Cisco Web Enablement

Cisco--Web Enablement

Time Line:

June 1994-Feb 1995 ERP Project 1995-2000- Web Enablement

Cisco is growing like crazy 1995 96 97 98 99 2000

$2B $4B $6.5B $8.5B $12B $19B

We left Cisco in Feb of 1995 when they had completed implementation of their ERP system

In the 1995-1999 Period, they compete with Lucent Technologies, Nortel (and Bay Systems), 3Com, and Juiper Networks (IPO in June, 1999)

Three business lines--Enterprise, Small/Medium Business, Service Provider

John Chambers, hired in 1991, becomes CEO in 1995 (Took over from Morgridge)

Cisco Business Plan:

1. Assemble a broad product line so Cisco can serve as one-stop shopping for business networks (See Ex. 3) 2. Systematize acquisitions as an efficient business process (more than 70 acquisitions since 1993) 3. Set industry wide software standards for networking 4. Pick the right strategic partners

Corporate Creed: "Dedication to Customer Success" IT at Cisco

Pete Slovik's challenges in 1993: 1. IT department was too traditional (viewed as a cost center that reported to Finance Dept) and too internally oriented 2. Current systems could not scale to support Cisco's growth, nor were they flexible and robust enough to support management requirements Related to Challenge 1:

--IT reporting changed from Accounting to Customer Advocacy --IT budget pertaining to functions were given to the functions. This created a structure where all IT applications projects were client funded --A central IT Steering Committee was disbanded and replaced with a structure where IT investment decisions on application projects were pushed out to the line organization, but execution was by central IT

Related to Challenge 2:

--The "$15 million" ERP Project --ERP project was centerpiece of a $100 million, 2-year series of initiatives to replace all IT applications and platforms worldwide --Ended up with no mainframes, no minicomputers, and no legacy technology, everything is current (As of, say, 1997) (What do they have??-- Client servers) --Standards

100% Unix at the server level 100% Windows NT at the LAN level 100% Windows Toshiba and HP PCs at the client level 100% Oracle at the database level 100% TCP/IP for the worldwide network Also standard throughout out the company:

Email Voicemail Meeting scheduling software Desktop and server OS Office productivity suites

All business units use single applications packages Advantages:

Reduced cost Flexibility Scalability on a local level

Challenges:

Distributing centralized core systems (Very big Unix services with huge databases without the reliability and scalability that the same size DB2 database would have on a mainframe)

Whole Unix platform is much cheaper than mainframe so money can be spent on server capability

Group Task Part The Next Phase of Slovik's Strategy

Cisco began web development in the early 1990s with Mosaic (a predecessor of Netscape)

Initial 3-Year Project ($100 million)

Intranet (within Cisco) Internet (outside Cisco)

EIS/DSS Extranet supply chain Employee self-service Customer self-service (web) Communication and distance learning Net commerce (web) Collaboration and workflow management Marketing (web) Web-enabled legacy systems Anyplace access (web) By 2000, virtually every application in the company uses a web browser as its only user interface

Focus on Electronic Connection with Customers (Cisco Connection Online [CCO])

600,000 Customers signed up accessing 3.8 million times a month 68 different country pages and 17 languages Customer Support Focus--answer questions, diagnose network problems, provide expert assistance worldwide Saves an estimated $506 million/year and improves customer satisfaction

For Slovik--internal users are clients, as differentiated from real "Customers" Note: 70% of Cisco employees have a significant bonus multiplier tied to the annual customer satisfaction survey. Notion of Critical Account List as a management tool. Net Commerce:

Order placement for company's entire product line Internet Shipments

0% in July 1996 2% in August 1996 65% by end of 1998 92% by January 2001, about $25 million annually

Productivity gains of 60% for Cisco and 20% for customers are being realized through online commerce. Note Sprint example. Cut a networking project from 60 days to 35 to 45 and reduced ordering staff from 21 to six Supply Chain Management FY 2000 Impact (up from $275 million in 1997)

Reduction in Operating Costs (2000)

Single Enterprise (with suppliers) $170 million New Product Introduction $402 million Autotest $108 million Direct Fulfillment $15 million

Single Enterprise Supply chain management--allows suppliers to react to customer demands in real time. Suppliers manage supply chain.

New Product Introduction--Reduced data gathering time from a day to 15 minutes Autotest--automated product testing, outsourced to suppliers

Direct Fulfillment--suppliers fill orders directly to customers

Summarizing the source of benefits

Employee self-help Customer self-help Execution of acquisitions Implementation of an "extended organization" Execution efficiency and speed of operations

Cost/Benefit Analysis

Cost for the Strategic I-net: $100 million (for applications, not replacing old IT infrastructure)

Benefits:

Internet Business Solution Financial Impact

Supply Chain Management $695 million

Customer Care $506 million

Workforce Optimization $86 million

Internet Commerce $65 million

Total Financial Impact $1, 352 million

This is one heck of a rate of return on the $100 million investment (even without looking at time value of money!!)

ILLUSTRATIONS OF KEY COMPONENTS OF A STRATEGIC I-NET

1. Real time messaging architecture: Speeding up the company form budget-time to real time 2. Data warehouse: Everybody works from the same data 3. One-to-one ratio of client computers to workers: Everybody has a PC hooked up to the netowrk 4. Browser interface: My browser gets me anywhere 5. Directory and layered-access: I have a worldwide telephone book with both a white pages directory and a yellow page directory 6. Web site: The web site is the "front door" receptionist 7. Self-service: Me and my computer do most things ourselves 8. Information transparency: Information is freely available 9. Extended enterprise: Our organizational boundaries are permeable 10. Knowledge management: Knowledge management enables us to capture the value from our information resource investments