October 2012
Document M131
ROI CASE STUDY
IBM ACCELERATED VALUE PROGRAM
CISCO SYSTEMS
T HE BO TTOM LI NE
Cisco’s consumer division used the IBM Accelerated Value Program to support its
consumer-facing Web site. Nucleus found the expertise and proactive tuning and
guidance IBM program consultants provided enabled Cisco to ensure high availability and
uptime, which was invaluable to its customer experience and brand image. The ability of
the program to help Cisco resolve incidents 40 percent faster also increased the
productivity of internal support staff.
ROI: 178%
Payback: 8 months
Average annual benefit: $188,260
T HE CO MPA N Y
Cisco Systems designs, manufactures, and sells Internet protocol (IP)-based networking
products and other products and services related to the communications and information
technology industry worldwide. Founded in 1984, Cisco is traded on the NASDAQ and has
grown both organically and through acquisition since its inception. This case study
focuses on the experience of Cisco’s consumer business division, largely based on Cisco’s
Linksys division in 2003.
T HE C H ALL E NGE
As a globally recognized leader in networking solutions, Cisco’s technical superiority and
high performance are key to its brand and reputation. Cisco’s business has historically
been focused on the enterprise market; however, the acquisition of Linksys moved it to the
leading position in consumer networking technologies as well. This presented new market
opportunities and challenges for Cisco:

Many consumers are less technically-savvy than Cisco’s enterprise customers,
meaning support and service are a critical part of customer satisfaction and loyalty.

Because most customers’ primary interaction with Cisco is through its Web site and all
support is through the site, the ability to access information when they need it and
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Document M131
get a high level of responsiveness from Web-based interactions has a clear impact on
Cisco’s brand image and reputation.

Given the rise of social networking sites and Web conversations around consumer
products and their companies, any customer criticism about a company’s Web
interactions can quickly become viral.
Cisco first implemented a Fatwire (since acquired by Oracle) content management system
running on BEA WebLogic (since acquired by Oracle) in 2005. In 2008, the company was
planning a major rebranding effort and, at that point, the company decided to recreate the
existing consumer-facing site to reflect the new branding as well as to support the
evolving needs of the business. That opportunity led Cisco to also reconsider technology
platforms for two reasons: first, because the division had experienced support problems
with its existing platform and second, because other divisions’ experience with WebSphere
had shown it could provide the level of support and performance Cisco needed. The
division determined that moving to WebSphere would support its performance needs
while aligning more closely with Cisco’s enterprise architecture strategy.
T HE S T RAT EG Y
Cisco’s consumer division chose to move to IBM WebSphere to support its consumer
business in 2008, largely because the enterprise team recommended IBM’s support as
being better than any other vendor. As Cisco normally engages for premier support from
its vendors, the consumer division adopted the program shortly after the migration in
January 2009.
The real test of the Accelerated Value Program happened during the holiday season of
2011, shortly after Cisco completed a vendor-recommended upgrade of its content
management system. Cisco’s consumer customers visit a support Web site most
frequently shortly after the holidays when they start to use gifts they’ve received and have
questions. The day after Christmas, Cisco recognized that it had a potential issue with the
Web site. The combination of the IBM Accelerated Value Program team’s tuning efforts
and rapid problem resolution enabled Cisco to resolve issues, ensure site stability, and
support customer demand without a brand-damaging impact on customer experience.
Our problem wasn’t even with IBM but with our content management application. The
difference is, with the Accelerated Value Program we always get an analyst who understands
how our content management is configured with WebSphere. If we tried to open a case with
general support, it would just not be the same. We have at least a 40 percent faster time to
resolution this way.
-
Venkat Shatagopam, Manager, Data Center and Platform Services, Cisco
Today, Cisco and the IBM program team meet on a regular basis to proactively identify
areas for improvement based on the knowledge of the IBM Accelerated Value Program on
© 2012 Nucleus Research, Inc. Reproduction in whole or part without written permission is prohibited.
Nucleus Research is the leading provider of value-focused technology research and advice.
NucleusResearch.com
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Document M131
upcoming product changes and upgrades, performance data, and Cisco’s planned
business needs.
KE Y BENE FI T ARE AS
Relying on the Accelerated Value Program has enabled Cisco’s consumer division to focus
on delivering ongoing innovation and improved customer experience through its Web site
while ensuring the high performance and stability Cisco customers expect from a hightech vendor.
1 : 2.4
Cost : Benefit
Ratio
Key benefits from the project include:

Improved customer experience. Taking advantage of the IBM program team’s
expertise and proactive performance-tuning efforts enabled Cisco to ensure its
consumer customers can rapidly access the information and services they need,
reinforcing Cisco’s brand image as a high-end experience-focused vendor.

Increased support staff productivity. Because Cisco’s internal support personnel have
to spend less time explaining support issues and doing research and troubleshooting
to understand the interrelated WebSphere and content management platform, they
can devote more time to other activities.

Accelerated time to issue resolution. The program extends beyond WebSphere
support to understand the overall platform environment, and the IBM program team
can leverage that history and knowledge each time Cisco has an issue, speeding the
time to resolution.
Cumulative Net Benefit
564,779 246,519 58,260 Year 1
Year 2
Year 3
KE Y COS T A RE AS
Because the Accelerated Value Program is a premier service offering from IBM, the only
cost incurred by Cisco to take advantage of program was an annual service fee. Nucleus
© 2012 Nucleus Research, Inc. Reproduction in whole or part without written permission is prohibited.
Nucleus Research is the leading provider of value-focused technology research and advice.
NucleusResearch.com
Page 3
October 2012
Document M131
estimated this fee based on the overall annual contract size at Cisco and the share of the
IBM program team’s time focused on Cisco’s consumer business site.
BEST PRACTICES
Cisco recognizes the brand value of having a high-performance Web site for its consumer
customers and that having a technology partner that understands not just its own
technology but the overall configuration and environment is critical to resolving issues
proactively as well as quickly responding to incidents that arise. For companies such as
Cisco that need to ensure a high level of quality interaction with consumers, one minor
issue can have significant repercussions. Using the Accelerated Value Program helps Cisco
to both proactively identify areas to improve performance and quickly resolve potential
customer-impacting issues that arise.
CALCULATING THE ROI
Nucleus calculated the overall investment Cisco made in the program by looking at Cisco’s
overall program contract applied across multiple divisions and allocated a portion of the
cost of program based on the overall workload devoted to the consumer division.
Indirect benefits quantified included an increase in support personnel productivity because
of the program, based on the average annual fully loaded cost of a Cisco IT support
employee. To quantify the indirect benefit of improved customer experience, Nucleus
took a conservative estimate of the potential loss in profits that could result from a bad
customer experience issue on the Web site. This was applied to an estimate of the annual
profits of the consumer division to quantify the potential impact of performance issues if
Cisco didn’t have the Accelerated Value Program.
Not quantified in the analysis were the potential investment in additional customer service
or branding investment that would have been required if a performance issue had resulted
in a visible Web site performance issue. Also not quantified were the similar expected
results for the other divisions of Cisco using the Accelerated Value Program to support
their Informix Software, Rational Clear Case and Team Concert, WebSphere Portal, IBM
Tivoli Composite Application Manager, and IBM Tivoli Workload Scheduler products.
© 2012 Nucleus Research, Inc. Reproduction in whole or part without written permission is prohibited.
Nucleus Research is the leading provider of value-focused technology research and advice.
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Page 4
FINANCIAL ANALYSIS
IBM Accelerated Value Program
Annual ROI: 178%
Payback period: 0.7 years
ANNUAL BENEFITS
Pre-start
Year 1
Year 2
Direct
0
0
0
0
Indirect
0
318,260
318,260
318,260
Total per period
0
318,260
318,260
318,260
Pre-start
Year 1
Year 2
Year 3
Software
0
0
0
0
Hardware
0
0
0
0
Project consulting and personnel
0
0
0
0
Total per period
0
0
0
0
CAPITALIZED ASSETS
DEPRECIATION SCHEDULE
Year 3
Pre-start
Year 1
Year 2
Year 3
Software
0
0
0
0
Hardware
0
0
0
0
Project consulting and personnel
0
0
0
0
Total per period
0
0
0
0
Pre-start
Year 1
Year 2
Year 3
Software
0
0
0
0
Hardware
0
0
0
0
130,000
130,000
130,000
0
Personnel
0
0
0
0
Training
0
0
0
0
Other
0
0
0
0
130,000
130,000
130,000
0
FINANCIAL ANALYSIS
Results
Year 1
Year 2
Year 3
Net cash flow before taxes
(130,000)
188,260
188,260
318,260
(71,500)
103,543
145%
103,543
145%
175,043
178%
-100%
25,269
-100%
115,707
-67%
258,594
260,000
195,000
EXPENSED COSTS
Consulting
Total per period
Net cash flow after taxes
Annual ROI - direct and indirect benefits
Annual ROI - direct benefits only
Net Present Value (NPV)
(71,500)
Payback period
Average Annual Cost of Ownership
3-Year IRR
0.7 years
130,000
145%
130,000
145%
FINANCIAL ASSUMPTIONS
All government taxes
45%
Cost of capital
7.0%
© 2012 Nucleus Research, Inc. Reproduction in whole or part without written permission is prohibited.
All calculations are based on Nucleus Research's independent analysis of the expected costs and benefits associated with the solution.
NucleusResearch.com
Page 6
By the Numbers
Cisco's use of the IBM Accelerated Value Program
Cost : Benefit
Ratio
The total time to value, or
payback period, for the program
THE RESULTS
Accelerated issue resolution by 40 percent
Increased staff productivity
1 : 2.4
$188,260
Average annual benefit
Number of users: 10
2
Weeks
8.0
178%
Months
Annual Return
on Investment
THE PROJECT
Cisco’s consumer division used the IBM Accelerated
Value Program to support its consumer-facing Web site.
Nucleus found the expertise and proactive tuning and
guidance IBM program consultants provided enabled
Cisco to ensure high availability and uptime, which was
invaluable to its customer experience and brand image.
Total time for Cisco to adopt the
program
"If we tried to open a case with general support, it would just not be the same. We have at least a
40 percent faster time to resolution this way."
- Venkat Shatagopam, Manager, Data Center and Platform Services, Cisco
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Copyright 2012 Nucleus Research Inc.
Nucleus Research Report M131 - IBM Accelerated Value Program ROI case study - Cisco