The Journey towards agility

To 100 of today's leading CIOs, agility means moving quickly and adapting intelligently to take business change by the horns.

Recognized in CIO magazine's 2004 CIO 100 Award, HP and 99 other companies - aptly called 'The Agile 100' - know that building an agile or Adaptive Enterprise means building adaptive IT and business processes. And that doing so isn't like a reckless running of the bulls. It's an on-going journey, well-planned yet fraught with many barriers along the way.

According to honorees, inflexible legacy systems, a lack of necessary skills and a misalignment between IT and business needs all block the road ahead. But, after traveling that bumpy road - having entered the ring without getting skewered - they agree it's a journey well worth it.

HP's Adaptive Enterprise journey began years ago - jump-started by the IT industry's largest merger in history: the merger between HP and Compaq. Today, that journey continues as the company takes a natural next step: unifying Global Operations and IT into one organization: GO+IT.

The goal behind this combined organization is to keep IT and business needs in close alignment, simplify and streamline how HP operates on a daily basis, and to make it easier for customers to interact with HP.

Ready to GO

Gilles Bouchard heads up the combined GO+IT organization as HP's Chief Information Officer and Executive Vice President of Global Operations.

Announced by HP's Chairman and Chief Executive Officer Carly Fiorina in December of 2003, GO+IT was fully integrated in May of this year. GO+IT is now a 10,000-person strong organization.

Within most companies, these two functions operate as completely separate entities. HP has taken a bold approach by integrating its IT assets with key business operations, including supply chain, procurement, customer and channel operations, and e-business.

'The end goal is to break down internal silos, deliver more value to customers, reduce costs and become more agile,' Gilles says. 'That's what GO+IT is about.'

According to Gilles, almost every large company faces similar challenges. 'A lot of companies are trying to figure out how to get IT to work side by side with business operations so the two work together in lock-step, yet few have taken the steps to make that happen,' he says.

'Nevertheless, in the future, we expect this kind of integrated approach will become more common. When I talk to customers and CIOs, many say they're heading in this same direction to make IT more responsive to business needs and business changes.'

Simplifying Business Processes

A major focus for the GO+IT organization is to simplify and standardize business processes across HP to make the company more efficient and effective than ever before. The goal is to make HP better equipped to respond more quickly to customer needs and shifts in the marketplace.

As part of this effort, Gilles and the GO+IT team are developing the Business Process Architecture, a holistic framework that ties together all the elements of the company's operations, from business processes through business applications, down through the IT infrastructure.

'In my view the CIO's role is no longer just about IT,' says Gilles. 'Driving change company-wide requires you to work from the top-down, starting at the strategy level and the business process level. It's about understanding how to link business processes to IT to enable - rather than hinder - your company's business strategy.'

The Business Process Architecture balances the need to integrate and optimize this entire ecosystem while enabling focused improvement in specific process areas. GO+IT began by mapping key business processes within the company, identifying 114 processes in all across six major areas: marketing operations, sales operations, order management, supply chain, finance and HR.

After analyzing each of these areas, HP set specific targets for increasing process commonality across different business units and across different geographic regions. The end goal of this effort is to standardize and simplify how HP conducts business on a daily basis worldwide, in order to reduce operational costs while increasing effectiveness.

With GO+IT leading the charge, HP's targets for business process commonality are aggressive, ranging from 52 percent commonality in sales to 95 percent commonality in HR.

Simplifying the Underlying IT Infrastructure

HP's IT infrastructure has been simplified and standardized on a massive scale, as well. At one time, HP had 7,000 different software applications running internally.

Through IT consolidation that number has been reduced to 3,500, and the company is on a path to further reduce that to 1,500 applications. At one time, IT costs represented the equivalent of 4.6 percent of overall company revenues. HP has reduced the cost of IT to 3.7 percent of revenue, and is on its way to further reducing the cost of IT down to 3.0 percent of revenue.

One of the many benefits of simplifying IT and reducing operational costs is the ability to 'flip the ratio' of investment in IT innovation vs. spending money on maintaining existing systems.

At present, slightly less than 30 percent of the money HP invests in IT is spent on innovation, defined as projects where the focus is on developing new business capabilities. In the future, GO+IT expects to be investing more than 50 percent of HP's IT budget in innovation and building new capabilities.

Creating a Customer-Centric Supply Chain

In addition to simplifying business processes and the IT infrastructure, another top priority for the GO+IT organization is HP's supply chain, which already represents a competitive advantage for the company.

The supply chain is critical for a company like HP: With its impact on product delivery, quality, and cost, the supply chain has a direct influence on customer satisfaction and is a key growth enabler.

At one time, HP maintained 35 different supply chains operated by individual business units. Today, the company has a customer-driven model consisting of just five supply chains, each providing unique capabilities to meet different customer needs - from a 'low touch' direct model all the way up to highly customized configure-to-order capabilities.

This 'portfolio of supply chains' strategy contrasts sharply with companies that rely on a 'one-size-fits-all' supply chain, where there is minimal customer choice in how they interact with their vendor. By enabling HP's multi-channel strategy, GO+IT provides customers with maximum flexibility and choice in how they interact with HP.

RFID and the Agile Enterprise

A prime example of HP innovation in the supply chain area is radio frequency identification. It is believed that this data collection technology will one day replace barcode technology to provide up-to-the-minute supply chain visibility to reduce costs and speed the flow of merchandise from the factory to retailers.

HP is now implementing RFID in 28 manufacturing sites worldwide. RFID is a good example of where the rubber meets the road on an Adaptive Enterprise journey: As real-time RFID data links with manufacturing processes, HP will have the up-to-date information it needs to respond quickly to change and take advantage of opportunities as they arise.

As an early adopter of RFID and a board member of EPCglobal, the international RFID standards board, HP is helping to develop a framework of global RFID standards and is bringing the benefits of RFID to customers with infrastructure technology, consulting and integration services.

And just in time: Wal-Mart challenged its top 100 suppliers (including HP) to tag all product cases and pallets headed to the Dallas/Forth Worth area by January, 2005. To meet that mandate, Wal-Mart supplier Conros hired HP Services to oversee its RFID implementation.

For Gilles and the GO+IT team, HP's innovative approach to linking IT and business makes good sense moving forward: If he's going to be responsible for both sides of the house, the new GO+IT organization will give him more control over the results. For Gilles and other CIOs adopting the same approach, those results will not only deliver the business agility they need, but the opportunity to prove IT's true value to the enterprise.

'If you take a step back, you can see we have multiple, inter-related efforts underway at the same time, all designed to simplify and transform HP as a company,' says Gilles. 'On the one hand, we're standardizing and improving our business processes on a global basis and streamlining our IT infrastructure. At the same time, we're continuing to innovate and pull substantial cost out of our supply chain and our customer operations.

'Put it all together,' he continues, 'and that's what enables us to build a one-billion-dollar-a-year cost savings machine inside of HP. And we will be capable of generating savings on that massive scale on a recurring basis every year for the next three years. Equally important, we are bringing the power of HP's portfolio to customers and offering a unified, improved customer experience.'