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Oracle didn't help Cisco see the precipice

Reporting software shortcomings hit another firm

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Marconi isn't the only networking firm whose disastrous failure to spot the downturn in telecoms market might be linked to the shortcoming in its implementation of Oracle's E-Business Suite.

Cisco Systems is a reference site for the same E-Business Suite, which insiders at Marconi have told us failed to flag up a slump in telecom sales. This revenue shortfall forced Marconi to suspend trading in its shares on July 5, in order announce its profits would be half of those expected.

As previously reported, Marconi investors and shareholders today have had their first opportunity to quiz the board on its handling of the profits warning which wiped billions off the value of shares.

Insiders at Marconi have told us board explanations that no-one saw the downturn coming doesn't come close to telling the whole of the story. Our sources tell us the Marconi's many acquisitions and the failure of (partially implemented) Oracle reporting software to keep up with the change contributed to the mishandling of the situation.

The revelations from Marconi cast new light on Cisco's May announcement of losses of $2.69 billion on its first ever quarterly decline in sales. One of the main reasons for the disappointing results was that an excess inventory charge of $2.2 billion took it well into the red.

At the time it looked as if this was due to the collapse of competitive carriers in the States, who had centres full of part-paid Cisco kit but the insider view from Marconi hints that there may be more to it than this.

Cisco was the first company to integrate its Web site with an Oracle infrastructure (based on E-Business Suite), creating Cisco Connection Online (CCO), an Extranet connecting the giant to its partners and suppliers.

For years Cisco (the poster child of the Internet economy) has been banging on about how almost three-quarters of its revenues are made through unassisted sales from its Web site, saving $550 million annually "while improving customer satisfaction".

Cisco bragged that its system would give it the ability to close its books daily, giving it visibility of the performance of its business across its many divisions and acquired companies. So if the system is that good why did it end up with $2.2 billion in excess inventory at the end of the quarter?

That question has never been adequately explained but Marconi's problems allow us to suggest a theory that the implementation of Oracle's E-Business Suite may somehow be lacking at both firms.

A senior Dell executive told us a couple of month's ago that Cisco's sales guys and partners were sometimes booking the same order into the system three times, and that this wasn't picked up automatically. Dell, which knows a thing or two about e-commerce itself, had no such problems, he told us.

Of course this evidence is strictly hearsay but it does give a suggestion of what was going on at the heart of a Cisco's business which, up until the start of this year, was enjoying almost exponential growth.

Its far from proven whether the course of Cisco and Marconi's businesses was affected by the reporting software they used but one thing for sure is that even in the during boom times proper financial controls need to be in place. Technology, however sophisticated, is never going to be able to run a business alone. ®

External Links

Oracle case study of Cisco Connection Online
Cisco Systems Reports Third Quarter Earnings

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Oracle aided Marconi collapse
Massive fall-out from Marconi share collapse
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