From the November 2010 issue of Treasury & Risk magazine

Networking New Dimensions


As the economy recovers, Cisco Systems, the world's largest vendor of the switches and routers that power the Internet, is mining deeper levels of connectivity by promoting video, collaboration and virtualization technologies as an engine for growth--one that will also drive the Web traffic that fuels demand for its equipment.

Treasury and finance are in the vanguard of this strategy.

Like everyone else, the $40 billion networking equipment giant took its lumps two years ago when the financial crisis brought technology projects to a screeching halt worldwide, and even the biggest technology players faced restructuring and layoffs (involving about 2,500 jobs between 2008 and 2009 at Cisco). With an eye toward revenue growth, the 26-year-old company made seven acquisitions in 2009--including Norway's Tandberg, maker of low-cost videoconferencing products, and Pure Digital Technologies, producer of the Flip camcorder--and is pushing into other new markets, such as smart grids to make electricity supply chains more efficient. Based in San Jose, Calif., with about 70,700 employees worldwide, Cisco reported in August that it hired 2,000 workers in the fiscal fourth quarter ended July 31, and expects to hire another 3,000 over the next few quarters as new markets develop.

Cisco takes home the Overall Excellence Award in the 2010 Alexander Hamilton Summit for Best Practices for implementing forward-looking projects while not forgetting the lessons of the crisis. Cisco's treasury and finance operation wins three gold awards: in Credit Risk Management, for its comprehensive, bank-like approach to the consolidated tracking of billions of dollars in trade receivables, loans and leases, and investments worldwide; in Technology Excellence, for the treasury-inspired and beta-tested Integrated Work Experience tool, which one of its banks is now piloting as a Cisco product called QUAD; and in Best Green Strategy, for proving that Cisco's own TelePresence videoconferencing and WebEx products can significantly cut travel and reduce the company's carbon footprint. Cisco also wins the bronze in Working Capital Management for its Navigate to Accelerate financing program to keep key supply chain partners in business. It also launched a financing plan in January to help small to medium-size businesses.

That's not all. Cisco approached this year's Solution of the Year gold winner, Credit Suisse Securities, to develop a new model incorporating tail risk for hedging foreign exchange risk. It also prompted its vendor, Clearwater Analytics, the category's bronze winner, to upgrade its operating fund analytics to a software-as-a-service (SaaS) monitoring solution that offers a choice of benchmark indexes.

Over the past 10 years, the challenge at Cisco has been keeping up with rapid growth, says CFO and executive vice president Frank Calderoni, who joined the company in 2004 and became CFO in 2008. "Our key emphasis in leveraging technology is to get real-time information across the company, so we can make better and faster business decisions," says Calderoni. He cites Cisco's virtual close, "where we can close our financials monthly and quarterly in four hours."

That was far from reality when treasurer and vice president Roger Biscay arrived at Cisco as a portfolio manager 11 years ago. Systems had not scaled in step with the company's burgeoning growth. "We still had a lot of manual processes, faxes for example," Biscay says. "Analysts and treasury spent a lot of time gathering data. The last 10 years or so have been a constant evolution in complexity and geography."

Cisco now operates in 120 countries and hedges nearly 100 currencies. Biscay says the head count is flat for treasury's five functions, which comprise cash management, investments, foreign exchange, insurance and corporate finance. This includes $40 billion in investments, $15 billion in debt, and billions in interest rate and foreign exchange derivatives.

Cisco's treasury has evolved "from a data analyst to a true financial analyst," he says. "Investing in systems and technology has elevated what we bring to the table in terms of quality. A bigger role has been given to us over the years as we have proven and demonstrated our ability to grow and scale, and I attribute that to technology," Biscay adds. Cisco's culture is "no technology religion," he says, so best of class rules, although, as exemplified by TelePresence and WebEx, the company does eat its own dog food.

Cisco intends to keep expanding despite the slow recovery, says Calderoni. "Our long-term objective is to grow our business 12% to 17% over three to five years," he says. "That would mean substantially increasing the size of our company in that time period." Besides treasury, finance encompasses tax and accounting, planning, business partner engagement, procurement, global real estate management and some operations, and it employs just under 3,000 people worldwide.

"Finance and treasury play key roles in helping the business prioritize and make decisions to ensure we get the right return," says Calderoni. "We need to be able to accelerate to keep up. How we add technology to how we plan is critical."

Initially in the downturn, the focus was on looking for better ways to manage resources through portfolio rebalancing. "We had to think about how to keep making investments in technology so we wouldn't lose our leadership position and would be ready to grow the business once we came out," he says. "Separately, we leveraged technology to manage our portfolio, and to achieve savings and efficiencies throughout the company."

More effective and efficient communications evolved. The goal is to be constantly connected on any device, and video has been a tremendous driver in the equation, says Biscay. Treasury uses TelePresence not only for internal meetings but to maintain relationships with its banks, many of which have their own TelePresence setups. The videoconferencing system is also useful for staying in touch with the sell side and institutional investors, Calderoni notes. TV programs such as CNN News and CBS Nightly News now use TelePresence to conduct interviews.

In early October, Cisco rolled out a consumer videoconferencing system that hooks up to a broadband-connected, high-definition TV, a likely competitor for international Internet call vendor Skype. Called Cisco umi (pronounced "you-me"), it automatically adjusts to a room's size and lighting. Next year, Cisco plans to begin shipping a tablet computer called Cius (pronounced "see us") that "interoperates with TelePresence and combines video and mobility in real time, not just over a Wi-Fi network, but a 3G or 4G network," says Biscay.

The economy has experienced a significant two years from a global perspective, says Calderoni. "Things have improved since the recession but are not as robust as generally expected. The focus of all business--not just Cisco--likely will continue to be conservative. There will be a need to invest in efficient and effective technology, and that plays well for us."

Biscay says his treasury operation is now set up to handle any geographic expansion without adding staff. He believes the dialogue is picking up in Congress over reducing the 35% tax rate on the overseas earnings of U.S. companies, which could repatriate much of the estimated $1 trillion sitting in offshore accounts. Cisco's CEO John Chambers and other top executives at big companies have backed the move in the press recently. Cisco has about half its portfolio outside the country.

"Cisco is on the leading edge--and sometimes the bleeding edge," Calderoni summarizes. "At Cisco, it's also about community. We test and showcase technology and bring in our clients to see technology at work enterprise-wide. We're doing the job of connecting."


To read about Cisco's award-winning projects:

Credit Risk Management

Technology Excellence

Best Green Strategy

Working Capital

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