Current Issue Case: Cisco's E-commerce ConnectionIn 2001, Cisco sold more than $17 billion of a total $19 billion worth of routers, switches, and other network interconnect devices over the Web. Cisco's Web site (www.cisco.com) has evolved over several years, beginning with technical support for customers and developing into one of the world's largest e-commerce sites. Today, Cisco offers nearly a dozen Internet-based applications to both end-use customers and reseller partners. Cisco began providing Internet support in 1991. Software downloads, defect tracking, and technical advice were the first applications. In 1994, Cisco put its system on the Web and named its site Cisco Connection Online. By 1998, Cisco's customers and reseller partners were logging onto Cisco's Web site about one million times a month to receive technical assistance, check orders, or download software. The on-line service has been so well received that over 90% of all customer service inquiries are delivered on-line, as are 90% of software updates. Cisco builds virtually all its products to order, so there are very few off-the-shelf products. Before the Cisco Web site, ordering a product was lengthy and complicated. Cisco began deploying e-commerce tools in 1995, and by 1996, the Internet Product Center allowed users to purchase any Cisco product over the Web. In 1999, the same customer's engineer could sit down at a PC, configure a product on-line, immediately detect any errors, and route the order to Cisco's procurement department. Cisco's large customers take advantage of immediate and automatic access to Cisco's on-line ordering, configuration, and technical support tools. But, because of their large purchasing volumes, these large customers sought a faster alternative to Cisco's Web site. Therefore, an alternative program was launched in 1997 that interactively links the customer's and Cisco's computer systems over the Internet. In this way the configuration of the new system and the price is validated at the customer's own PC before the order is placed. With on-line pricing and configuration tools, about 98% of the large orders go through Cisco's system, saving time for both Cisco and its customers. Lead times were reduced, down from 4 to 10 days to only 2 to 3 days, and customers' order submission productivity increased an average of 20%. In the first 5 months of the system's operation in 1996, Cisco booked over $100 million in sales on the Internet alone. In 1997, the figure grew more than tenfold. Cisco closed 1998 with $4 billion in on-line sales. On-line sales grew to 85% of total volume during 1999, reaching $37 million per day. Finding Order Status Each month, Cisco's Web site receives hundreds of thousands of order status inquiries such as When will the order be ready? Is it eligible for NAFTA? What export control issues apply? Cisco gives customers the tools on its Web site to find the answers by themselves. In addition, Cisco records a shipping date, the method of shipment, and the current location of each product. The company's primary domestic and international freight forwarders regularly update Cisco's database electronically with the status of each shipment. The new information in the database automatically updates Cisco's Web site, keeping the customer current on the movement of each order. As soon as an order ships, Cisco sends the customer a notification message by e-mail or fax. Benefits Reduced operating cost: Cisco estimates that putting its applications on-line saves the company hundreds of millions of dollars per year, or over 17% of the total operating costs. Enhanced technical support and customer service: With 60% of its technical support and customer service calls handled on-line, Cisco's technical support productivity has increased by 200% to 300% per year. Reduced technical support staff cost: The on-line technical support reduces technical support staff costs by roughly $125 million per year. Reduced software distribution cost: Customers download new software releases directly from Cisco's site, saving the company $180 million in distribution, packaging, and duplicating costs per year. Having product and pricing information on the Web and Web-based CD-ROMs saves Cisco an additional $50 million per year in printing and distributing catalogs and marketing materials to customers. By using e-commerce, Cisco is able to increase the sales to business while reducing costs associated with order processing, customer service, technical support, and confirming order status. DISCUSSION QUESTIONS • Describe how Cisco succeeded in selling its products and providing services to its customers on-line. • What kinds of inquiry are supported when customers check order status? • What are the benefits of Cisco Connection Online to Cisco and its customers? • What steps are involved in ordering a Cisco networking product on-line? Send in your analysis of the above case to b_cognizance@iiita.ac.in latest by 30th May 2005. -------------------------------------------------------------------------------------------------------------------------------
|