Cisco Systems

Case Study 1 - Cisco Systems

Cisco’s current situation

Cisco Systems, Inc. was founded by two Stanford computer scientists in 1984 and soon ascended to one of the big players in the booming Internet industry. The router, Cisco’s primary product, enabled networks to make up the Internet. In 1997, Cisco joined the list of Fortune 500 and one year later, 1998, Cisco’s market capitalization cracked the $100 billion mark. That were the fourfold net sales from 1995.

As Pete Solvik joined Cisco as their new CIO in 1993, the company was worth $500 million and supported its core transaction processing with a UNIX-based software package from a software vendor. The business strategy of growth prospects of $5 billion-plus did not match with the old system. Since the application of the software vendor did not provide the required degree of redundancy, reliability, and maintainability Solvik was convinced that Cisco needed a change. After years of customization, the system had led to a complex platform which was familiar to its customers but outdated and not capable of keeping track with Cisco’s rapid growth. A severe shut down of two days in 1994 gave the management no other choice but to act. Because the software vendor was being bought by another company and the future support of its software was unclear, urgent action was needed.  

Case context and analysis

As a result, Cisco decided to implementing a single integrated replacement of its legacy system within the next 9 months. This evaluation case, in which Cisco faced the necessity for information systems replacement, focuses on how management decisions were made.

Cisco’s management realized the priority of this project from the beginning and understood that the ERP implementation was too risky for functional areas to implementing it alone and therefore could not be driven by IT itself but needed involvement from the whole company. Additionally, Cisco hired KPMG as an experienced consulting team to assist with the vendor search.

Making this project to one of the company’s top seven goals for the year equipped it with the right priority. High level sponsorship, shown in an executive Steering Committee with the presence of high level executives ensured motivation within the company.

Out of two vendors, Oracle was chosen for the implementation. The choice was based on Oracle’s strong manufacturing process, great interest in long-term partnership, small geographical distance and most of all its similar interest in making this project a success. Nevertheless, it is to mention that the project budget of $15 million was based on an undefined scope without economic argumentation. In addition, the negotiations about the time frame and budget were done after Oracle won the bid, which is untypical because Cisco thereby lost almost all of its negotiation power.