Cisco IT Case Study

Acquisition Integration

How Cisco Applies Companywide Expertise for Integrating

Acquired Companies
Faster, smoother integrations help to realize acquisition value.
Cisco on Cisco Case Study/Business Management/Cisco Acquisition Integration: Acquiring companies
that offer attractive technologies, products, or market opportunities has been a major growth strategy for
Cisco®. To help integrate these companies rapidly, consistently, and with minimal disruption, Cisco has
formed cross-functional teams, defined common principles, and developed standard processes. This well-
established approach to integration allows Cisco the ability to quickly gain the value expected from the
acquisition, among other benefits. Cisco customers can draw on Cisco's real-world experience in this area to
help support similar enterprise needs.

CHALLENGE
Acquiring other companies is an important strategy for Cisco to rapidly offer new products, reach new markets, and
grow revenue. Since 1993, Cisco has acquired more than 120 companies, from small startups to large, well-
established firms such as Linksys, Scientific Atlanta, and WebEx.
Integrating the employees, products, services, operations, systems, and processes of acquired companies can be a
daunting effort. With multiple acquisitions occurring each year, it became clear that Cisco could not approach the
integration effort in an improvised manner, with different personnel and activities engaged each time. Instead,
acquisition integration needed to become a standard way of doing business for Cisco employees. Cisco needed an
integration approach that would be consistent across the company, repeatable for each new acquisition, and
adaptable as Cisco began to acquire large companies with different operational parameters.
“Cisco acquires only companies that will help to grow
“We centralize acquisition integration our business, so we always ask how we can protect
for several good reasons: It is and grow the value that we expect to obtain from an
acquisition,” says Graeme Wood, director of
efficient, and it allows us to capture
acquisition integration in the Cisco Business
best practices, use our skills and
Development group.
resources most effectively, and apply
discipline and oversight to the entire SOLUTION
acquisition process.” Cisco has developed—and continues to evolve—a
– Graeme Wood, Director, Acquisition Integration,
well-defined approach to integrating acquired
Cisco Business Development Group
companies. This approach encompasses the
following elements:
• Formalized and centralized integration management through a designated team in the Cisco Business
Development group.
• Cross-functional teams for each acquisition that plan, manage, and monitor integration activities across Cisco.
• Standard principles, metrics, tools, methods, and processes that can be repeatedly applied to new integration
efforts, yet are adaptable to the unique issues and parameters of each deal. These standards are defined both
at the corporate level and within the many Cisco departments involved in acquisition integration.

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Acquisition Integration

• Extensibility of the acquisition integration model to other major change events, such as divisional
consolidations, divestitures, or acquisitions by Cisco divisions.
“We centralize acquisition integration for several good reasons,” says Wood. “It is efficient and it allows us to capture
best practices, use our skills and resources most effectively, and apply discipline and oversight to the entire
acquisition process.”
He continues, “If you get mired in the simple integration activities, and a lot of companies do, you never get around to
resolving larger business issues that come with an acquisition. Standard processes allow you move quickly through
the straightforward tasks of integration with clear responsibilities and minimal finger-pointing.”

A Companywide Approach to Integration

Cisco’s integration activities occur in three broad phases, corresponding to typical events in an acquisition deal (see
table).
Table 1. Cisco Process-Driven Approach for Acquisition Integration

Phase Deal Activity Example Integration Tasks

1 Discovery and planning Scope assessment, business modeling, detailed due diligence, and integration
planning
2 Execution Ensuring operational readiness
Activation of employees, resources, and integration tasks
3 Monitoring Ongoing measurement and adjustment of the integration activity

Within each phase, the central and cross-functional teams work together for a companywide approach to integration.
The central acquisition integration team broadly defines methods, tools, and processes that can be standardized
across Cisco departments and business units. For each acquisition, the central team also manages the overall
integration activity and provides a leader for the deal’s cross-functional integration team.
The cross-functional team then manages the planning, execution, and monitoring of specific integration activities in
each phase as they are carried out by the appropriate Cisco departments. The same Cisco employees often serve on
the integration teams, with representation from all company departments and functions.

Integration Principles
The following principles guide Cisco acquisition integration activities:
• Alignment. Set common standards so that all internal organizations and integration activities are aligned to
achieve the business goals of the acquisition.
• Communication. Enhance cross-functional communication to highlight interdependencies, overlaps, and gaps
in activities and schedules, and to encourage cooperation on integration tasks.
• Operational effectiveness. Continually improve integration capabilities across Cisco by:
• Promoting consistent, repeatable processes that can reduce integration project setup time and assist
with resource and capacity planning
• Adapting integration standards to accommodate different business models as Cisco acquires large
companies and those offering different types of products and services
• Incorporating the lessons learned from each acquisition
“For typical acquisitions, we can standardize between 70 percent and 80 percent of the integration processes for
each functional area,” says Wood. “But specific integration and business issues come up in every deal that you can’t
anticipate in advance. For those issues, you need people on the integration teams who have the experience and
creativity to develop the right solution for the business.”

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EXECUTIVE SUMMARY Integration Tools, Methods, and Processes

CHALLENGE Cisco integration teams have developed many standardized processes to
● 120+ companies acquired since 1993 support rapid and consistent integration activity. These repeatable
● Integrate acquired employees, products,
processes also define roles, responsibilities, dependencies, deliverables,
services, operations, systems, and
processes rapidly and smoothly and timelines for the numerous integration tasks that must be performed in
● Maximize the value of acquisitions each Cisco department.
SOLUTION In addition, each department has its own well-defined approach and
● Formal, central integration management
processes for acquisition integration, which can evolve easily to reflect
● Dedicated, cross-functional teams from
departments and business units changes within the department.
● Standard principles, metrics, tools,
To conduct their work, the integration teams use standard information-
methods, and processes
● Meetings conducted with Cisco sharing and collaboration tools such as Cisco MeetingPlace® conference
collaboration solutions calls, WebEx online meetings, e-mail, online document sharing, and project
RESULTS management software. Collaboration will be enhanced as Cisco implements
● Ability to realize acquisition value and a new online project management tool that will be used by all employees
pursue diverse acquisition types
● Faster, smoother integration of acquired
involved in integration activities.
companies Cisco TelePresence virtual meetings facilitate discussions with remote
● High levels of employee retention
integration team members and employees of the acquired company who
● Continuous development of integration
expertise are in a distant location. “Because the participants can see each other,
● Efficient integration activity throughout Cisco TelePresence will help us catch the nuances of understanding and
the company
communication that are difficult to detect when you are conducting a
LESSONS LEARNED sensitive discussion in an audio conference call,” says Wood.
● Centrally manage integration activity
● Follow consistent practices and
approaches Integration Metrics
● Build integration expertise Cisco uses a variety of qualitative and quantitative metrics to measure the
● Anticipate country-specific differences
success of each acquisition integration effort. Typical metrics include the
NEXT STEPS following:
● Continue to apply and refine integration
best practices • Retain 100 percent of the employees who transition from the
acquired company.
• Sustain the acquired company’s current product and service revenues (as well as current levels of service
and support) during and after the transition to Cisco.
• Launch new Cisco products based on the acquired products and technologies.
As part of the integration approach and plan, Cisco applies the following tactics to enhance the customer experience:
• Repackage and rebrand an acquired product or technology as a Cisco product when appropriate.
• Identify potential new product and service revenue opportunities within the acquired company’s existing
customer base and sales prospects.
• Provide the new customers with a single interface for product support and service and maintain customer
satisfaction.
• Integrate the sales channels and services functions of Cisco and the acquired company as appropriate.

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Department-Level Integration Practices

Each major Cisco department assigns an employee team assigned to acquisition integration activities. This section
presents as examples the integration practices of five Cisco departments: human resources, sales, manufacturing,
customer service and support, and finance.
The Cisco IT department, is not discussed here. Instead, details about Cisco IT integration practices are presented in
a separate case study, which is available at www.cisco.com/go/ciscoit
Human Resources. “What will happen to my job?” is the first question asked by employees when their company is
acquired by Cisco. Employees are a critical part of the acquisition strategy, because they hold the key to the next
generation of the product.
The Cisco human resources (HR) acquisition team has designed the integration strategy around employee concerns
to help facilitate and expedite acceptance of change by the new employees. Cisco HR applies the following principles
and practices to these employee transitions:
• Cisco has a goal of retaining 100 percent of employees who transition from acquired companies. The Cisco HR
team works with executives from the acquired company to help map employees to Cisco’s employment
structure for salary, stock options, and benefits.
• Cisco HR works with internal resources to handle routine transition tasks such as employee setup in HR and
payroll systems. These tasks adhere to the standard processes defined by the HR integration team. Cisco HR
also outsources some of the due diligence and project work related to individual acquisitions, which is
especially effective for rapidly processing large companies with thousands of employees.
• To reduce the disruption and anxiety of the transition process for new employees, HR staff are among the first
Cisco representatives onsite at the acquired company when a deal is announced. Because communication is
critical during the early integration phase, an internal Website is created for each acquired company to present
detailed information and updates about the employee transition process, and to provide links to Cisco training
resources.
• The Cisco HR acquisition team provides employee transition letters and hiring documents online to improve the
efficiency of employee processing and create electronic personnel files that are easier to update and manage.
• The Cisco HR team hosts a new-hire orientation for all new employees at the time the acquisition deal closes.
This orientation gives the acquired employees the information that they need to work at Cisco. Other training
sessions address employee concerns such as immigration and company stock. The training sessions are
formatted to meet the needs of the global audience and are delivered through online videos, in WebEx online
conferences, and video conferences.
“We must act as quickly as possible to make decisions and inform the new employees about their job status, because
we know that until employees have that information, they will not be able to focus on their work, ” says Shari Yocum,
director of acquisitions in the Cisco Human Resources department. “Our goal is to have the new employees fully
transitioned and ready to work as Cisco employees from the first day after the deal closes.”
Sales. Many companies experience a decline in sales during an acquisition because of turnover and uncertainty
among sales personnel. For Cisco, avoiding this decline and maintaining the acquired company’s current revenue
stream is the first sales challenge.
Another challenge, merging sales processes and teams, can be the most lengthy and complex in the acquisition
integration effort. This challenge encompasses issues such as:
• Identifying the details of sales compensation plans for the acquired sales team and for the Cisco teams who
will sell the acquired products.
• Training all sales personnel, promoting the new products, and coordinating sales logistics in each world region.

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• Planning and executing the specific integration tasks, which are handled by more than 10 operations teams
and five global regional teams within the Cisco sales department.
• Merging customer and prospect data from the acquired company’s sales tracking systems.
• Integrating the sales channels of Cisco and the acquired company.
The Cisco sales department addresses these challenges by initially focusing on alignment of sales efforts, with full
integration developed gradually over time. During this alignment period, the acquired sales team focuses on selling
the acquired products, while the Cisco account manager continues to maintain the overall relationship with individual
customers.
A separate Cisco channel integration team resolves issues such as overlap of territories and customers among
individual channel partners, partner compensation, and which partners are authorized to sell specific products.
A key tool used by the Cisco sales integration teams is a milestone document, which details the typical integration
activity for every sales function and region. Given the large scope and complexity of integrating sales activity, the
integration team tracks the activity milestones for up to two years after the close of the acquisition deal.
According to Pat Belotti, senior manager of sales acquisition integration in the Cisco Worldwide Sales Operations
group, “The most important benefit of our standard integration processes is that we can avoid a dip in revenues. In
fact, we can increase revenues quickly by applying Cisco resources to help the acquired sales team reach their full
potential.”
Manufacturing. A product’s time-to-market and availability are vital aspects of customer satisfaction and value
drivers for Cisco. “We are trying to shorten the time-to-market and time-to-revenue as much as possible for acquired
products,” says Steve Williams, director of operations for Cisco Worldwide Manufacturing.
For the Cisco manufacturing department, maintaining this timeliness of product delivery presents a multidimensional
challenge when integrating an acquired company. Specific dimensions of this challenge include integrating with
Cisco’s enterprise resource planning (ERP) systems as well as manufacturing and supply-chain processes.
Some of Cisco’s large acquisitions, such as Linksys and Scientific Atlanta, have well-established manufacturing
processes, systems, and suppliers. “In the case of large companies, a key integration activity is to identify alignment
and collaboration opportunities, such as leveraging our expenditures and preferred supplier strategies, in order to
gain benefits and reduce risk for Cisco,” says Karen Frazer, manager of the acquisition integration team in Cisco
manufacturing.
To meet this goal, the Cisco manufacturing integration team has developed a phased approach and an overall
framework to speed and simplify the integration of acquired products.
For example, the team uses a defined framework of predictable, scalable, and repeatable processes for introducing
new products into the supply chain. The steps to introduce an acquisition product into the Cisco supply chain are
similar to those used for a Cisco-developed new product, with specific tasks and responsibilities. The manufacturing
team also works closely with the acquired company to transition products and processes while using Cisco’s internal
tools for supply-chain management.
“The consistency of the acquisition integration process with our familiar processes for new product introduction is
critical for maintaining the productivity of our employees and suppliers,” says Williams. “Our standard processes and
internal tools for supply-chain management allow us to gradually migrate production to our preferred suppliers, which
creates cost savings and scalable operations as the product’s sales increase.”
Customer Service. The Cisco Customer Advocacy group develops, sells, and delivers service and support offerings
for Cisco products. These services help customers plan, prepare, design, implement, operate, and optimize Cisco
technologies.
When Cisco acquires a company, a primary challenge for the customer advocacy group is migrating the new
customers to Cisco’s standard service programs. In some cases, the group must develop a new service and support

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program for the acquired product. At the same time, Cisco must continue to meet the obligations of existing service
contracts and offer new services to the acquired customers.
New product and service models, such as the subscription-based products offered by WebEx, present significant
differences in service terms and how support programs are structured and sold. These acquisitions may mean the
customer advocacy group develops new types of service offerings.
“The consistency and repeatability of the acquisition integration processes helps the customer advocacy group clarify
the requirements of new service programs and ensure customer satisfaction. Even for acquisitions that bring new
business models to Cisco and require new service offerings, you can be consistent and scalable in your service
operations,” says Clare Markovits, senior manager of the acquisition integration team for Cisco customer advocacy.
Integration of customer contact centers is another acquisition integration challenge. Cisco’s long-term goal is to
consolidate all contact centers, to the extent possible, into a single Customer Interaction Network (CIN) to lower
internal operational costs and help ensure a consistent customer experience. The contact centers operated by
acquired companies initially continue as standalone operations. However, interaction with Cisco contact centers is
established through call routing, call system interoperability, and connections between back-office systems. Over
time, the call center resources from the acquired company can be integrated into Cisco’s contact centers.
“For customers, our integration efforts provide service continuity and often increase their level of satisfaction with
Cisco,” says Markovits.
Finance. Proper accounting and financial reporting for an acquisition is important to meet regulatory requirements
and to determine whether the expected value of the acquisition has been realized. The three primary requirements for
the Cisco finance department when integrating an acquired company are alignment of fiscal calendars, financial
policies, and compliance with Sarbanes-Oxley requirements.
As a publicly traded company, Cisco must file a single set of quarterly and annual financial reports with the U.S.
Securities and Exchange Commission, incorporating the data from all divisions and subsidiaries. At the corporate
level, this means acquired companies must report their financial data according to a single global calendar.
“We have fixed dates when financial data must be reported, which means that we can benefit from anything that
helps an acquisition integration proceed quickly,” says Daisy Ng, a controller in the Cisco finance department. “To
help, our department has developed standard policies and calendars as well as repeatable processes for internal and
external reporting of financial data.”
The department follows a similar approach to meet the regulatory requirements of the U.S. Sarbanes-Oxley Act. A
single certification is maintained for Cisco Systems, Inc., with a single coordinator at the corporate level and
standardized processes for certification adherence in Cisco’s internal departments.
Additional challenges for the financial integration of an acquired company include different sales models, differences
in the chart of accounts and financial systems, integration of systems for payroll and stock option tracking, and
variations in the employment laws and benefits that apply to employees located outside of the United States.
“Aligning acquired companies with our standard processes helps us to solve these diverse challenges. We can also
avoid lost productivity because we do not need to reinvent the procedures with each new company,” says Ng. “We
are now evolving our integration approach to better handle the differences involved with acquiring large companies
and companies located in other countries.”

RESULTS
Defined principles, standard processes, and consistent yet adaptable activities for integrating acquired companies
have yielded significant business benefits for Cisco.

Benefits for Cisco As a Company

Ability to realize the value expected from each acquisition. Because the integration tasks can be completed
quickly, the transition of a company to ownership by Cisco creates less disruption in sales and productivity levels.

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Employees in the Cisco business units and functional departments can instead focus on bringing the new products to
market and other activities for maximizing the value Cisco gains from the acquisition. Metrics that track the value
gained by Cisco from its acquisitions are monitored over time.
Faster, smoother integration of acquired companies. With decision-making and execution capabilities centralized
in one team for each acquisition, the integration activity can proceed with greater speed and ease than would be the
case for decentralized efforts. Clear guidelines and objectives for all areas of the company also produce faster and
less disruptive integration efforts in the departments and business units.
Easier cultural integration. The internally developed processes reflect Cisco corporate culture, which facilitates
clearer communications and easier collaboration among the integration teams. Deep experience in acquisition
integration helps Cisco to increase integration of the corporate cultures and the sense of inclusion for employees of
the acquired company.
High levels of employee retention. In the first two years after an acquisition closes, Cisco retains nearly 100
percent of the new employees. Long-term retention levels are also high, at 85 percent from 2002–2006 and 45
percent since the early 1990s.
Optimized operational infrastructure. The integration effort
can identify opportunities for optimizing Cisco’s operational
“The most important benefit of our
infrastructure. For example, acquired companies migrate to the
standard integration processes is
Cisco corporate network, standard IT infrastructure, and
that we can avoid a dip in revenues.
application architecture, which reduces operating costs as well
In fact, we can increase revenues as management and support requirements.
quickly by applying Cisco resources
Maximized sales structures and channels. By consolidating
to help the acquired sales teams
sales forces and channels, Cisco can expand its customer
reach their full potential.” base and sales opportunities while avoiding overlap in sales
– Pat Belotti, Senior Manager of Sales Acquisition
activities.
Integration, Cisco Worldwide Sales Operations
Solid foundation for acquisitions. The foundation of
standards and a well-defined integration process support a strong, active Cisco acquisitions team that can pursue
more deals, more quickly and at lower risk. This foundation also gives Cisco the confidence to enter new markets and
acquire companies with diverse operating models.
Continuous development of integration expertise. Because the same Cisco employees typically serve on multiple
acquisition integration teams, this expertise can be developed, sustained, and deepened throughout the company.
The teams also strive to continually improve integration practices based on the lessons learned from each deal.
Efficient integration throughout the company. Defined processes and standards allow all teams to work efficiently
and effectively and sustain focus on high-priority activities.

Benefits for Cisco Departments

Individual departments within Cisco have also benefited from the company’s standardized approach to acquisition
integration (Table 2).

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Table 2. Examples of Benefits Gained by Cisco Departments from Standard Acquisition Integration Processes

Cisco Department Benefits

Human Resources Department supported transition of 3500 employees, located in 25 countries, from
companies acquired by Cisco in fiscal year 2007
High levels of employee engagement help to sustain productivity throughout the
transition
Standardized compensation and benefits plans across the company yield cost savings
for Cisco and increase employee satisfaction
Automated tools, standard processes, and use of outsourcers make the transition
process faster, simpler, and more consistent for the HR department and less confusing
for employees
Automation and well-defined processes allow most acquisition integration efforts to be
handled by a small team of HR representatives
Sales The decline in revenues from the acquired products are minimized during the transition
Sales teams can pursue new revenues quickly while the acquired company is being
integrated
Sales department employees can work more efficiently by following standard,
consistent procedures
Retention rates for acquired sales employees remain high, which helps to maintain
customer relationships
Manufacturing Manufacturing representatives participate in the business development teams to
anticipate the impact of new product types and volumes on manufacturing operations
Process consistency helps suppliers accommodate the acquired products quickly and
easily
Cost savings and scalable production are achieved by migrating products to preferred
suppliers
Customer Advocacy Customers experience service continuity while transitioning their service and support
agreements to standard Cisco offerings
Cost savings are realized from contact center consolidation
New opportunities to increase levels of customer satisfaction, renew existing service
contracts, and sell additional services
Finance Financial reporting can be consolidated and meet Cisco’s accounting close deadline
can be met for each fiscal period
Clear processes make it easy to explain roles and expectations to employees of the
acquired company
Compliance can be achieved with Sarbanes-Oxley requirements
Communications within the department and training for new employees are easier

LESSONS LEARNED
“The way that we integrate acquisitions is a competitive advantage for Cisco. We have invested in a centralized
acquisitions team, we have learned from each deal, and we have been consistent in our approach to acquisitions and
integrations over time,” says Wood.
Based on experience gained from more than 120 integration projects, Cisco has identified several lessons as
valuable for handling new acquisitions.
Centrally manage integration activity. Central management of integration activity is vital to help an acquired
company transition quickly and easily to Cisco ownership. Two types of central teams manage acquisition integration
within Cisco: a companywide team and a team within each department. This structure improves communications and
coordination of efforts, assigns responsibility for key tasks, and allows easier monitoring of progress and results.
Build integration expertise. From each acquisition lessons learned can be identified that can be applied to future
integration plans and activities. Consistency in processes and team membership also builds integration expertise with
each new acquisition.
Expect country-specific differences. Standard integration processes and methods may need to vary in each
country in order to meet differences in local laws and business practices.

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NEXT STEPS
As Cisco continues to expand its business through acquisitions, integration teams will continue to apply and adapt the
best practices and standard processes described in this case study.

FOR MORE INFORMATION

Cisco IT case studies about Cisco IT practices for integrating acquisitions and about the Cisco Customer Interaction
Network are available at www.cisco.com/go/ciscoit

For additional Cisco IT case studies on a variety of business solutions, visit Cisco on Cisco: Inside Cisco IT
www.cisco.com/go/ciscoit

NOTE
This publication describes how Cisco has benefited from the deployment of its own products. Many factors may have
contributed to the results and benefits described; Cisco does not guarantee comparable results elsewhere.

CISCO PROVIDES THIS PUBLICATION AS IS WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESS OR
IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.

Some jurisdictions do not allow disclaimer of express or implied warranties, therefore this disclaimer may not apply to
you.

Printed in USA C00-000000-00 08/07

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