Cisco – Discussion Topic 1 Cisco's business model, products, goals ...

rabidwestvirginiaNetworking and Communications

Oct 26, 2013 (4 years and 8 months ago)




Discussion Topic 1

Cisco’s business model, products, goals and major strategies.

Cisco’s Model

Cisco Systems operates under a manufacturing and service model where it manufactures
networking equipment and offers services to support the functionality of their products in the
communications and IT industry.
Or, you may say Cisco adopts a networking eq
uipment product
and service provider model.

Cisco is the industry

leader in

products and services
for both


business and individual customers. From its groundbreaking role in the internet
phenomenon to its current diversification, Cisco c
ontinues to innovate its way into all corners of
the market.

Cisco’s Products

Cisco's current portfolio of products and services is focused upon three market segments:
enterprise and service provision for large businesses, small business use and home use
. Cisco
provides a wide variety of product lines mostly network products which are routers, switches,
wireless, security, physical security and building systems, optical networking, networking
software and interface, and modules. Cisco's routing product
s are designed to enhance the
intelligence, security, reliability, scalability, and level of performance in the transmission of
information and media
rich applications. The company's switching products are used within
buildings in local
area networks (LANs
), across cities in metropolitan
area networks (MANs),
and across great distances in wide
area networks (WANs). Their switching products offer many
forms of connectivity to end users, workstations, IP phones, access points, and servers, and also
function a
s aggregators on LANs, MANs, and WANs. The company's home networking products
connect different devices in the household which allows people to share internet access, printers,
storage, video, music, movies, and games throughout the home. Home networking p
include routers, adapters, gateways, switches, modems, home network management software,
and other products. These products are sold through select retailers, value
added resellers, online
retailers, and service providers worldwide.

The product le
adership strategy for Cisco involved not only the innovation of Cisco’s
engineering teams but also alliances, acquisitions, and minority investments. Through a series of
acquisitions and alliances, Cisco entered new markets, extended its product offering a
identified new channels of distribution. These products and channels of distribution are high
performance work group solutions, software based routers for remote network sites and Ethernet
switches. Different solutions for every single market are segme
nted into architectures, which
form the basis for how Cisco approaches every other market. Cisco tries to increase productivity,
improve customer satisfaction and strengthen competitive advantage. In 1997, Cisco made
approximately 80% of the large
scale ro
uters that powered the Internet
. The Cisco name has
become synonymous with the Internet, as well as with the productivity improvements that
Internet business solutions provide.





Cisco products are used by top retailers
such as Staples who is using
Cisco TelePresence

technology to help ease the integration of associates and processes following the company's
recent acquisition of Corporate Express and to inform associates about products. Cisco is
deploying this immersive
person" meeting technology within Staples to help the world's
largest office products company streamline internal communications across its global business
operations. Another example is Cabela's, the world's largest direct marketer and a leading
ialty retailer of hunting, fishing, camping and related outdoor merchandise, is working with
Cisco and SCOPIX, an industry leader in store operations analytics, to outfit its store with
innovative digital video technology designed to continuously improve i
ts in
store customer

A short list of current Cisco products

and service
s of networking covers



routing, switching, and services


line collaboration


Data center virtualization and cloud.


Video conferencing.


Architectures for business


Cisco’s Goals

Cisco Systems, Inc. is
the current leader in the data networking equipment market. Their

goal is to stay at the forefront of the industry for the foreseeable future which they intend to do
by helping their customers increase their competitive advantage an
d profitability through
creating intelligent networks. Their organizational goal or mission statement is “to shape the
future of the Internet by creating unprecedented value and opportunities to its customers,
employees, investors, and ecosystem partners”

and to define the industry
wide networking
protocols and become the worldwide leader in networking. The company provides high quality
networking equipment to the consumer and a
s a result, they have “transformed how people
connect, communicate, and collab
orate” when they use the networking equipment (Cisco
Earnings Report 2Q12).

Cisco also aims t
o build a company for the next generation
which is capable of forging customer relationships as well as maintaining a passionate customer
focus and consis
tently trying to exceed customer’s expectations.

Another version:
Cisco’s business goal is to continue to grow with the adoption of Internet
infrastructures by other companies. Cisco continues to pioneer in the development and use of the
Internet, a
nd provide leadership to most traditional companies. These companies can find the
same benefits that Cisco has enjoyed

Source: Nolan, L. Richard. (2005)
Cisco Systems Architecture: ERP and Web
enabled IT.
Boston: Harvard Business School Publishing.


Cisco’s Major Strategies

Cisco’s business strategies aim to focus less on complexity and more on agility as well as
on its five foundational priorities: leadership, collaboration, data center virtualization and cloud
technology, video, and technology archi
tectures. By adopting an enterprise architecture
approach, organizations can align both technology and business priorities to achieve their
organizational goals. This strategy can ensure the business has the capability needed for present
and future succe
ss and provides metrics that help architecture teams align people, processes and
systems with the business and technology goals.
The practice of using the enterprise architecture
approach at Cisco has several benefits which include one group owning critic
al business
functions, being responsible for defining strategies and governance processes that span the IT
department as well as being responsible for foundational platforms such as the enterprise data
warehouse and business intelligence systems.
ore, Cisco will maintain some strategies
used over the past years, which includes: cost structure alignment, portfolio optimization,
restructuration, and increased value to shareholders.

Case Synopsis

Cisco Systems had in a place a UNIX
based software pac
kage which they were quickly
outgrowing. In 1994, the company decided it was time to shop for a new ERP product. After
sending out RFP’s to vendors, and visiting company sites, Cisco decided that Oracle would be
the best fit for them. Oracle was selected b
ecause it had a better manufacturing capability than
the other vendors, there were long term development guarantees, and the close proximity of
Oracle offered greater flexibility. Additionally, the consulting company KPMG was selected to
assist with the im
plementation of the new ERP system.

The implementation process was developed using a Conference Room Pilots with a
implementation team selected from various IT, management and users. Starting with CRP0 the
team focused on demonstration capacity to take

a Cisco order all the way through the business
process called Quote to Cash. In CRP1 the team worked to make the ERP system work in each
individual area. During this process the team identified that the Oracle program would need to be
modified to fit thei
r needs. In CRP2 the team went through the major modifications, developed
an after sales support package, and additionally it became necessary for a data warehouse. It was
under CRP3 in which the implementation team went live and simulated a full day’s wor
moving sequentially through each step of the business process. Also, m
ore than one day of
testing the system at full capacit
y was needed before going live.

The a
ction plan would detail
new timeline for testing.


Discussion Topic 2

value chain application at Cisco

Primary Activities

Inbound Logistics

It refers to obtaining the parts, managing the receiving and storing of the parts for its major
products. Cisco has one of the most complex supply chains of the Information technology

industry. The company purchases over 50,000 parts supporting over 200 product families. They
have a supplier code of conduct and audit their suppliers.


The company m
ctures network products, routers, switches, video and content

storage networking among others. The major services are related to their major products such as
networks services, routing services, switching services etc.

Outbound Logistics

Cisco handles the s
hipping of completed products to distributors and
end users

to several
locations around the world.

Sales and Marketing

The company markets its products through different channels. Cisco markets to enterprises,
service providers, small business and individual consumers.

Customer Service

Cisco provides cus
tomer service and after sales support.



Here is another more developed version:

based value chain and its application at Cisco

based value chain model

Michael Porter introduced the concept of the value chain in his book
Advantage: Creating and Sustaining Superior Performance

(Porter, 1985)
. The value chain
analysis provides a basis by which to analyze activities in an organization. The model allows
one to examine how the firm’s activities are connected and the value created by these
associations. The value chain, the full sequence of ac
tivities required to design, produce, sell
and deliver the product and how these activities work together to give the company sustainable
competitive advantage
(Gobble, Petrick, & Wright, 2012)

Activities in the firm
d value chain are classified as primary or support activities.
Primary activities are business functions that relate directly to the production of the
organization’s products or service while support activities assist and facilitate the primary

(Kroenke, 2012)
. Primary activities are Inbound Logistics, Operations/Manufacturing,
Outbound Logistics, Sales and Marketing and Customer Service
(Kroenke, 2012)
. Support
activities include Procu
rement, Technology Development, Human Resource Management, and
(Dagmar Recklies, 2001)

Figure 1.1 Illustrates Porter’s Value Chain Model


Cisco realizes the importance of maximizing profit by ensuring value is added from each
activity within the value chain. In an effort to not only maximize profit within the value chain
Cisco has demonstrated corporate responsibility by reducing carbon emi
ssions, waste production,
and natural resource demand in processes. Cisco realized more than 12 million in annual cost
savings by applying sustainable practices and manufacturing efficiencies through the structure of
their value chain in Fiscal 2009.































Total Margin,
upport Activities

Total Margin,



sco takes a holistic approach to value chain management, focusing on all nine nodes of
activity associated with meeting their customers’ expectations for quality solutions.

Primary Activities

Cisco’s value chain focuses on every stage in the lifecycle o
f their products. This means
managing the whole value chain, including issues such as ethics, product security, environmental
impact, and labor relations. About 95 percent

of manufacturing
, testing, delivery, return, reuse,
and recycling of Cisco products
are outsourced to partners in Asia, Europe, and North and
Central America.

Design and Planning of Products

Cisco integrates supply chain and sustainability considerations from the beginning of the
products lifecycle. Cisco works to drive sustainable prod
uct design by utilizing energy
efficiency, material, and end
life management that complies with environmental laws and
reduces negative environmental impacts. All the while, Cisco still works to maintain their
promise in providing high standards of pro
duct quality and reliability within their product design

Inbound Logistics

This activity is related with the order part from suppliers. Cisco has 95% outsourced
value chain. They have already 750 suppliers from North and Central America, Europe

and Asia
( The alliances formed through the joint ventures and partnerships with Cisco are a
source of their competitive advantage.

Cisco also utilizes reverse logistics, recovering products from customer, to redeploy them
in ways that bring
value to Cisco

(Argawal, 2010)
. Over 30,000 units are recovered weekly
resulting in $100,000 net contribution annually
(Argawal, 2010)

Operations and Manufacturing

Cisco’s operation is divided
in two types: products and services. The products are
categorized in five types: Routing, switching, advanced technologies, and others products, and

The routing products (IP) are designed for transmission of information for enterprises to
ers at home. The switching products are LANs and MANs (local and metropolitan area
network), and WANs (wide area network). Cisco utilizes technology such as Ethernet, Power
over Ethernet, Fiber Channel, among others to facilitate providing routing servi
ces. Cisco uses
advanced technologies if or applications networking services, storage, home networking
services, etc. They offer services secure, high performance, reliable delivery of applications
across of the WANS, or WASS (Wide area application servi
ces). (Datamonitor, 2011)

The bulk of Cisco’s production, 90%, is conducted by independent, globally diffused
contract manufacturers
(Shister, 2007)
. Cisco employs approximately 2,000 people directly in

manufacturing while the
ir contract manufacturers employ nearly seven times that number
(Shister, 2007)

Outbound logistic

Most of Cisco products are configured to order. In this part of the chain, they delivery
and distribute the products of the b
uyers. Cisco manages the shipment of new and refurbished
products to its customers utilizing vast supplier network
(Argawal, 2010)
. Cisco uses a number
of transportation suppliers to ship and track outbound products.

g & Sales

Cisco has an enormous marketing and sales force. The company has approximately
12,000 employees in more than 300 offices worldwide, as well as numerous headquarters and
corporate personnel ( At one point in the firm’s history sales te
ams spent 25% of
time selling and the remaining 75% on ancillary responsibilities such as tracking orders,
resolving credit issues, prospecting, and researching competitor information. The executives
have developed web based portals to help the sales forc
e to manage customers more effectively
( Utilizing these portals to facilitate that presentation of real
time business critical
info to customers directly has freed up more time for sales to manage accounts effectively.

Customer Services

co often invites customers to an executive briefing center for individualized
presentations and discussions with executives and tech support. Cisco has devised a virtual
customer support solution to minimize meetings required, which reduces travel expendi
tures as
well as provides real time solutions for customers. Cisco’s TelePresence Meeting facilitates
meetings between customer, reduces travel, accelerates sales cycles and supports more efficient
internal communications (

Support Activities


Monitoring and improving performance follows six
step process:


Share the Code of Conduct with suppliers and communicate the expectation on how it
should be applied.


suppliers to identify facilities at risk of noncompliance


Evaluate those facilities through self


If warranted, commission an audit of facilities, either via the EICC
validated audit
process, or using Cisco
sponsored third
party auditors


Work w
ith suppliers on corrective action plans to resolve any findings


Validate that issues are resolved and continue to monitor and talk with suppliers

Promoting a diverse supplier

Base through a range of initiatives designed to build business skills and capab
ilities across
the globe. Working with certified diverse suppliers and partners ensures Cisco's access to a wide
range of skills and innovation. Cisco executives sit on the boards of 15 diverse supplier





organizations in seven countries, including Canada, C
hina, the United Kingdom, and the United

Building capability

Cisco’s mentoring programs continue to enhance the capabilities of diverse suppliers. In
FY10 , diverse suppliers participated in:


Basic skills building: The UCLA Management Development for Entrepreneurs
Academy is a four
day skills development program through the University of
California at Los Angeles. In FY10, Cisco funded scholarships for two diverse
suppliers to participate in t
his program.


Executive mentoring: Nine suppliers participated in FY10. The program teams Cisco
executives with supplier CEOs.


Advanced mentoring: Cisco engages diverse suppliers with revenues of over $50
million and with whom we have a long
term relation
ship (more than three years).
The focus is on a specific business solution to bring benefits to customers.

Increasing Supplier Diversity

Cisco expands their base of diverse suppliers through relationship
building, including:

Global Diversity Partner Foru
ms: These help create a network of diverse
suppliers that encourage closer and more effective partnerships.

Global Business Missions: U.S.
based partners and suppliers joined Cisco on
business trips to Australia, China, South Africa, and the UK with the N
ational Minority
Supplier Development Council, We Connect International, and the America
Business Women's Alliance. This helps to expand networks and expertise.


Cisco regularly seeks to introduce new products and features to address the re
of their markets. They allocate their research and development budget among routers, switches,
new products, and other product technologies for this purpose. Our research and development
expenditures were $5.8 billion, $5.3 billion, and$5.2 bill
ion in fiscal 2011, 2010, and 2009,
respectively. The research expenditures are applied generally to all product areas, with specific
areas of focus being identified from time to time.

Recent areas of focus are tied to our foundational priorities and include, but are not
limited to, our core routing and switching products, CiscoTelePresence systems products, and the
Cisco Unified Computing System. Our expenditures for research and develo
pment costs were
expensed as incurred.

The industry in which we compete is subject to rapid technological developments,
evolving standards, changes in customer requirements, and new product introductions and
enhancements. So it is important that they use
their ability to improve the performance and
reduce the cost of their products.

They do this by implementing specific customer needs that are inquired by their
management and engineering personnel while also working with other innovators in the industry
cluding universities, laboratories and other corporations. They also continuously make

acquisitions and investments that provide them with access to new technologies that will assist in
the R&D sector.

Human Resources

The Cisco Human Resources function i
ncludes approximately 700 HR professionals who
support the company’s 66,000 employees around the world. To maintain and optimize such a
large HR function, the company employs a team of HR professionals whose task is to carry out a
training and development
strategy specifically for human resources personnel at Cisco.

Cisco use WebEx technology throughout their entire recruiting strategy. WebEx enables
training sessions and large
scale events that connect more team members from more locations at
a far lower
total cost,
changing both the visibility and the impact that Cisco can have on college
campuses. By using WebEx Meeting Center to conduct online orientation sessions for incoming
interns, the Cisco HR function accelerated interns’ time to productivity.


Cisco was incorporated in California in December 1984, and the headquarters are in San
Jose, California. Cisco designs, manufactures, and sells Internet Protocol (IP)
based networking
and other products related to the communications and info
rmation technology (IT) industry and
provide services associated with these products and their use. The company conducts their
business globally and is managed geographically in four segments: United States and Canada,
European Markets, Emerging Markets,
and Asia Pacific Markets. The Emerging Markets
segment consists of Eastern Europe, Latin America, the Middle East and Africa, and Russia and
the Commonwealth of Independent States (Cisco Annual Report, 2011).

General Management

Minimizing the
environmental impacts of Cisco products is a key focus of their value
chain program. Cisco looks for ways to reduce environmental impacts throughout the product
lifecycle by:

Integrating environmental considerations into product design, from minimizing

of potentially hazardous materials to improving product energy efficiency

Working with partners in the supply chain to reduce impacts from
manufacturing, product packaging and transport in five key areas: energy use,
greenhouse gas emissions, water avail
ability and quality management, and
materials management

Managing waste at end
life through product take
back and recycling

Addressing CSR issues in their value chain through:

Aligning work around four key sustainability pillars, and
embedding these into
routine business practices.

a) Labor and worker rights

b) Security and integrity, including ethics and intellectual property protection

c) Health and safety

d) Effective use and preservation of natural resou


By embed these pillars in routine business practices at Cisco and their suppliers will
further improve the management of the supply chain and ensure business continuity by reducing

Supplier self
assessments, supported by joint audits and Cis
initiated reviews
against their Supplier Code of Conduct.

Open collaboration with industry partners to develop a common approach.

Cisco promotes responsible practices in the wider ICT value chain through industry
collaboration. Their participation in
the Electronic Industry Citizenship Coalition (EICC) enables
Cisco to exchange ideas and pool resources with industry peers, respond to stakeholder concerns,
and influence the development of industry standards.

Finance and Accounting

Cisco has strong
finances in its annual report from 2011 they report revenues from sales
more than $43 billion and increases of 8 % compared to the year before. The sales in 2011 were
$34.5 billion with increases of 6%. In the services activities, the revenue was $8.7 mill
ion and
represents the 20% of the total revenue. The routing revenue was $334 million and new product
revenue $13 billion. The strong balance sheet is a competitive advantage for the investors.

Legal Issues

As stated in Cisco’s annual report (2011), it
is currently subject to legal proceedings,
claims, and litigation arising in the ordinary course of business, including intellectual property
litigation. While the outcome of these matters is currently not determinable, the company does
not expect that the

ultimate costs to resolve these matters will have a material adverse effect on
the consolidated financial position, results of operations, or cash flows if Cisco.


Cisco, as well as many other companies, uses the firm value base model in the case
nalysis because this model is typically used to analyze internal operations of an organization.
Because companies have different functions, processes and tasks, it can be difficult to analyze
and describe the different procedures to an outside party.

rtunately, the firm based value chain model provides a simple, clear and complete format that
can easily be used as the framework to explain the business processes of their organizations in a
manner that can easily be understood.



Discussion Topic


Problems/Needs identification for ERP implementation

The needs for ERP implementation at Cisco included


Company’s current systems were not catching up with their growth and they were not
able to make changes to the application to meet their business


Even though their software vendor offered an upgraded version with time, it would not
meet their future business needs.


Deciding to implement different systems for the different departments or deciding to run
all the functional areas together under
a common architectural database.


Concerns about the size, cost, and time to implement the ERP system.

Here is another version:

Problems and needs that drove implementation of an ERP system

Cisco Systems was experiencing a growth rate of 80% per year. The
software used was old and
designed for companies that were smaller, and Cisco outgrew the optimal size. They were the
largest customer of their software vendor, which was currently in the process of being purchased.
Concern of future support made upgrading

important regardless of whether Cisco wanted an
ERP solution or not. The company had strict standards making ERP ideal over individual
business units implementing their own; departments were not taking the initiative to purchase
new software for their own

groups anyway. Finally, a major outage shut down the company for 2
days; this was unacceptable, and could not happen again.


Discussion Topic 4

Evaluation of ERP Implementation at Cisco

Problems and needs that arose before and during implementat

For the system to be configured properly, the best employees had to dedicate time to this project;
it was difficult to spare them from their actual jobs causing either company performance to
suffer, the overworked employees, or both. The project timel
ine was extremely tight to the end of
the fiscal year either forcing the project to be longer or shorter than optimal. Major software
modifications were required, since business processes varied from the standards in Oracle that
were beyond the ability of
configuration. Lastly, the hardware itself required upgrading to handle
the transaction volume and capacity of the new software. This would not have been as big of a
deal if it was discovered at the start of the project; however, the system was tested by m
and not at the same time, and the issue was not discovered until the system went live and caused

disruption to the workflows. On the plus side, their contract required the vendor to pay for the
necessary upgrades.

Evaluate ERP implementation at Cis
co Systems
Integrate tangible/intangible topics using
a cost
benefit analysis.

Although the notion of implementing Enterprise Resource Planning (ERP) at Cisco Systems was
crucial in supporting their 80% annual growth rate (since incremental
modifications were just not
enough) it did not come free of drawbacks and benefits.

At Cisco Systems, one of the major constraints of implementing the organization wide ERP
system was the maximum cost of $15 million that could be budgeted and time frame o
f nine
months, with 14% allocated towards headcount 16% towards software, 32% towards hardware
and 38% towards systems integration (Austin, Nolan & Cotteleer, 2002, p.14, Exhibit 3). Apart
from these tangible costs associated with the implementation, it al
so had to be considered that
personnel within the organization that were recruited to be on board for the ERP system were
only being able to devote their time and expertise on working in collaboration with Oracle and
KPMG, especially the IT department. ‘“W
e are needing to divert more and more energy, and
more and more resources towards the project.” IT did nothing else that year (Austin, Nolan &
Cotteleer, 2002, p.9).’

In the long run, however, the benefits associated with the system far outweighed the cos
ts. For
one, with the implementation of ERP at Cisco, integration demonstrated the system’s ability “to
take a Cisco order all the way through the company’s business processes (Quote
(Austin, Nolan & Cotteleer, 2002, p.8).” This streamlined operat
ions and decreased inefficiency
in communications amongst various business functions, leading to increase in overall
productivity for the organization. Furthermore, as kinks were sorted through in the stabilization
phase of the implementation, as “technica
l problems associated with Oracle implementation
proved to be short
lived…new information systems would fulfill the promise of supporting the
rapid growth that the company was experiencing (Austin, Nolan & Cotteleer, 2002, p.11).” This
was indicative of th
e fact that the potential costs that would have been associated with
“constantly band
aiding” existing systems would be reduced and systems outages or the
corruption of the database could be avoided.

Also, the implementation of the system allowed for the

company to maintain the 80% growth
rate sufficiently. Just six months from when the process was implemented, July 1995, the
company was achieving net sales of approximately $2.2 billion. Three years later, this number
increased by nearly 286% to net sales

of about $8.5 billion (Austin, Nolan & Cotteleer, 2002,
p.12, Exhibit 1). With consistent system outages that were prevalent before Oracle and KPMG
joined forces with Cisco, this substantial growth would likely not be in that zone.

Not only will Cisco h
ave significant cost
savings and increased sales, with the implementation of
this ERP system, but additionally, as mentioned, the flow of communication amongst the various
functional teams in the organization, including the order entry, manufacturing
, finance,
sales and reporting and finally technology, will become more timely and relevant and

consequently lead to an improvement in resource control, organizational planning, operations
and decision making for Cisco Systems (Austin, Nolan & Cotteleer, 2
002, p.15, Exhibit 4).

Although the implementation of ERP at Cisco was completed in a timely and mostly efficient
manner, some of the decisions made during the actual implementation process could have been
adjusted for maximum benefits and to avoid some of

the kinks that were present early on after it
went live in the organization. Nevertheless, overall, the implementation was a wise decision on
Cisco’s part that led to quite an accelerated growth for the organization and efficiency for users
within the org
anization and for Cisco’s customers.

We’ve found five reference sources



How Cisco IT Migrated to an ERP Technical Support Module
. Retrieved April 5, 2012, from

Sarah Jane Johnson (October 14, 2010). ERP Payoffs and Pitfalls. Retrieved April 5, 2012, from

Data Monitor (2011), Cisco System, Inc.

Company Profile. Retrie
ved April 5, 2012, from

Suen, J., Sangari, S., Sun, J., Varanasi, S. Cisco ERP Implementation Case [Power Point Sli
Retrieved April 6, 2012, from University of California, Davis Website: u

Bindas, B,. Cisco Systems. Retrieved April 6, 2012, from Penn State University Website:


The implementation was a success in that the completion deadline was met and the project came
in on budget. It could hav
e been a better implementation as when all the users were live; the
system went down at least once a day. This was a result of the hardware architecture was not
robust enough and not sized properly. Secondly the implementation team did not test the system
with a large enough database at the same time. As a result the system was overwhelmed with the
size of data when all the users were live. We would recommend testing the system at full
capacity with the largest possible database before going live with all t
he users.