Cisco Systems: Implementing ERP - Case Study Example

Cisco Systems: Implementing ERP The essay explores the effectiveness of Cisco Systems, Inc., a well-known organization fashioning high-end networking equipment. It has been observed that the company implements Enterprise Resource Planning (ERP) system in order to incorporate the skills and knowledge to increase the effectiveness of the business. The benefits of ERP are explored with relevance to the case of Cisco. The ERP system was selected by Cisco and implemented due to its design and better durability exhibiting the best practices followed. Moreover, the essay has revealed the effectiveness of Cisco in relation to the external environment by implementing the Oracle ERP package system. ERP was initiated by Cisco to overcome the failure which could be mitigated through the reliability and the flexibility that the package would offer for the enhancement of the performance of Cisco. The implementation of Cisco had to face several issues by the employees which include insecurity related to their job. The essay has exemplified various factors with regard to Cisco along with ERP installation for the benefit it provides in the long run. Table of Contents Abstract 2 Introduction 4 Selection and Implementation of the ERP System Process 5 Evaluate the Factors Made the Difference between Success and Failure of an ERP System Implementation 9 Evaluation of the ERP Solution Offered By Different Providers 12 Evaluate Issues and Challenges Cisco Systems, Inc. Faced During the Implementation of an ERP Solution 13 Conclusion 15 References 16 Introduction In the modern competitive environment with the ever-changing information technology (IT) advancements, it is important for the companies to effectively use their skills and knowledge to increase their level of efficiency to be effective. Effective utilization of the resources is a vital aspect of the companies in order to gain proper control and competitiveness over the other competitors in the market of IT. Thus, in order to be effective and useful in the IT marketplace it is of significance to implement Enterprise Resource Planning (ERP) system. This would be an effective and efficient tool for the organizations in order to meet the business need of incorporating skills, knowledge along with information. Moreover, it can be reflected that the implementation of the ERP technology will assist the businesses in enhancing the speed through which the information flow within the company due to the necessary integration of the system (Cisco, 2014). In accordance with the given case study, the use of ERP system in the business of Cisco will be evaluated for better understanding. Cisco Systems, Inc. was initiated in the year 1984 by two scientists of Stanford University. It was for the first time traded publicly in the year 1990. The service provided by Cisco with regard to software and hardware is used to develop solutions for the internet in order to gain easy access to the information during any given time and place. Due to the enhanced feature and effective rise of technology, Cisco became one of the leading players in the industry. In the year 1993, Pete Solvik the Chief Information Officer (CIO) realized the need for change in order to grow in the market. This change enabled Cisco to be ranked among the top five companies as per the Fortune 500 list on the basis of revenue on returns and assets in the year 1997 (Austinri & et. al., 2002). The study will critically evaluate the need for Cisco to implement ERP and its future implications. The study will also explore the various factors for the success of Cisco with reference to the ERP System. Selection and Implementation of the ERP System Process Cisco was initiating the need for change in order to gain a strong market share. The need for expansion and the expectation to develop was the core driver for change within Cisco’s business operations. Cisco in the initial years utilized the UNIX based package software for the effective use of information. The packaged software was implemented within the functional area which comprises the manufacturing, financial along with the order entry system. The UNIX based package software was giving rise to the issue of scalability when the company was in the need to expand to get a large customer base. The present system was not in a position to offer various aspects which were important factors for the growth of the business including redundancy, maintainability and also reliability. Customization was reflected as a solution however the company had already effectively used customization to the maximum extent. Thus, customization would not be of any effectiveness for Cisco. Another possible solution would be the implementation of upgraded version of system but it was not considered as a proper solution by the vendors. The reason was the small number of vendors. The issue of scalability was becoming obstacle in the future growth of the company. The new CIO Pete Solvik was initially against the use of the ERP system to bring change. The reason for his opposition was that the system implementation was too huge for Cisco within a limited span. However, the solution derived was to value change in every functional area but resistance was faced by Cisco which was deteriorating the heritage of the company. It was evident from the incident when the database of Cisco got corrupted the business was closed for a period of two days and hence the autonomous approach was not sufficient. The need for the implementation of the ERP was then given weightage by the management after assessing different business functions (Austinri & et. al., 2002). The ERP system was implemented by the business because of its design and better longevity demonstrating the good practices. ERP system is desirable by the business organizations due to its various attributes and features. Nonetheless, the ERP system is not only complex but also expensive which restricts its implementation. With the rise in the competition, a large of organizations was executing ERP for better outcomes. The need for Cisco to install ERP was massive in order to save its image and survive in the competitive market. Time was becoming a constraint for the business as they had only fifteen months’ time for the implementation of the ERP system in order to avoid major contingencies. However, it was an issue for the company as the ERP installation requires in an average twenty three months. The time was another factor which was restricting the implementation of ERP for the development. Furthermore, the ERP installation will alter the way of business performance of Cisco for the betterment (Otieno, 2010). ERP would meet the need of the company and necessitate the participation of the business community. Cisco then developed a project selection team comprising the members of the organization and also KPMG employees in order to assist the selection and implementation procedure. The team was observant regarding the use of ERP in order to avoid various challenges based on cultural and operational aspects. In order to mitigate the issue of scalability, the vendor of ERP should be of the size of Cisco in order to meet the future demand and growth of the company. The team after proper research tied up with Oracle to motivate and create an opportunity for the company to use the Oracle ERP products. This would lead to a proper development of the manufacturing unit which is one of the core fundamental areas of Cisco. Due to the Oracle ERP package and its successful implementation, the company was able to get a strong vendor commitment which is an important aspect for the success of the project. Oracle as a vendor for ERP would reduce various issues in order to derive benefits and success through ERP implementation. Keeping in view the requirement of the business, the implementation of ERP time was reduced to nine months with US$15 million as the budget (Davenport, 2012). The ERP implementation was one of the important tasks which required the involvement of every employee for rapid and effective implementation of the system. The team employed the strategy in order to use the development technique which is the “rapid iterative prototyping.” This approach was useful to form different phases known as the Conference Room Pilots (CRP). It was useful to develop proper understanding regarding the software and the business environment. The iterative approach is useful and continuously helps in improving the system. Iterative prototyping which is used by the Cisco team is a part of the Spiral Model for software operations. This Spiral Model was established to deal with the risks associated with the projects which are high in level. The need for the ERP solution is high to meet the requirements of competitive environment. In case of failure of implementation of ERP, Cisco will have to face high risk and thus the Spiral Model will be of importance (Boehm, n.d.). The model is effective as it helps in risk analysis, problem identification and also aids in proper identification of the objective. The stages of Conference Room Pilots (CRP) are again of significance to develop an in-depth understanding regarding the business environment. This model and CRP are of significance for the business and for the attainment of the desired goals. The rapid iterative prototyping is of immense value to gain advantage and stability within the given time frame for the implementation of change. The time aspect was a critical factor for Cisco’s business to survive and to expand in the competitive market. Prototyping is one of the significant steps in the proper implementation of ERP. The implantation of the rapid iterative prototyping for the implementation of ERP requires the interference of strong end users. The end users are vital because without them the effectiveness of the prototype cannot be evaluated. It might lead to the resistance from the end user if not effectively implemented. The involvement of the end user is valued as Oracle also provides intense training for the ERP implementation and effective usage. This training is effective to understand the Oracle system and the application that the ERP would provide so that the end users are well aware to regarding their approach towards the system. The useful opinions of the users were valued in order to design the new prototypes. The objective of Cisco was to implement the new ERP system with the least possible changes as the company had a strong market prior to the implementation of the same. Due to customization, Cisco required changes for the sustainability in the marketplace. Through the use of ERP and by preventing total customization, the company will now be effective in resolving the future issues. The implementation decision of Cisco was that it changed the process as per ERP for the benefit of the business instead of ERP installation as per the business process. This step was the turning point for the Cisco’s business and its sustainability. It is a noticeable fact that changing the organization as per the ERP system leads to better performance of the organization rather than customizing the ERP into the business environment. Moreover, Cisco’s legitimacy with the new ERP system will support the future endeavor of the business along with aiding in maintaining the long-term marketing environment. The ERP implementation would be beneficial and hence the implementation was effective for the proper functioning of the business (Slide Share, 2007). Evaluate the Factors Made the Difference between Success and Failure of an ERP System Implementation ERP implementation is an important factor in order to derive success and competitive advantage in the modern day competitive business environment. ERP provides a set of solutions to the business by making the process faster, reliable, flexible and effective in reducing the overall cost in relation to information technology domain. The ERP implementation is one of the major investments and requires sustained commitment from Cisco as the event has an impact on the cost. The size along with complexity of the ERP project is one of the prime factors that can influence the cost of the implementation of ERP in Cisco. The success factors with regard to ERP implementation in Cisco are several based on the choice of the vendor to the tool and techniques used. The success factors of Cisco are majorly dependent upon project planning in the initial stage. The implementation of ERP depends on the planning process, the objectives to be attained, requirements of the business, time and the development of a proper team for the selection of the vendor and the budget. Strategizing the business objectives in accordance with the ERP process and keeping pace with the changing environment are amid the key success factors for Cisco. Another factor for the success was that every member of the organization had the same vision and was trained in order to understand the changing needs of ERP implementation. Cisco made the employees realize the importance that ERP would bring for the organization’s success through encouraging expansion. The success factors for the Cisco business environment depend on many other factors. Architectural design is another common factor which inclines towards the selection of the vendors who are strong, effective and have the capability to integrate ERP with the business (Wong & Tein, n.d.). The size of the ERP vendor must be approximately equal to that of Cisco so that it can meet the future growth objective. Cisco selected Oracle as the ERP vendor in order to gain effectiveness and success. Besides, the other prominent success factor for Cisco was the fact that it selected one of the financially strong vendors Oracle for its ERP implementation as per the decision of the team. Cisco created a strong team which comprised of the best members in the business from various departments to take into consideration the different aspects important for the business to sustain in the competitive environment. The ERP installation is expensive and complex hence any mistake in the later stage might lead to high cost. Consequently, Cisco had every required data and employee during the installation to make the entire process less costly and effective. ERP was installed in order to improve the effectiveness of the business and strengthen its market position. The execution of the top management in an effective manner from the initial stage till the end is another factor for its success. The success of ERP implementation in Cisco was also due to the fact that the implementation was given priority for the attainment of the strong market presence in the competitive market. Strong coordination was formed amid the vendor i.e. Oracle and Cisco’s management keeping in view the attainment of the common objective. The benefit of ERP was considered and taken into account for the long-term success and every feature was implemented with ERP. Furthermore, the time factor was taken into account for its proper implementation within the given duration through the use of effective techniques and tools (Leon, 2008). In addition, the success after the implementation of ERP was due to the fact that the interpersonal skills were used through proper training and knowledge for the benefit of the business process. Another factor for the success of the ERP implementation was based on the fact that customization will be avoided to a large extent in order to minimize the risk and expand the market of Cisco meeting the future objective. Monitoring and evaluation of the performance of the employees after the implementation increased reliability and flexibility which led to the success as per the review of Cisco (Leon, 2008; Austinri & et. al., 2002). On the contrary, there are few failure factors of ERP implementation which are of challenging nature for the business of Cisco. The major issue with the ERP implementation is regarding the people and their skills. At every aspect, people need to work hard to achieve success and thus the issue is not regarding the technology but availability of skilled people. Training and skill enhancement is another factor that at times led to the failure of the company i.e. Cisco in relation to the implementation of ERP. With regard to the case, it is observed that the failure for ERP is also due to the resistance from the employees regarding the change of the structure. The resistance by the employees was due to the fact that they felt insecurity of losing their jobs after the implementation of the ERP as it requires skilled employees and training. The commitment from the top management i.e. the CIO was another reason for the failure as the management did not value ERP at the initial stage and was incapable of being able to inform the benefits that it would bring for both the employees and the management (Wong & et. al., n.d.). The inadequacy of the organization with regard to time, budget and complexity of ERP led to its failure in Cisco in the initial stage. Proper selection of the ERP package is of great relevance as the selection of a wrong package might lead to failure. Hence, it was important to evaluate all the important factors to avoid the failure of Cisco in terms of ERP installation. The failure as per the review also materialized due to several factors such as the misfit of the ERP system into the process. Therefore, Cisco did not try to fit the ERP into the process but changed the process as per ERP to reduce the level of risk and failure after its implementation. Poor IT infrastructure, knowledge transfer and Business Process Re-engineering also can be termed as the critical failure factors for the ERP implementation in Cisco. Another major reason for the failure was due to the over reliance of the business on the customization (Leon, 2008; Mandal & Gunasekaran, 2003). Evaluation of the ERP Solution Offered By Different Providers According to Cisco’s business environment and the future objectives, the best provider of ERP is Oracle. Oracle is effective as it would help Cisco to meet their objectives and the future demands with the change implementation. Oracle has significant organizational structure and employee support to aid the business functions of Cisco and can help the company in attaining a strong market presence by providing information which will be accessible in every possible location. Hence, Oracle is the most suitable provider for Cisco. Moreover, the Cisco’s project was manufacturing based and Oracle had the best capabilities in the field of manufacturing than the other providers. Oracle would be beneficial for Cisco as they offered functionality packages to help in developing the business. Oracle promised the business to provide long-term support for its expansion and also offered flexibility by extending their support as per the need. Another aspect was the fact that Oracle wanted to make this project a success as it required a business success by helping the company to gain market share. Furthermore, Oracle had a new version to support the manufacturing activities and had a strong package which helped in quick configuration for Cisco. The other provider which can help the business of Cisco to sustain the business environment is SAP due to its various ERP components (Suen & et. al., n.d.). SAP is similar to Oracle with regard to its size and has the capability to meet the demands of the company. The evaluation and the selection of the other vendor was an important task. The “Big Six” research team was given the responsibility to select the best vendor on the basis of the ERP components provided. SAP and Oracle were close to each other because of their offered benefits. The vendors were providing their packages and benefits in terms of various components which include financial management, manufacturing, human resource and also production planning (Gaspar, 2006). All the components are of importance for Cisco to be competitive in the prevailing business environment. The core component of ERP is the financial facet which is important to analyze the valuable financial reports. Every provider was providing their best component to have long-term sustainability. As per the requirement and the mission of Cisco, Oracle was the most effective among the vendors for its efficiency in the manufacturing and sustainability for the business in the competitive environment. Oracle was meeting the business requirement of Cisco and hence it is evaluated to be the best among the vendors by the team. It also supports the supply chain management and the customer relations management initiatives for the business which is one of the major aspects for fulfilling the functional requirements. Consequently, it can be recommended to the senior executive that the choice of Oracle as the ERP vendor is appropriate because of the benefits it provides to Cisco and its future endeavor (Oracle Corporation, 2011; Cisco Systems Inc, 2007). Evaluate Issues and Challenges Cisco Systems, Inc. Faced During the Implementation of an ERP Solution Cisco Systems, Inc had to face several issues during the implementation of the ERP package by Oracle. The first aspect that the Cisco’s management had to face was to change their mind regarding the “vanilla” implementation. In order to enhance the scope of the business, a major challenge was faced by the company after the installation of Oracle software for ERP. During the trial, the ERP software was not run and not tested properly i.e. by running every program simultaneously as will be the case in the real scenario. However, the testing was done in consecutive manner. Thus, after the implementation Cisco recognized that the system was not able to work simultaneously which was the need of the company. The issues were due to architecture fault in the hardware along with the software as they were not capable of handling the huge number of data of Cisco (McNally & et. al., 2012). Another issue faced by Cisco during ERP implementation was related to time and budget. The process was long and the need to accomplish the task was less hence the challenge was to complete the task within the timeframe with the help of expert skilled employees. The challenges for the project was that it was user focused and required strong cooperation which was resisted in the initial phase because of the fear people had regarding their jobs and sustainability of the organization in the competitive environment. The key challenge originated was the gap between the planning process and the implementation (Cisco Systems Inc, 2007; Austinri & et. al., 2002). Conclusion Cisco Systems, Inc. had a vision to expand and grow in its operational marketplace. It wanted to have a competitive edge over the other competitors. In order to compete with the changing environment, it implemented the ERP system to derive benefits and help the organization to flourish. The implementation and the selection of the ERP vendor was a difficult task because of the availability of various resources. Cisco selected the Oracle ERP package for its sustainability in the long run. Various issues were faced during the installation but due to proper management and critical success factors, eventually the ERP solution was implemented successfully. Cisco changed its process in accordance with the ERP system to gain benefit, reliability and long-term sustainability in the market as a leader. References Austinri, R.D. & et. al., 2002. Cisco Systems, Inc.: Implementing ERP. Harvard Business School, pp. 1-19. Boehm, B.W., No Date. A Spiral Model of Software Development and Enhancement. University Of Southern California, pp. 1-25. Cisco, 2014. Enterprise Resource Planning. Solution. [Online] Available at: http://www.cisco.com/c/en/us/solutions/data-center-virtualization/enterprise-resource-planning/index.html [Accessed April 17, 2014]. Cisco Systems Inc., 2007. 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[Online] Available at: https://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd=5&cad=rja&uact=8&ved=0CF4QFjAE&url=http%3A%2F%2Fucd-mba.wikispaces.com%2Ffile%2Fview%2FCisco_ERP_v12.ppt&ei=KLpPU5TPBMfqrAfptoDgAQ&usg=AFQjCNEiLZtvHcvV_jEac5AeNsFjg2_yPw&sig2=EzqLSGybCBdn-8nIHq5TxA [Accessed April 17, 2014]. Slide Share, 2007. ERP - Implementation is The Challenge. Implementation. [Online] Available at: http://www.slideshare.net/vinaya.hs/erp-implementation-is-the-challenge [Accessed April 17, 2014]. Wong, A. & et. al., No Date. Critical Failure Factors in ERP Implementation. Downloads, pp. 1-14. Wong, B. & Tein, D., No Date. Critical Success Factors for ERP Projects. Downloads, pp. 1-8. Read More