Critical Success Factors of Inter-Organizational Information Systems: A Cisco & Xiao Tong Case Study

1. Critical success factors of inter-organizationalinformation systems—A case study ofCisco and Xiao Tong in China Xiang-Hua Lu ,*, Li-Hua Huang , Michael S.H. Heng School of Management, Fudan University, Shanghai 200433, PR China School of Computer and Information Science, University of South Australia, Adelaide, SA, Australia Accepted 1 June 2005 Available online 6 October 2005 指導教授 ：林娟娟 教授 學生： 98756014 陳國智

2. Agenda • 1.Introduction • 2.Literature review • 3.Research method • 4.The inter-organizational information system of Cisco and Xiao Tong • 5.Critical success factors of the inter-organizational information system • 6.Conclusion • Appendix

3. 1. Introduction • IT-based inter-organizational information systems is a powerful strategic tool. • IOS is increasinglybeing used by Chinese business firms to enhance theircooperation with transnational corporations. • It is hopedthat the findings provide some insights for othercorporations that want to implement IOS in China.

4. Introduction(con.) • Rockart defines CSFs as those few key areas of activity in which favorable results are absolutely necessary for a particular company to reach its goals. (things must go right) • An IOSdiffers from an internal distributed information ： • Allowing information to be send across organizational boundaries trough communication technology.

5. Introduction(con.) • The strategicvalue of IOS has been well recognized for: • Real-timeinteraction • Higher transaction accuracy • Moreefficient and quicker payments • Rapid response • Reduced search costs • Reduction in inventory andtighter links to customers

6. Introduction(con.) • The IOS system of Cisco and Xiao Tong is a web-basedB2B application using RosettaNet standard. – The first successful IOS. • Web-based applications provide corporations an opportunity to develop new communication standards that can be used within an entire industry and even across industries. • RosettaNet is a worldwide consortium of more than 400 of the world’s leading electronic components to create, implement and promote this open e-business process standards.

7. Introduction(con.) • Look for the CSFs through a case study research method for three reasons: 1.CSFs have been heavilyused by IS research, but mainly in intra-organizationalinformation systems. 2.Much is known about the CSFs of information systems,but CSFs specific to a given technology in a given organization environment. 3.There are many successful cases RosettaNet-based IOS, only one paper (Eric, 2002) focuses on CFSs.

8. Introduction(con.) • Groups the CSFs uncovered in our research into three clusters, namely: • The cluster of decision motivation. • The cluster of implementation process. • The cluster of infrastructure conditions.

9. 2. Literature review • Include both web-based and non-web-based IOSs. • IOS share common features of other information systbems, including common critical success factors.

10. Literature review(con.) • One studyidentifies the following six characteristics of inter-organizationsystems compared with gegernal IS: • (1) They require partners which are willing, able and ready to cooperate. • (2) A key role for standards (e.g. datacommunications protocols, company policies). • (3) Third parties are often involved. • (4) The work must be synchronized among partners. • (5) Technical aspects are less important than the new electronic relationships involved . • (6) Efforts often cannot be secretive, i.e.IOS require more openness especially when industry standards are adopted.

11. Literature review(con.) • The most obvious feature of IOS :It involves two or more parties being electronicallylinked up for the purpose of conducting their businessactivities. • Issues related to working partnership arelikely to feature prominently.

12. Literature review(con.) • The factors may be grouped broadly under the following categories: • Psychological perception by organizational players — trust, motivation and consensus. • Organizational preparation and response—cross-organizational team, preparation and coordination, project management and maintenance and BPR. • IS/IT infrastructure • Industry standard.

13. Literature review(con.)

14. Literature review(con.) • Trust • The most critical factor forsustained business relationships and that it needs to benurtured between partners for successful IOS implementation. • Unless two companies feel that their relations are so interdependent that there are operational savings and benefits from the IOS, they are unlikely to bear the cost in implementing IOS

15. Literature review(con.) • Motivation • In order to compete in the global market at the level of supply chain • Cost down and to get faster response time so as to enhance its comprehensive competition. • Consensus on IOS mission • The shared vision of IOS between both sides is a vital element for IOS success.

16. Literature review(con.) • Cross-organizational team • A dedicated cross-functional team with the appropriate skills and executive support. • Preparation and coordination • Effective communications • Project management and maintenance • A detailed project plan and effective communication

17. Literature review(con.) • BPR • Refining and re-engineering business processes. • To achieve seamless integration of key processes. • Establish smooth exchange of data and information between themselves • The potential value of IOS is realized only when it isfully integrated with the other internal informationsystems.

18. Literature review(con.) • IS/IT infrastructure • The capability of the legacy systems andIT infrastructure affects to a significantof implementing IOS and reaping the benefits. • Industry standard. • Shared standard

19. 3. Research method • Interview with core personnel • 5 senior managers: • CEO.CIO of Xiao Tong • IT Director from the IT vendor • 2 Senior managers of Cisco • 5 heads of departments that were affected by IOS. • 6 employees • satisfaction evaluation survey • Find out the differences before and after the IOS implementation.

20. Interview • Usethe simple framework developed in Section 2 as a basis for structured interview, inviting them to comment on the findings based on literature research. • Every formal interview, either faceto-face or through telephone.

21. Satisfaction evaluation survey • Designed a structuredsatisfaction evaluation questionnaire to record thedifference before and after the IOS implementation. • The aim was to obtain some quantitative data as well asmore information on corporation background and thedegree of implementation success.

22. How to evaluate success • Need to employ a set of criteria to reach this conclusion. • Satisfaction-based evaluation isone efficient and simple supplementary method that canbe used in IOS effectiveness evaluation. • The satisfactionevaluation of the stakeholders is as importantto judge the project’ssuccess or failure.

23. How to evaluate success(con.) • The satisfactionevaluation of the stakeholders is as important asotherobjective methods employed to judge the project’ssuccess or failure. • Demonstrate the success of this case both from the calculated effectiveness and satisfaction evaluation of internal staffs of Xiao Tong.

24. 4. IOS of Cisco and Xiao Tong • Case Background • The IOS of Cisco and Xiao Tong • Part I : Production information updating • Part II :MLC integration • Part III : Submitting PO • Part IV : PO status updating • Part V : Invoice pre-check in

25. Case Background • Cisco Company, one of the biggest network equipment providers, experienced its toughest years ever in 2001 and 2002. • Cisco was embarking on cost-saving, cutting down the manufacturing cost and sales cost • These traditional ways had reached the point where there was little left to be gained. • Gain competitive advantage through value generation-Internet enabled.

26. Case Background(con.) • Cisco began to promote their B2B plan: integration of its commerce site and customers’ back-end systems through a combination of off-the-shelf software and RosettaNet standards. • Xiao Tong was founded in 1990. • One of Cisco’s four first-tier distributors in China.

27. Case Background(con.) • The revenue of Cisco in China’s network products market： • 6% of the whole global market revenue. • Xiao Tong was responsible for 11.8% of Cisco’s revenue in China. • For Xiao Tong, Cisco was its biggest supplier, about 60% of its transaction was related to Cisco’s products.

28. The IOS of Cisco and Xiao Tong • The first successful one that strictly conforms toXML protocol and e-Business RosettaNet standard in China. • The business processes were mainly related to Purchase Order (PO) execution between Cisco and Xiao Tong, including product information update, product configuration, PO submission, PO status update and invoice pre-check-in, respectively

29. Process diagram after IOS

30. Part I : Production information updating • Deliver part numbers and price information to Xiao Tong's ERP system. • Verify the data integrity of Xiao Tong's PO (purchase order)/SO (sales order) entry.

31. Part II :MLC integration • Removed the need to do configuration check in Cisco Connect Online (CCO). • Any salesperson or other staffs who had the right to configure could just do it in their own ERP system. • In the old process, the time spent on the transfer was much more than the time of configuration.

32. Part III : Submitting PO • Xiao Tong could submit PO in its own ERP system instead of on CCO. • Old process: the staff in Xiao Tong’s product planning department had to visit CCO to do configuration, and then submitted PO on CCO, followed by retyping PO data in their own ER • The new process removed the work of retyping the same set of data in ERP system and CCO, which would reduce typing errors and processing time.

33. Part IV : PO status updating • It provided the possibility to the product planning department and the distribution division to check the status of PO. • Instead of checking PO status on CCO or calling Cisco by phone, they could now check their status in Xiao Tong's own ERP system.

34. Part V : Invoice pre-check in • All the information in Cisco's commercial invoice would be sent to Xiao Tong through this process. • Xiao Tong could know the shipping schedule precisely, which makes it feasible for Xiao Tong to do sufficient preparations for the incoming goods.

35. Part V : Invoice pre-check in(con.) • They could scan in all products according to the serial numbers without errorwhen products arrive. • Could have the accurate information for every product in its warehouse. • They could make smart payment schedule. • The cycle from SO to PO in new process had been reduced time to 2.5 days. • Cost saving was the equivalent of US$ 33,000 annually.

36. Part V : Invoice pre-check in(con.) • Xiao Tong could get data related to its sales activities more quickly, more accurately and more integrally than ever before. • The managers expressed satisfaction with the IOSs support of their ability to improve decision making, as indicated in the pre-IOS figure of 3.00 to post-IOS figure of 4.33

37. 5.Critical success factors of the IOS • Three clusters: • Decision motivation • Implementation process • Infrastructure conditions

38. CSFs which motivated the decision-1 • CSF1: strong motivation was essential to gain and thereby guaranteed the commitment from partners • CISCO: • The motivation of Cisco was mainly based on long-term strategy. • In order to compete in the global market at the level of supply chain • Organizational underpinning of its very strong commitment in this project

39. CSFs which motivated the decision-1 • Xiao Tong: • 1.The pressure from Cisco was the main reason. • 2.capital arrangements proposed by Cisco: • (1) Certain sales profit rebate in the first 2 years after implementation of IOS. • (2) Cisco covered all software cost for Xiao Tong, amounting to about US$ 350,000.

40. CSFs which motivated the decision-2 • CSF2: shared motivation and vision • Need communication to reach consensus on the vision- Top managers of Xiao Tong and Cisco had a discussion about the blueprint and objectives of IOS. • The shared vision of IOS among all stakeholders would reduce the divergences of opinion in the implementation process and in turn lowered the risk and shorten the period of IOS project.

41. CSFs in implementation process cluster-1 • CSF3: cross-organizational implementation team • The implementation team for the IOS in this case consisted of three parties. • Four sub-teams were built. • management team • business team • technical team • partner team

42. CSFs in implementation process cluster-1

43. CSFs in implementation process cluster-2 • CSF4: high integration with internal information systems • If no way to integrate IOS with internal information system =the value of IOS would be greatlydiminished. • Value created by IOS, was the direct reflection of the internal operation performance

44. CSFs in implementation process cluster-3 • CSF5: inter-organizational business processre-engineering • 1. adjustment of process. Ex: post-sales service • 2. new form of cooperation between two firms. Ex. Production Configure

45. CSFs in infrastructure condition cluster-1 • CSF6: advanced legacy information system and infrastructure • Cisco has mature infrastructure and adequate capability. • Xiao Tong’s ERP modules had covered almost every aspect of its operations, such as procurement, finance management, order management, logistics and inventory management.

46. CSFs in infrastructure condition cluster-2 • CSF7: shared industry standard • It makes sense for them to select the same standards when they are going to implement IOS. • RosettaNet Partner Interface Processes (PIPs) define business processes between supply chain partners

47. Discussion of the findings • Organizations using the IOS must : • 1.derive benefits from the system. • 2.must be able to co-operate with each other. • 3.must perceive their business relationship as interdependence.

48. Discussion of the findings • The seven CSFs of inter-organization information system

49. Conclusion • Uses a case study method to examine the success story of the IOS of Cisco and Xiao Tong in China. • Identifying seven critical success factors which are grouped into three clusters • Offering some guidelines for corporations that consider IOS adoption with partners, especially for those which want to cooperate with Chinese business firms.

50. Conclusion • limitations • The seven factors might not be complete since it is a single case based study. • With more and more IOS cases, the list of factors can be modified. • Different countries have different cultures, business practices and business institutions.