Profit Magazine - November 2007

HIGH TECH | ON DEMAND

“From an IT cost perspective, we have gone down to about 30 percent of
what we were five years ago. We consider that a tremendous ROI.”

—Suresh Vaidyanathan, Director of IT and Enterprise Business Solutions, Agilent

that remain in-house, but many of our IT operations are outsourced,” Vaidyanathan says. Through Oracle On Demand, Agilent uses Oracle E-Business Suite 11i’s Advance Planning, Order Management, Manufacturing, Warehouse Management, Procurement, and Financials modules.

Agilent operates almost like a venture capital firm. Its in-house research staff develops breakthrough measurement technologies. Some of these discoveries fit Agilent’s core competencies; others would be better off as part of another company. Likewise, Agilent sometimes needs technologies developed elsewhere to complement its in-house mix. The goal is to have the optimal mix of measurement devices and services used in communications, electronics, life sciences, and chemical analysis.

No matter the size, each purchase, sale, or spin-off carries risks. If Agilent’s fixed costs are too high relative to the posttransaction business, it won’t have the money to put into research and development. If it can’t convert the information systems of newly acquired companies, information won’t be available to help everyone in the organization. Oracle On Demand solved both problems. “We found it’s better for us to rely on Oracle,” Vaidyanathan says. Because the IT application operating cost is now based on the number of users, the IT expense scales with the size of the business. It’s a simple matter to add or subtract users as Agilent adds or subtracts business units.

TRANSITIONING SYSTEMS AND PEOPLE Along with flexible systems, Agilent needed flexible people handling its information technology. The internal staff were open to outsourcing because it meant they could concentrate on the very thing that excited them about technology: how to use it to do things better. “It’s pretty challenging to get your internal employees motivated around doing the standard, day-to-day, repetitive tasks,”

Vaidyanathan says. “Most IT folks love to work on new challenges and new problems—they’re not as interested in trying to solve existing problems in the current production environment. We found quite a few people interested in adding to their skills who wanted to go out and learn about project management,” he adds.

However, they didn’t have all of the skills that Agilent needed. “We’ve been able to get our top-notch folks focused on how to make the Oracle platform work for the business,” Vaidyanathan says about his team, but it took some training. Among the things that they had to learn was how to manage resources, how to work with service-level agreements, when

>>SNAPSHOT
Agilent Technologies
www.agilent.com
Headquarters: Santa Clara,
California
Employees: 19,000
Revenue: US$5 billion in FY 2006
Oracle products and services:
Oracle Database, Oracle E-Business
Suite 11i, Oracle On Demand

to hold vendors and partners accountable, and when the work had to be done by Agilent, says Vaidyanathan.

One lesson that Vaidyanathan learned was to settle on processes and do the training at the beginning of the transition. Agilent’s staff moved from managing systems and incidents to managing vendors and strategic plans. Although most were thrilled to spend more time using technology to drive the business, they hadn’t necessarily used those skills in their previous roles, so they needed to be brought up to speed. “We sent quite a few of our folks to supplier management training and other courses so that we could get these relationships to be much more fruitful rather than being a pure subject-matter backup for our Oracle

partners,” Vaidyanathan says.

The users experienced some dislocation too. Agilent employees were used to tapping in-house IT expertise when they needed a quick solution to a systems problem. But with the company spread out through the world, this meant that it was difficult to keep a centralized knowledgebase. “We probably had 20 different people solving the same problem because they were in different places,” Vaidyanathan says. “We were not able to see the problem management side of things, which is about tracking repeating incidents and figuring out how we prevent the same incidents from happening again and again and again.”

Once the transition was complete, Agilent’s users saw faster, more-reliable service while the IT department got to work on projects that kept the company’s competitive edge razor sharp. That, in turn, made it easier for Vaidyanathan to attract new employees to his team. “Now we can attract people with options,” he says. “They come to work on business enablement projects that push the business forward rather than help users figure out basic operations. We have all these projects and activities that IT people typically love to work on and that made our recruiting job easier.”

LESS LEVERAGE LEADS TO BETTER RETURNS

The traditional IT model assumes that a huge investment in hardware, software, and training will pay off as the business grows, because those costs won’t change much with the organization’s scale. That leverage would go straight to the bottom line. That model works fine for companies that are solely focused on internal growth, but it doesn’t work for companies that manage their product lines as actively as Agilent does.