When Chuck Sperazza joined fab-less semiconductor company Agere Systems Inc. in February 2004, his first assignment as CIO was to perform an infrastructure assessment. What he found was not encouraging.
Years earlier, the company had deployed commercial ERP software that had subsequently been customized so much it now functioned as a homegrown system. As a result, Agere's IT department had to spend 90% of its time just fixing, stabilizing, and enhancing the ERP environment.
Because of all of the work -- and money -- that had been put into the ERP application, which was based on version 10.7 of Oracle Corp.'s E-Business Suite, company executives had decided never to upgrade. That put Sperazza in a bit of a bind because Oracle had announced that in June 2004 it would cut off support for 10.7 and was encouraging customers to migrate to its new 11i suite.
"Even though the clock was ticking and we were months away from being de-supported by Oracle, Agere kept its head in the sand about what to do," Sperazza recalls.
But that wasn't Sperazza's only challenge. The hardware and operating system from Sun Microsystems Inc. that ran Agere's Oracle 10.7 system was also about to be de-supported. "The entire stack ERP ran on was in danger. If something went wrong we had no vendor to call for support," he says.
Besides being stuck with an aging system that couldn't be upgraded, Agere also was missing out on some key ERP functionality. For example, because the 10.7 release of E-Business Suite lacked a supply chain tool capable of monitoring prices and supporting reverse auctions, Agere was paying top dollar for raw materials and general procurement items.
Fortunately for Agere, Sperazza was ultimately able to persuade company leaders to meet the problem head on and invest $30 million and 18 months on a major ERP upgrade. In October 2005, the Oracle Agere Systems Information Solutions (OASIS) project went live on time and within budget. That in itself was a tremendous accomplishment. But Agere's selection as a co-winner of the Progressive Manufacturing Data & Integration Mastery Award stemmed from the company's ability to deploy a totally integrated application suite that offers a "single version of the truth" for everything from demand and supply chain planning to order management, warehouse management, purchasing, and financials.
Now, rather than being stuck with a disjointed infrastructure that requires the IT department to spend almost all of its time just keeping the ERP environment running, Agere can take advantage of a system that actually fuels business efficiency. The new ERP suite delivers real-time and relevant data about customers, partners, and employees, thus improving Agere's service levels and resulting in tangible efficiency gains for the business.
Seeing the Light
Acting like an ostrich when it comes to necessary technology deployments may seem to contradict good business practices, but any company that has experienced an early ERP nightmare would likely have the same reaction that Agere's management did.
"It's an old proverb, 'If it ain't broke, don't fix it,' because life's experiences show that the fix is not going to go as easily as we would like to think," says Steve Clouther, a senior analyst at ARC Advisory Group (Dedham, MA) who covers the ERP market. However, no business can function effectively for long with that mindset. "Businesses need to change to stay competitive... and I do believe the ERP 'nightmares' have been significantly reduced over the last few years," he says, because "the technology has changed dramatically."
So how did Sperazza and his team get Agere's management to accept the need for an ERP refresh? First they put the problem into terms the company's top managers could understand: If investors, partners, and customers feel their supply chains are at risk because of Agere's lack of technological foresight, the company's whole business could be in jeopardy.
That got the executive team's attention. As a provider of semiconductor and software solutions for consumer electronics manufacturers and communications providers like Samsung, Seagate, and Sirius Satellite Radio, Agere's chips go into everything from cell phones to hard drives to cellular stations. The company simply couldn't afford to be perceived as losing its edge.
Make it Vanilla
As a fab-less semiconductor company, Agere outsources chip production to contract manufacturers in Singapore and Thailand and only does the testing and packaging in-house. To support that business model, the company works with E2open Inc., which hosts Agere's B2B hub. The hub helps Agere manage suppliers in a quick, repeatable manner, working with any data transfer method, be it EDI, RosettaNet, or Web services.
That same simplified philosophy was what Agere officials wanted the ERP system to reflect. For that reason, no customization of Oracle 11i was allowed. It was a tough mandate, but one that Sperazza was able to adhere to.
The deployment, which was carried out by a combined team of Oracle Consulting and Agere's IT organization, was managed using a tight methodology that emphasized milestones. "It was an organized team right from the steering committee down," Sperazza notes. "It was tightly managed, and we hit every milestone because that's what we had to do. The second you fall behind in a project you are sliding down a slippery slope. So we never missed a milestone. There were lots of issues, but if it looked like we were at risk, we cranked up the pressure."
"The biggest thing we are proud of," says Subir Dutt, senior director of strategic accounts for Oracle Consulting, "is that we have a customer which runs a global, single-instance, vanilla solution for all major business functions. It is fairly rare to see that in the marketplace," he notes. "Most companies have many different applications that are not synchronized together. In this case, [Agere] has the ability to have orders come in from across the globe and [react] instantly."
For example, when Agere receives a sales order, it enters the Oracle order management system and leverages the Oracle planning system to figure out the earliest point in time that product can be shipped to the customer. At the same time, Agere can use the system to generate a supply chain plan to figure out the most efficient way to fill the order by modeling suppliers' facilities against manufacturing availability. The plan helps Agere understand when to start production lots and when to move product from one facility to another. Once the planning is done, the order moves into the execution system, which is where the B2B hub comes in. Everything flows back into the Oracle order management system to reflect what just happened in the supply chain.
"So they have seamless connectivity between customers and suppliers with our system serving as the glue and decision-support system," says Nadeem Syed, Oracle's vice president of advanced planning products. "One reason they are able to achieve that velocity is because all of the information is in one place."
Indeed, OASIS replaced an environment where information was scattered throughout many systems. Agere was able to retire about 15 major, third-party applications related to warehouse management, shop floor management, and the supply chain. The new reverse-auction capability from Oracle's sourcing software packs the most punch, as it enables Agere to bid for lower prices -- anywhere from 5% to 20% lower, depending on the class of the items.
As a result of the OASIS project, Agere is now able to upgrade its ERP environment quickly and with little investment. Over the six-year lifespan of the old ERP system, Sperazza figures Agere spent at least $10 million to create and maintain its own customizations of the software.
Now, that is money saved. And now Agere's IT organization can spend more time on new development rather than operational support and maintenance of custom code.
The company has also been able to take advantage of previously missing advanced supply chain planning and warehouse management functionality.
"During the upgrade, we did go to Oracle-based WMS and their shop floor management system to help us manage product flow through factories from a high level," says Scott Blyler, Agere's IT Manager, operations applications. "We also took advantage of getting rid of a large homegrown order management system and replaced it with [Oracle's] advanced planning and scheduling system."
There's still more work to do. Now that the focus is off maintaining an unwieldy enterprise architecture and major efficiency gains have been achieved, Agere can start to see where it can add more business value. Sperazza's next big project: Get Agere's 2,000 or so design engineers in the OASIS loop.