What went wrong with Cisco’s ERP implementation?
In 2001, Cisco Systems, Inc. was the world’s leading manufacturer of networking equipment and one of the most admired companies in America. The company had successfully navigated the technology downturn of the late 1990s and was posting strong profits and sales growth. But in early 2001, Cisco began to experience problems with its enterprise resource planning (ERP) system. The ERP system, which had been implemented 18 months earlier, was not working as planned. Inventory levels were rising, order backlogs were increasing, and customer satisfaction was declining. In March 2001, Cisco announced that it would take a $2.5 billion charge against earnings to write off the cost of the failed ERP implementation.
What went wrong with Cisco’s ERP implementation? This case study will examine the causes of Cisco’s problems and explore what the company could have done differently.
2. What went wrong with Cisco’s enterprise resource planning implementation?
There are several reasons why Cisco’s ERP implementation failed. First, Cisco did not adopt a “big bang” approach to implementing the software. Instead, it implemented the software in phases, rolling it out to different business units at different times. This phased approach created chaos and confusion within the organization and made it difficult for employees to use the system effectively. Second, Cisco did not assign adequate resources to the project. The company did not hire enough experienced project managers or consultants to help with the implementation. As a result, many key decisions were made by inexperienced employees who did not fully understand the implications of their decisions. Third, Cisco did not adequately communicate with its employees about the changes that were taking place. Employees were not given enough information about the new system or how it would affect their jobs. Finally, Cisco did not properly test the software before implementing it. As a result, many employees were not properly trained on how to use the system and there were significant bugs in the software that caused further problems down the line.
3. What could Cisco have done differently?
If Cisco had adopted a “big bang” approach to implementing its ERP system, it would have avoided many of the problems that occurred during the rollout. When implemented all at once, an ERP system can be disruptive to an organization, but this disruption is usually less costly and less time-consuming than a phased approach. In addition, a big-bang implementation would have allowed Cisco to focus its resources on a single goal: getting the system up and running as quickly as possible. By contrast, in a phased implementation, resources are spread thin across multiple Business units, which can lead to delays and cost overruns. Furthermore, a big-bang approach would have given employees a chance to get used to the new system before it was fully operational; in a phased implementation, employees are often asked to switch back and forth between old and new systems, which can be confusing and difficult to learn.
4. Lessons learned
The Cisco case illustrates some important lessons about ERP implementations:
– First, a “big bang” approach is usually preferable to a phased approach;
– Second, adequate resources must be assigned to the project;
– Third, employees must be properly informed about the changes that are taking place;
– Fourth, proper testing is essential before an ERP system goes live.