Now, Where To PointBy Larry Barrett | Posted 2003-01-17 Email Print
Agilent blew $70 million on a software project. Was that a cause of its financial problems? Or an excuse?
Now, Where To Point?
Analysts say they suspect the reason Agilent's ERP rollout went sour was most likely a combination of insufficient testing, the company's extremely detailed and customized products, and management's inability to properly train its employees to execute what amounts to a complete transformation of the company's business processes.
It didn't help that Agilent's roots as the electronic test and measurement manufacturing division within Hewlett-Packard dates back to the company's inception in 1939. It makes data generators, multimeters and oscilloscopes, as well as semiconductors, optoelectronic components and RF chip setsall very complex products that require a great deal of customization for individual customers.
Agilent's Lewis says there's no way to overstate the cultural issues involved in taking so many disparate applications created over seven decades at Hewlett-Packardthe poster child for the decentralized organizational structure of Silicon Valley's pastand boil them down to less than two dozen applications.
"It appears that project management was really the big problem there," says Laurie Orlov, an analyst at Forrester Research in Cambridge, Mass. "They obviously didn't do adequate testing and cut over all the transactions at once. If you have hasty and insufficient preparation, rolling back and recovering could take a week." Agilent began planning and preparing for this project in September 2000.
"That's plenty of time for an organization of Agilent's size to easily and effectively complete this implementation," Gartner's Zrimsek says. "Shame on Agilent, a technology company, if they couldn't get their act together in that amount of time for something like this."
To investors, this software implementation debacle is merely the latest symptom of larger problems at Agilent.
Agilent is in the midst of a major restructuring plan that includes laying off 8,000 employees, or roughly 18% of its work force, and the shuttering of several manufacturing plants. It hopes to save $1.2 billion in annualized costs in order to stem the flow of red ink and regain investor confidence. The stock was trading above $150 a share in early 2000 before tumbling to an all-time low of $10.50 a share in October.
"It was not evident from the conference call what was going on in October," Timothy Anderson, an Agilent analyst at Salomon Smith Barney, wrote in a research report. "What's going on here? Is management sandbagging or are business conditions not quite what the October numbers imply?''