So what exactly was unexpected about Agilent's earnings shortfall? Could it be that other factors were more germane to the company's financial problems (Agilent hasn't posted an operating profit for several quarters) than an enterprise software implementation? Not until a footnote in Agilent's release is it revealed that the company's other operational challenges include the economic downturn, competitive and pricing pressures, changing demand, an internal reorganization and the company's ability to execute on new products. Yet half the release is dedicated to navel gazing about the ERP implementation.
As a technology vendor, Agilent knows better than most companies that big IT projects are difficult and disruptive. As the CFO suggested, the ERP upheaval was a normal cost of doing business, a cost Agilent's management should have mitigated with technical and process controls. Any collateral financial damage should have been anticipated and built into the company's revenue and earnings forecasts. Instead -- surprise! -- the company comes up $105 million short.
To Agilent's credit, it didn't point fingers directly at its technology vendor or IT organization -- either because it knew better or of professional courtesy. Other companies have dragged their implementers' names through the mud to deflect criticism of their own management inadequacies.
In March 2001, for example, Nike blasted its supply chain software vendor for inventory problems that reduced third-quarter sales by as much as $100 million. Nike never said much more about those problems, probably because it had no one to blame but itself. According to one source with knowledge of that project, Nike's business executives made unrealistic demands of the software at the start of the project planning, only to be set straight by several of the company's IT managers, who were then replaced by yes men (and women) who ultimately couldn't deliver what the execs demanded.
Agilent and Nike are by no means the first companies to blame a bad quarter on an IT snafu. Almost every company, from luggage maker Samsonite to distributor W.W. Grainger to HMO Oxford Health Care to electronics conglomerate Siemens, has made IT a financial scapegoat at one time or another. Senior executives figure they can blame IT for their companies' less-than-stellar financials since the less-than-tech-savvy analysts and shareholders they answer to aren't likely to call them on their logic.