Online Extra: How Cisco Saves with Net Telephony

CIO Brad Boston explains how running voice traffic over data networks has cut costs and boosted efficiency

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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