In 1999, Hewlett-Packard spun off its testing and measurement business to form Agilent Technologies, which at the time was the largest initial public offering in Silicon Valley history.
For ten years, Agilent had two primary businesses: one focused on life sciences technologies and chemical analysis solutions, and the other on electronic instruments. In 2014, with a high-growth life sciences business on its hands, the executive team at Agilent spun off the electronics business to form Keysight Technologies. Dan Krantz, who led the Agilent-Keysight IT separation, became CIO of Keysight in 2017.
Keysight pursued a three-pronged strategy to shift the focus from product sales to industry solution sales, increase R&D spend, and acquire new companies to grow the company from $2.8 billion to $4.6 billion in annual revenue.
This new high-growth business required a new set of business capabilities, including digital engagement technologies, a more dynamic supply chain, and the ability to support a product line that was shifting from warranty-based hardware to subscription-based software.
Krantz knew that stabilizing the new IT environment would just be table stakes. To provide a new set of business capabilities and support the tremendous growth ahead, he and his team would have to transform IT.
Cloud-first, composable architecture
“You might think that a high-tech company would run on modern IT,” says Krantz, “But technology companies need to modernize IT just like everyone else. We may be offering the leading quantum computing capabilities in the market, but the underlying IT infrastructure can still be 15 years old.”
Krantz’s target architecture would require moving from traditional onsite monolithic systems to a cloud-first composable architecture bucketed into three areas: systems of engagement, which included both sales transactions and customer support; systems of record; and systems of insight.
For systems of engagement, “our preference is to subscribe to a configurable cloud architecture, but if there is nothing that meets our needs, we’ll develop our own solution and build the integrations between them,” says Krantz.
Pricing, for example, required a custom solution. Keysight has more than 8,000 product families, each with up to 10,000 configurations, which requires sophisticated pricing algorithms. “We wrote the pricing engine with AWS microservices, so whether its presales, sales, post-sales, or even internal operations, every platform makes API calls to our custom-developed pricing engine,” Krantz says.
For systems of record, the team combines its traditional ERP with new cloud-enabled solutions to support new business capabilities. For example, when the sales process shifted from one-time sales to subscriptions, Keysight needed a new way to recognize revenue. “The financial flows and manufacturing data from our 78 legal entities around the world run through one on-premises ERP,” says Krantz. “So, rather than try to modernize our ERP, we bolted a cloud-based revenue recognition system onto our legacy ERP. That is the benefit a composable architecture.”
How to get the data out
Krantz and his team are now starting to focus on the third layer of the architecture, systems of insight. “Once we’ve modernized our systems of engagement and systems of record, how do we get data out of them? That’s where we are now,” says Krantz. “We’ve been replacing the reporting tools that were designed for a quarterly calendar and tied into our old monolithic systems, and moving them to a cloud platform.” For this, Krantz is working on the visualization layer and partnering with a start-up analytics company because, “We like to work with smaller, hungry players who are eager to listen to a large complex customer and quickly iterate on new features.”
One key step in improving analytics has been shifting from ETL (extract, transform and load), where you extract systems data, transform it, and then load it into your data warehouse, to ELT, where you extract the data out of your system of record, load it into a modern in-memory analytics system, and then transform it. “With traditional ETL, the transformation step really slowed us down,” says Krantz. “Shifting the process enables us to move faster. Don’t transform the data before you load it.”
But architecture is just one piece of Keysight Technologies’ IT transformation. “When you have large monolithic systems, you spend six months on requirements, then a year building, another six months stabilizing, and then two years later, you start over,” says Krantz. “With composable architecture, you can work independently, iteratively, and quickly on all these little building blocks.”
Adopting a growth mindset
Iterating on building blocks requires a new way of working, so Krantz and his team are on a journey to be Agile at scale, with nimble, cross-functional teams, and product owners. This is a major shift from the heavily outsourced IT model that Krantz inherited. “When I joined Keysight, only 15 percent of the team was internal,” says Krantz. “Our team managed the IT suppliers who did the work, whether it was day-to-day support or project delivery. IT played the role of a broker.”
To evangelize the idea of growing internal talent, Krantz introduced his leaders to the neuroscience concept of “growth mindset,” which emphasizes brain elasticity and learning potential. But the shift didn’t happen overnight, and Krantz took the same iterative approach to talent development that he took to IT modernization. “Our insourcing sequencing largely followed our architecture,” says Krantz. “As we modernized our systems of engagement, we insourced that talent. We did not want to stand up a new digital product with outsourcers. When we transitioned from our legacy MPLS (Multiprotocol Label Switching) to software defined networking, we decided to run our network with a much higher mix of internal network engineering talent.” Today, Keysight IT is 55 percent internal.
While Krantz acknowledges that the journey to an Agile model and cloud-composable architecture is never over, he can share some lessons learned:
- Krantz advises that CIOs modernizing their architecture “figure out a way for your new systems to coexist with your current systems,” he says. “A plan that includes knife-edge cutovers from old to new is a recipe for perpetual project delays. You will never get your new system to work exactly like your old one, so your business partners will never be ready for go-live.”
- Calling new solutions “digital products” rather than projects, was key to providing maximum value. “When you sell a product in the marketplace, you don’t say, ‘I’m done. I will never add another feature or enhancement,’” Krantz says. “Customers will want enhancements indefinitely, which is why we called our new revenue recognition solution a ‘revenue digital product.’”
- Automate testing as early in your transformation as possible. “In our traditional model, 60 percent of our time was spent on testing and 40 percent on actual development. That doesn’t scale,” he says. “For us, the big ‘A-ha!’ came when we automated our test cycle so that every piece of code we push triggers a rerun of automated testing scripts, which ideally, should always be running. Testing cannot be manual or platform-specific, since in a composable architecture, a business process can cut across multiple systems.”
IT strategic planning comes next
With his target architecture in sight, and his team largely insourced, Krantz is now setting his sights on improving the strategic planning process for IT. “In our traditional approach, we would ask our mid-level business partners what they needed from IT,” he says. “The demand would outweigh our resources, so we would ask the executive team to prioritize. We wasted a lot of time.”
Recognizing that the process was inefficient, Krantz and the rest of the executive team have made a change. Before Keysight’s P&L leaders commit a strategic plan to the board, they meet with Krantz and his team to discuss the IT resources their plans will require, and those resources go into the IT strategic plan. “Shifting our bottom-up planning process to a top-down approach is something I wish I had started earlier,” Krantz says.
For most CIOs, the “what” of a modern IT organization is pretty clear: a cloud-enabled, microservices-based architecture with platforms, APIs, and agile development that allow for fast, iterative releases. By focusing as much on the “how”—iteration, insourcing, and strategic planning—Krantz and his team are well on their way to modernizing technology in an 80-year-old high-tech company.