Cisco seeks greater productivity through study

Cisco recently began an intense management focus on internal business processes in an effort to boost its productivity, Cisco CEO John Chambers told reporters and analysts Wednesday.

If the research on business processes yields insights, Cisco plans to share them with its customers to help them also improve productivity, Chambers said at the Worldwide Analyst Conference 2003, which is being held in Santa Clara, Calif., and at the company’s headquarters in San Jose, Calif., over two days.

In a short interview after his speech before 400 people, Chambers was asked if Cisco might eventually sell such management guidance as a consultancy. “It depends on what we find,” he said.

Process management has become a fashionable IT trend among analysts in recent years, although those in attendance at the Cisco event said it’s significant that Chambers and other executives are focused on the concept now. “It signals a shift of Cisco from a hardware company to a services company with network solutions,” said Zeus Kerravala, an analyst at The Yankee Group.

“It’s a whole new step for Cisco, and they’re on the right track,” said Dennis Drogseth, an analyst at Enterprise Management Associates.

Mark Fabbi, an analyst at Gartner, said it may be “tough for Cisco to deliver” business process advice to customers, a view reinforced by the calls he gets about the cost of Cisco gear and low levels of return on investment.

Business process management includes a wide range of adjustments a company can make to reduce costs and increase productivity, including everything from inventory control to product development and manufacturing and IT system interaction, analysts said. Gartner calls the trend “business process fusion,” Fabbi said.

Randy Pond, recently named senior vice president of operations, processes and systems management at Cisco, said that when the company develops business process methods, it will share them at no cost to its customers through a 6-year-old Cisco program known as the Internet Business Solutions Group.

Chambers said the focus on business process emerged after top executives from 45 large corporations told him in March that although IT and networking gear from Cisco serve as “enablers” for their businesses, they wanted to cut the payback time on IT investment from as much as 36 months to as little as 12 to 18 months. Many at the time were “pessimistic” about increasing IT spending, although Chambers said spending prospects by customers are improving.

Customers have also indicated they see greater benefits from technology investments such as voice over Internet Protocol hardware and software — if business processes are adjusted to accommodate the new technology, Chambers said.

Pond and Chambers didn’t describe any process adjustments that Cisco is likely to undertake internally. But Chambers said he wants productivity rates to reach 10% to 15% annually in the next three to five years companywide, and he wants the annual value of productivity per employee to rise from its current rate of $590,000 to $700,000 before Cisco begins hiring more workers.

Chambers said the decision to study business process was unexpected, because “process used to mean bureaucracy,” a comment that provoked laughter from several senior Cisco managers at the conference.

One analyst on hand asked why Cisco didn’t outsource the effort to a consultant for business process evaluations. Chambers responded, “We’ve never been good at picking consultants,” then noted that “nobody has done this real well.”