Enterprise IT at Cisco (2004)
Summary by Alissa Crescimano
This case takes a look at the progression of IT governance and project management at Cisco. It discusses the issues faced by the CIO of Cisco in developing the right IT organization, prioritizing IT projects, and funding IT initiatives. Essentially, the case shows that IT governance must be aligned with business activities and tie all functions together to support the company’s strategy. Below outlines the major restructuring efforts and projects during the years.
1993-2001 ·Peter Solvik, CIO of Cisco, joined in 1993 ·At the time, IT was an internally oriented cost center ·There were 9 business functions, 7 technology groups, and 4 marketplaces ·Solvik implemented the following changes: oChanged reporting relationship of IT department (from Finance to Customer Advocacy) oReallocated the majority of the IT budget to each department so that each group controlled their money (instead of grouping at top in G&A) oDisbanded central IT steering committee and pushed IT investment decisions to line organizations (but still executed by centralized IT organization) ·Changes helped get away from the perception of IT as “overhead” ·1994: A more robust infrastructure was needed to replace rudimentary IT systems. Cisco implemented the ERP system to help manage inventory and manufacturing processes. ·Over the 1990s, Internet capabilities were improved to meet growth of business ·Resources were allocated based on a client-funded-project system, which each function controlling its own budgets and deciding on projects to pursue ·Problem: By 2000, there were over 200 projects in process, 40 companies had been acquired, and IT had “unlimited budget” as long as functions were willing to allocate money… Direction was lost.
2001 – 2003 ·Sales slowed as markets stumbled with September 11th attacks and Internet bubble burst ·Solvik left Cisco, Brad Boston joined as CIO in 2001 ·IT decisions had been made in functional silos, with no centralized group checking for conflicts and redundancies ·Lack of centralized planning made it difficult for Cisco to update its most important enterprise-wide systems ·Groups had made their own custom interfaces and programs ·First, Boston decided to take administrative action: oHalt all projects until IT was reorganized oChange the IT funding model oGet support of senior leaders to emphasis the importance of central governance oUncover all “shadow IT” projects (i.e. projects happening on the side) ·Created a centralized IT planning and spending in major IT infrastructure projects ·Second, Boston decided to help guide the selection of 3 enterprise projects: oUpgrade the Oracle ERP system oEstablish an enterprise reporting and business intelligence solution oDevelop a “single source of truth” customer database (to be called “e-customer”) ·Finally, Boston focused on a new process for funding IT projects oIT would no longer function as a “vendor” and simply build whatever groups wanted oFunding would be split between infrastructure (monitored by central IT), application development, and direct-charge items. Application and direct-charge spending would be monitored by client groups. oA portion of funding from each group was to be contributed to the central budget for companywide initiatives. oFor multi-functional projects, groups were expected to divide costs based on usage and benefits to each group ·The Business Process Operating Committee (BPOC) was created to emphasis the importance of a higher degree of centralized IT planning. oBPOC was a cross-functional team oA “high-level advisory committee oIn charge of prioritization of issues that cut across all divisions ·Boston assigned an owner was assigned to each of the 3 initiatives ·Boston also insisted data scrubbing be done to improve the quality of data ·It was viewed that Cisco’s IT department should be Cisco’s “first and best customer”, but utilizing the products that Cisco was known for. 2003-2004 ·Progress was made on the 3 projects ·Boston continued to make changes to increase productivity: oReorganized team into business process groups to align with major activities – Market to Sell, Lead to Order, Quote to Cash, etc. oRemoved regional subdivisions, forcing team to think more in a global context oEngaged in more worldwide enterprise planning, especially with foreign counterparts o IT had become a matrixed, cross-functional structure, making many wonder if the other functions should do the same. ·Funding of IT projects were still an issue oRejection of projects hurt employee morale oCommunication needed to be improved oRelentless focus on process and productivity dampened Cisco’s entrepreneurial nature ·Most saw the IT spending model as simply a balance between ROI and risk oThis would be good to prioritize projects, but would it discourage breakthrough ideas? ·The use of contractors was also an issue oTwice as many contractors as employees oReferred to a “shadow IT department” - not managed closely, worked on side projects oShould contractors become employees? oShould work be moved to offshore companies in India? ·Cisco had come a long way in transforming IT governance, but Boston still faced some issues: oHow to preserve the benefits of the client-funded model? oHow to make all feel invested in the IT strategy? oHow to encourage “employees to think about the greater good of the enterprise without losing the entrepreneurial drive”? oHow to propose and fund the customer interaction network?
Summary by Alissa Crescimano
This case takes a look at the progression of IT governance and project management at Cisco. It discusses the issues faced by the CIO of Cisco in developing the right IT organization, prioritizing IT projects, and funding IT initiatives. Essentially, the case shows that IT governance must be aligned with business activities and tie all functions together to support the company’s strategy. Below outlines the major restructuring efforts and projects during the years.
1993-2001
· Peter Solvik, CIO of Cisco, joined in 1993
· At the time, IT was an internally oriented cost center
· There were 9 business functions, 7 technology groups, and 4 marketplaces
· Solvik implemented the following changes:
o Changed reporting relationship of IT department (from Finance to Customer Advocacy)
o Reallocated the majority of the IT budget to each department so that each group controlled their money (instead of grouping at top in G&A)
o Disbanded central IT steering committee and pushed IT investment decisions to line organizations (but still executed by centralized IT organization)
· Changes helped get away from the perception of IT as “overhead”
· 1994: A more robust infrastructure was needed to replace rudimentary IT systems. Cisco implemented the ERP system to help manage inventory and manufacturing processes.
· Over the 1990s, Internet capabilities were improved to meet growth of business
· Resources were allocated based on a client-funded-project system, which each function controlling its own budgets and deciding on projects to pursue
· Problem: By 2000, there were over 200 projects in process, 40 companies had been acquired, and IT had “unlimited budget” as long as functions were willing to allocate money… Direction was lost.
2001 – 2003
· Sales slowed as markets stumbled with September 11th attacks and Internet bubble burst
· Solvik left Cisco, Brad Boston joined as CIO in 2001
· IT decisions had been made in functional silos, with no centralized group checking for conflicts and redundancies
· Lack of centralized planning made it difficult for Cisco to update its most important enterprise-wide systems
· Groups had made their own custom interfaces and programs
· First, Boston decided to take administrative action:
o Halt all projects until IT was reorganized
o Change the IT funding model
o Get support of senior leaders to emphasis the importance of central governance
o Uncover all “shadow IT” projects (i.e. projects happening on the side)
· Created a centralized IT planning and spending in major IT infrastructure projects
· Second, Boston decided to help guide the selection of 3 enterprise projects:
o Upgrade the Oracle ERP system
o Establish an enterprise reporting and business intelligence solution
o Develop a “single source of truth” customer database (to be called “e-customer”)
· Finally, Boston focused on a new process for funding IT projects
o IT would no longer function as a “vendor” and simply build whatever groups wanted
o Funding would be split between infrastructure (monitored by central IT), application development, and direct-charge items. Application and direct-charge spending would be monitored by client groups.
o A portion of funding from each group was to be contributed to the central budget for companywide initiatives.
o For multi-functional projects, groups were expected to divide costs based on usage and benefits to each group
· The Business Process Operating Committee (BPOC) was created to emphasis the importance of a higher degree of centralized IT planning.
o BPOC was a cross-functional team
o A “high-level advisory committee
o In charge of prioritization of issues that cut across all divisions
· Boston assigned an owner was assigned to each of the 3 initiatives
· Boston also insisted data scrubbing be done to improve the quality of data
· It was viewed that Cisco’s IT department should be Cisco’s “first and best customer”, but utilizing the products that Cisco was known for.
2003-2004
· Progress was made on the 3 projects
· Boston continued to make changes to increase productivity:
o Reorganized team into business process groups to align with major activities – Market to Sell, Lead to Order, Quote to Cash, etc.
o Removed regional subdivisions, forcing team to think more in a global context
o Engaged in more worldwide enterprise planning, especially with foreign counterparts
o IT had become a matrixed, cross-functional structure, making many wonder if the other functions should do the same.
· Funding of IT projects were still an issue
o Rejection of projects hurt employee morale
o Communication needed to be improved
o Relentless focus on process and productivity dampened Cisco’s entrepreneurial nature
· Most saw the IT spending model as simply a balance between ROI and risk
o This would be good to prioritize projects, but would it discourage breakthrough ideas?
· The use of contractors was also an issue
o Twice as many contractors as employees
o Referred to a “shadow IT department” - not managed closely, worked on side projects
o Should contractors become employees?
o Should work be moved to offshore companies in India?
· Cisco had come a long way in transforming IT governance, but Boston still faced some issues:
o How to preserve the benefits of the client-funded model?
o How to make all feel invested in the IT strategy?
o How to encourage “employees to think about the greater good of the enterprise without losing the entrepreneurial drive”?
o How to propose and fund the customer interaction network?