) system that unified departments and created a greater level of synchronization between departments at the process level than was possible with legacy systems was the answer. As the ERP implementation would cost an estimated $15M and take 9 months to complete. The Cisco Board of Directors had to vote and approve of the plan. ERP installations are not just a large it project. They are instead a complete re-examining of the company's business model and a re-defining of interprocess communication and the defining of process conduits between systems. In short, Cisco completely re-architected the core business processes that their company was based on, down to the Bill of Materials (BOM) used for managing their production operations.

As the company completed the multi-phased implementation plan for getting the ERP system up and running, the decision was made to also get a data warehouse in place and functioning. The data warehouse would give the company, for the first time ever, an opportunity to have all enterprise applications using the same data set, for the first time. Having a single data warehouse significantly improved accuracy of key processes including quote-to-cash over the long-term. This was a first for Cisco, as they had never been able to use the same database across all enterprise applications in the past. Cisco also ran into scalability on their hardware purchased specifically for the ERP implementation, and due to a unique clause in their contract, was able to get the hardware provider to install servers that could scale more efficiently to support the transaction load. This is a second area that Cisco had never been able to accomplish before, which was the scalability of all company transactions on a single application. With the enterprise-wide ERP system this also became possible for the first time.