ELECTRONIC BUSINESS

Invest now for competitive advantage, says Cisco MD

Cisco shows the way for web business

Tony Waltham

Thai companies need to understand that their investments in IT equipment for web-based services are a necessary outlay of funds for their competitive advantage and not merely for better productivity, according to Cisco Systems (Thailand) Managing Director Vorkon Patra-Yunan.

By way of illustration, he pointed to how Cisco Systems, the leading supplier of data networking equipment, had gained tremendous financial savings and benefits by putting its business and its internal operations onto a corporate web.

All orders of Cisco products that are made here by the company's business partners in Thailand are placed directly on the web, as is 70 percent of Cisco's business around the world today.

All product information is on the web, along with pricing information, order forms and delivery tracking.

Mr Vorkon pointed out, however, that its business partners here still paid for their products by traditional means, such as by opening letters of credit.

He said that if other Thai companies were to adopt this strategy, with a web-based business but still making their payments using traditional means, then they would remove most of their security concerns that now deterred them from getting into e-commerce.

He said that most Thai companies simply did not understand this and as a result they were losing out by not adopting an efficient electronic commerce model.

But for Cisco Systems, the Internet and corporate intranet is more than merely a way of streamlining the order and supply chain process, it is a core part of its internal operations.

Mr Vorkon said that Cisco Systems had no Human Resources Department, no IS Department and no Finance Department, as all these functions were now web-based.

Staff members can edit their corporate profile, which is stored on a central server so that when personal information, such as a mobile telephone number, should change, it is kept up to date by the employee.

The company has no paper copies of personnel records and all this information is on the web and accessible in one of three levels of password-protected access.

Technical enquiries are dealt with by providing access to an extensive knowledge base at a technical research centre on the web that provides answers to most questions, while the company operates with incentives and a "management-by-objective" scheme.

This is such that if employees achieve their assigned goals, which are reviewed on a quarterly basis, then their bonus is automatically accredited to them, Mr Vorkon explained.

Similarly, expense claims are entered into the intranet and staff are automatically reimbursed for such charges made using the company's credit card service provider, American Express.

Cisco has registered remarkable savings through its corporate intranet, with global orders placed over the network now standing at 70 percent of its total, up from a mere 20 percent in April 1998.

This amounts to $22 million in orders a day from its 1,025 business partners worldwide, or a total of $8.7 billion a year.

Cisco's business is one of the fastest growing in the world and it has expanded 20-fold in just four years, and this year its Thailand operations are double the volume of the previous year _ but with the same number of employees, Mr Vorkon pointed out, citing the corporate intranet as the reason _ coupled with a policy that strongly encourages teleworking.

The company keeps its employees informed of events and developments and offers training in the form of what it calls "IP/TV broadcasts", which are also available after the event for reviewing, while training courses can be followed online.

This is generally a live video image, coupled with presentations in the form of charts and graphs as well as the script of what is being said that can be followed by participants in the training.

There is also a "Ciscocast" ticker of information that crosses the foot of the screen and supplements email messages, enabling staff to click for more information, Mr Vorkon explained, noting that this helped to avert email "overload."

But running the business on the web has brought impressive savings to Cisco, which saved US$650 million last year, contributing 30 percent to the company's overall net profit.

The company also realised a 25 percent productivity increase that it attributes to this way of doing business.

Mr Vorkon also noted that in terms of market capitalisation, in four years the company had advanced from being valued at $14 billion to $180 billion today, where its six closest competitors in the networking business, 3Com, Newbridge, Fore, Cabletron, Bay and Ascend, had together grown in value from $24 billion to just $43 billion.

He said that this style of business brought benefits any way you looked at it, with sales for the 1998 Fiscal Year increasing from $8.49 billion to $12.15 billion in Fiscal 1999, a 43 percent growth, while the profit in this period increased by 54 percent to $2.1 billion from $1.36 billion.

Good security underpins such a wide and complex network, and Mr Vorkon noted that this was a combination of the right hardware and software, good policies along with encryption and other disciplines.

However, he did note that many Thai companies here, ranging from major banks to some ISPs, were afraid to spend the additional funds on a good security suite and good networking equipment with advanced features because they were preoccupied with the price of the equipment.

Instead, he suggested, they should be looking to invest in competitive advantage and in procuring the best equipment to secure this. The problem with this cost-conscious approach was, all-too-often, that they would then find that their network was not as secure as it could or should be, and then they would revert to their old way of business and lose any possibility of competitive advantage.

Even some ISPs here, while being in a fiercely competitive business, would procure cheap networking equipment and then try to sell a service based on this _ which was very short-sighted.

Some banks, Mr Vorkon said, also failed to recognise the benefits of these intangibles and selected equipment based on price, rather than on features that could enable enhanced services.

 

© Copyright The Post Publishing Public Co., Ltd. 1999
Last Modified: Mon, Nov 16, 1999
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