Slide about opening vignete of cisco virtual close. This slide is presented by Achmad Solichin (http://achmatim.net, http://ebook.achmatim.net) and friends

1. Cisco and The virtual close Opening Vignette http://ebook.achmatim.net

2. Outline About Cisco The Problems The Solutions Questions and Answers Conclusions References

3. About Cisco Section 1

4. History

19. The Problems Section 2

20. Before Dot-com Bust (2001) Dot-com 1st boom, Cisco’s revenuesgrew at an annual compound rate greater than 60% Larry Carter, CFO, worried about financial reporting system could not keep pace with the rapid growth The solution is “Virtual Close” It was taking Cisco 2 weeks to close its financial books.

21. After Dot-com Bust 2001, many telecommunication companies started to fail, demand for Cisco’s products declined dramatically. Overstocked with inventory and lost almost $3 billion, from $80 per share to $8 per share. So, what’s wrong with the virtual close?

22. What’s wrong with Virtual Close? John Chambers (CEO) : it allowed the company to track financials and others on daily basis, but it didn’t allow to predict the future, especially macroeconomic trends. Cisco was unable to avoid the dramatic economic downturns at beginning of 2001. But, some analyst suggested that the damage to Cisco would have been greater if the VC hadn’t been in place

23. The Solutions Section 3

24. The Strategies No need to switch product or change business model Lower revenue level strategies: Reducing operating cost Improving productivity Reducing inventory (up to $2,5 billion) Reducing headcount (20,000 emps) Reducing number of product’s model. Using internal product development, rather than relying product acquisition

25. The Results In 2005, Cisco’s revenues were over $25 billion, net income close to $6 billion. 12 percent increase in sales per year Acquisitions (Linksys) and new products (network security and IP telephony) Cisco is leading the transition to intelligent network environments

26. Questions and Answers Section 4

27. Question #1. What is the virtual close system? Virtual close is a process which would provide the capability to determine the financial state of the company with an hour’s notice and to disseminate the information instantly through the company’s intranet

28. More about Virtual Close… Another term: fast close, one day close. John Chamber (CEO): it enables manager to spot the problems and opportunities at any time. It enables to close books faster.

29. How to Achieve Virtual Close? Management & Cultural Changes: Reduction in the number of legal entities to consolidate Clearly defined of KPIs Focus on top level results rather than unnecessary details Eliminating interim closes

30. How to Achieve Virtual Close? Financial System Changes: Adopting a fully integrated financial application systems Deploying an automated financial consolidation system Using an automated, intercompany accounting system, which allows transactions to occur between different legal entities owned by the same company. Leveraging a Web portal for delivery of standard reports Linking a Web portal to an online analytical processing database that allows companies to conduct ad hoc queries and analyses

31. Business Benefit of Virtual Close Better decision-making due to timely access to information, decoupled from the financial reporting cycle. Managers working from the same set of facts as a result of consistently defining and measuring results Reduced costs from the elimination of manual input and reconciliation Increased top-line potential derived from reducing the time spent closing by 40 to 60 percent, allowing more time for analysis of market opportunities

32. Virtual Close Solution Network Overview

33. Question #2. What explanation did John Chambers, Cisco CEO, give for the company’s downturn in 2001? It allowed the company to track financials and others on daily basis, but it didn’t allow to predict the future, especially macroeconomic trends.

34. Question #3. What was Cisco’s strategic response to its financial downturn in 2001? Lower revenue level strategies: Reducing operating cost Improving productivity Reducing inventory (up to $2,5 billion) Reducing headcount (20,000 emps) Reducing number of product’s model. Using internal product development, rather than relying product acquisition

35. Conclusions Section 5

36. Conclusions Cisco’s virtual close enabled the company to monitor key indicators of operational or tactical importance. Effective business performance requires an organization to model and monitor not only its tactics but also its strategies and the assumptions on which those strategies are built.

37. Reference C CristianWulf, 2006, CFO Insights: Enabling High Performance Through Leading Practices for Financial ERP, John Wiley & Sons, Inc. Zachary Coffin, 2001, The Top Ten Effects of XBRL: The Future of Internet Reporting. An Oracle White Paper, 2008, The Fast Close: Are We There Yet?, updated July 2008 Cisco, 2009, Cisco Corporate Overview, http://www.cisco.com KPMG Consulting, 2001, Virtual Close – A Financial Management Solutions. Ghislaine Royer and William R. Horbatt, 2005, The Challenge of Financial Reporting during the 21st Century, Society of Actuaries, April 2005 John S. McClenahen, 2002, The Book On The One Day Close, IndustryWeek.Com

38. Thank you We are AchmadSolichin, Anita Muliawati, AtiZaidiah and SafrinaAmini say…