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Online Extra: How Cisco Saves with Net Telephony

Ever since the Internet took off in the mid-1990s, Cisco Systems (CSCO) has been one of the biggest promoters of its potential as a business tool. And Cisco has put its money where its mouth is. In fiscal 2003, the networking giant says it saved $2.1 billion on Internet-related efficiencies. Chief Information Officer Brad Boston recently talked about Cisco's technology use with BusinessWeek's Peter Burrows. Here are edited excerpts of their conversation:

Q: Cisco had a reputation as a leader in e-business before the market downturn. How has your approach changed in the past few years?

A: We have more time to concentrate on operational excellence. For example, soon after I took over as CIO, I discovered that while 92% of orders were taken over the Internet, only 29% flowed directly to manufacturing. We found there was a sizeable organization of people who just processed the orders.... Six months later, the percentage of "no-touch transactions" went to 58%.

Q: Cisco has also outfitted its 35,000 staffers with voice-over-Internet-protocol (VoIP) phones. This is a key growth market for Cisco, but what have you found are the benefits?

A: We have three ways of getting cost savings. Running voice traffic over the data network cuts down on long-distance bills. Also, there are administration savings. [Since the phones can easily be assigned any phone number,] we can move people around much more easily. When we opened up a facility in Taiwan, we had someone [set up the phone network] from Sydney, with no one on the ground in Taipei.

Also, our facilities people found out that they didn't need to have the bumper space reserved [normally, Cisco's facilities planners set aside 10% to 15% of the cubicles to be used by visitors to the office]. No prep work has to be done to set up a cube. By using the same phone, there's nothing to rewire. The return on investment is great for our real estate people.

Q: How much have you saved overall?

A: We just moved a lot of traffic in Europe to a [VoIP] network. In the first quarter, we reduced costs by $300,000.

Q: Any other advantages to VoIP?

A: During the SARS epidemic, many of our people in China were quarantined at home. Because they almost all had high-speed [Internet access] at their homes, we were able to push a "soft phone" [basically, the same program that runs on Cisco's VoIP phones] down to their PCs. So it was like their office at work was configured for them there at home. Later, when a hurricane threatened Raleigh [N.C.] earlier this year, our head of operations was able to tell employees to just stay with their families -- work at home.

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