SYSTEMS Inc.

:
IMPLEMENTING ERP
Case Analysis : Group 4
Anmol Kapur (2016IPM016) || Akhil Govind (2019PGP040) || Arshad
Ayoob (2019PGP080) || B. Sushanth Kumar (2019PGP107) || Prasanth
Kumar TS (2019PGP306) || Saismita Mohapatra (2019PGP357) ||
Tanmay Pal (2019PGP435) || Versha Choudhary (2019PGP463)
BACKGROUND OF THE SITUATION
• Cisco Systems Ltd., founded 1984 by 2 Stanford Computer Scientists
• Primary Product – Router
• In 1997, became Fortune 500 company; ranked among top 5 on return on
assets & revenue; July 17, 1998 – Market cap passed $100 Billion
• Legacy System : UNIX Based Software Package; supported Financial,
Manufacturing & Order Entry Systems
• Application didn’t provide level of redundancy, reliability & maintainability
needed; Unable to make changes to application to meet business needs
• Reluctance to implement ERP Solution initially by CIO – borne out of
concerns about type of mega-projects ERP implementations often became.
LEGACY SYSTEM FAILURE
• Reluctance to throw out legacy system due to time and costs associated
with getting new systems in
• Systems outages became routine
• January 1994 – dramatic failure of system due to malfunction of
unauthorized method of accessing core application database; Central
database got corrupted & company shutdown for 2 days
• Leadership team realized that alternative approach was required
• February – investigation team put in place to replace legacy application.
• Realization : Reliability, Scalability & Modifiability of current application
wouldn’t support anticipated future growth.
SELECTION OF ERP PRODUCT
• Team Selection:
• ERP selection – IT and business community working together in selection and
implementation
• Integration Partners:
• Cisco team – needs strong integration partners who would help end to end.
• KPMG – Why?? They brought experienced people . Mark Lee, director of IT & he has put in
various parts of an ERP system
• Search of best ERP
• Leveraging the experience of other similar firms- “Big Six” accounting firms.
• Tapped the research sources – Gartner Group
• With design speed & usage in the market – Five Packages shortlisted
• Further evaluation led to two prime candidates – Oracle & another major player
SELECTION OF ERP PRODUCT
• Why Oracle?
• Better Manufacturing handling capability
• Promised long term development of functionality in the package
• Proximity of headquarters
• Going to the Board:
• Oracle – 15 months, but Cisco wanted to complete in 3 quarters.
• 15 million – ERP cost
• Board approved the proposal – to go with 1 ERP among update existing one,
replace in parts or replace as a whole.
ORGANIZATIONAL STRUCTURE
IMPLEMENTATION OF ERP
• The process worked on Rapid Iterative Prototyping technique:
• CRP0:
• Immersion Training & implementation
• Discussions on System Configuration
• CRP1: performed system modeling
• CRP2: Point to Point Data Warehouse
• CRP3: Full system testing
CHALLENGES FACED DURING IMPLEMENTATION
• Software couldn’t support a number of business processes.
• Need for modifications & introduction of Service support package.
• Demanded excess resources from the IT department.
• Performance issues due to insufficient hardware resources.
RESULTS OF SHIFT TO ERP SYSTEM
• As shown in Exhibit 1, in 11 years of the company’s existence, the net
sales reached $2.2 Billion. In 3 years of ERP System implementation,
the company was able to record net sales of ~$8.5 Billion by 1998, an
increase of ~$2 Billion YoY.
• Net Income per common share grew from $0.32 (1995) to
$0.85(1998) almost >2.5X.
• Stock price grew from $12.458 (1995) to $65.167 (1998) almost >5X
PARTING THOUGHTS
• Factors that made difference between success & failure :
• Made the Implementation Priority 1
• Hired experienced Consultant
• Involved all functional units in organization
• Smartly negotiated contract; cost of fixing problems on vendor
• Able to stay within budget and schedule
• Smart Moves :
• Bought hardware capability and not resources from vendor
• Lucky Moves :
• ERP Product was new in market; Cisco first user
• After sales also fell in place at right time
PARTING THOUGHTS
• Could they do it again :
YES, provided they work in the same smart way ( prioritizing, cross-
functional effort, management commitment)