Telstra has been charging out, tracking costs and measuring service to keep a handle on IT costs during at least the 20 years Graham Bull has been an employee. But during that time it has also come full circle, moving from a corporate wide computing model, out to decentralisation and duplication and then back to centralised control.
Back when Bull joined the company, life for the average DP man was rather dull and the computing model pretty straightforward. The corporate data network was just a series of mainframes with SNA links out to terminals, and the biggest excitement was waiting to see which of "The Bunch" (Burroughs, Unisys, NCR, Control Data and Honeywell) IBM would wipe out first.
Since then Bull has watched as telephone companies - including his own - turned away from mainframes towards Unix platforms. And he has witnessed firsthand the PC explosion and subsequent chaos as clusters of PCs and LANs began to mushroom out of control. "It wasn't just a revolution in technology, it was an end users' revolt," he says.
Finally, as Telstra recognised that going back to that successful earlier corporate IT model was indeed the key to its future, Bull has helped oversee the resulting determined and highly successful battle to bring everything back under the umbrella of the corporate data network. That move to recentralise has had brilliant results.
Indeed it has been so successful that recently growing numbers of functions historically handled by business units - and so previously excluded from the IT cost equation - have been brought under that same umbrella. This has led to a better understanding of the total costs and a chance to rationalise technology and introduce economies of scale. But during all those turbulent times, the focus on costs has remained. And while Telstra has enjoyed a high degree of success in this area, Bull knows as well as anyone else it's a battle that's likely to continue just as long as Telstra stays in business.
Currently executive general manager for IT Services responsible for providing the service base on which Telstra applications run, Bull says the last two or three years has seen the focus on cost intensify even further within Telstra.
And while he believes most of the industry, including his own company, still has a way to go in controlling costs, he has no doubt there is great potential to make significant progress into the future.
"Anybody that can get to the level of standardisation we have will see improvements, but I think as the tools mature there is still room to keep driving the cost down significantly if you look out five years," he told CIO recently.
Bull is responsible for running the entire Telstra IT infrastructure and for the operational aspects of systems, including those outsourced to IBM GSA. He's also responsible for the overall relationship with IBM GSA, which on July 24 last year formed a joint venture company with Telstra and Lend Lease to run Telstra's computer centre operations, related technical support and some application development and maintenance.
Telstra's enterprise infrastructure is broad and comprehensive. It embraces some 750 highly skilled staff; 55,000-plus users; applications performing four million online transactions per day; a LAN/WAN structure comprising more than 2000 file servers and 1400 routers; 1000 2Mbit/sec links and 2000 X25 links, and 1000-plus locations including eight international sites.
Since that much infrastructure naturally costs a bundle, keeping control of costs is almost as important a goal as delivering a high level of end to end service to internal customers. "There has been more of a focus on cost over the last two or three years," Bull says. "There's been a significant focus on not just delivering a high level of service but also improving the cost of the whole effort. Although that is not something that's just happened recently, it has intensified, driven partly by competition and partly by the float."Enterprising MoveWhile Telstra had 33 separate national wide area networks (WANs) by the late 1980s, it was quicker than most to recognise the problems and to jump in to move to a much more enterprise approach.
"We started making some key decisions about 1990," Bull says. "First of all we said we were going to standardise on the desktop, and we picked Microsoft very early, before people knew Microsoft was going to dominate the industry.
"We also standardised early on Novell and the LAN environment, stated this idea of the corporate data network, and started a process of standardisation and consolidation before it really got too far out of hand.
"And the first part of it was that we rationalised the WAN and we picked TCP/IP as the basis of that before anyone knew much about the Internet. There was a little luck in that. Some people were studying what we needed - we wanted something to connect up all this diverse range of equipment, including Unix boxes - and TCP/IP made sense," he explains.
The second stage was to standardise the WAN and desktop environment into a Standard Operating Environment (SOE).
"The SOE just basically said: 'You will use Microsoft and IBM compatible PCs and Novell in a LAN'. But there's a hundred different ways you can configure those things, so the subsequent step, which we made in about 1992/93, was to introduce the Corporate LAN Standard. That actually specifies in great detail all the parameters and configuration of every PC and every LAN," says Bull.
"Every application that's deployed on the desktop now goes through a central group which tests it and sets all the parameters so it can just be distributed automatically to every desktop and every LAN in the company.
"It means if you want to distribute a piece of application software it will run exactly the same on every PC and every LAN in the network. And we're increasingly doing a lot of support remotely, and that's giving us big savings." Remote support is possible because at the same time it was rationalising WANs and mandating the SOE, Telstra was consolidating the support organisation. It has centralised platform management, while LAN administrators previously responsible for individual business networks were progressively pulled into a single national support organisation. There they were trained in common standards and given some common tools.
The move has allowed vastly improved efficiency and given Telstra the ability to support more desktops with the same number of staff or even less. "Service centres increasingly do things remotely," says Bull. "You can actually call the help desk and someone takes control of your PC and can move the cursor around on your PC from a remote centre, because we use LANDesk Manager and a number of other tools from Novell. It means the previous jobs that LAN administrators used to do can be done remotely."Consolidation has resulted in some reduction in network support staff, and has also allowed Telstra to achieve service management end to end, at significantly lower cost. In fact the savings have been so dramatic, annual network costs last year were less than half what they were projected to be had rationalisation not proceeded.
Telstra began benchmarking as soon as benchmarks were available, and typically runs well ahead of most of the benchmarking pack on costs. But Bull says maintaining that position is an ongoing task that never really lets up. "We've been benchmarking mainframe costs for quite some years using Real Decision Corporation, but at that stage they didn't have a database of benchmarking companies on WANs, LANs and PCs. Once they became available we joined those benchmark studies.
"We wanted to see where we stood relative to others in the world, and we used it as a motivator for ourselves to keep driving costs down, and to prove to top management that we're doing okay," he says.
Bull says because the average cost in the database is lower every year, maintaining Telstra's place in the database means continually working to drive unit costs down. That goal, of continually trying to improve the company's position in the database towards the best practice end, is an excellent motivator. But while he would recommend benchmarking to any organisation, he says it is important to realise benchmarks only measure unit costs. The other focus must be total costs.
"The cost per megabyte transmission might be going down, but if you're wasting megabytes your total cost might not be going down at all," he says.
In the mainframe area Telstra is well advanced in reducing unit growth in order to control costs as business grows and new applications arise. "We've got technical experts we can send into an application to see if they can take 20 per cent of the MIPs and gigabytes out of it, and they usually find they can." But while that works well for mainframes, Bull concedes it's much harder to achieve within the network.
Within Telstra, PC ownership and purchasing decisions remain decentralised. The IT services group negotiates corporate contracts for PCs and LANs and defines standard configurations depending on the type of application. It is then up to the business units to buy them.
By moving to a sale and leaseback approach to those costs - so business units have a lease charge on their bottom line - Telstra has given business managers a good incentive to be cost conscious. Since every business unit has to carry the depreciation and the capital costs of PCs and LANs, the discipline imposed by making business unit managers accountable for costs tends to make them "pretty reticent about wasting money on technology", says Bull.
Under Telstra's charge-out infrastructure, user departments pay for and own or lease PC hardware assets. Telstra takes out a corporate licence for software and charges business units for each user. IT Services includes LAN and desktop support in its own budget but has an internal charge-back arrangement by which it charges business units per user. And when it comes to the wide area network, IT Services owns the asset but charges it out to business users via an access charge.
"The principle we try to apply is 'cost to the cost causer'. The economics of getting down to a really fine level of charge-out, like charging per call to the help desk, or a charge per byte transmitted over the WAN, gets you to a point of diminishing returns," says Bull. "For that reason what we do is charge a common fee per user for LAN desktop support. Some people do ring up and get lots of support, and they pay the same as people who don't ring up much at all."Although this may not seem strictly fair, Bull says there are very few complaints. IT Services calculates the charge each year, based on the projection of its costs. Since that amount has come down by about 12 per cent over the last 12 months, thanks to the efficacy of many of its cost saving measures, business unit managers are generally well satisfied. And over recent times the charge-out infrastructure has extended to virtually every corner of Telstra's business.
"We're down to mopping up the little bits; in fact, I think that work is basically completed now. As we'd pick up each new business unit we'd go to them and say: 'These are the people you've got, these are the assets you've got.
We'll take them over and charge you so much per user.' Then we'd make the sales pitch - we'll tidy it all up and bring it up to the corporate LAN standard and we'll manage the service."Altogether, Bull says, the entire process of Telstra's progression "Back to the Future" proves that:an enterprise approach is key to controlling service and costs;proactive rationalisation is an ongoing process; and,considerable savings arise from standardisation and economies of scale.
While Telstra may have achieved impressive results in the past in keeping a lid on its IT costs, Bull says much work remains to be done. "Essentially the things that I see bringing the costs down into the future are firstly doing more remote support, continuing to support the LANs and desktops more and more using remote tools. In the last 12 months we've reduced the cost of this support by 12 per cent, and I'd expect to keep driving it down at a level of between 10 and 15 per cent per year.
"We expect to get better tools when we've fully deployed Novell NetWare 4.0 and Windows NT on the desktop, and we expect that to happen subject to business case. We're looking to make that migration over the next two to three years," he says.
"We expect to achieve some savings out of that. It's not something that will pay for the cost of going to Windows NT - that's driven more by the fact that we've just exceeded the capacity of our existing desktop operating systems - but it will lead to some improvement in tools," he adds.
The other side of the equation is to continue the task of progressively moving to a smaller number of bigger servers on the network. Bull says that will lead to lower support and maintenance costs and achieve significant economies of scale in hardware. That work is already under way for Telstra's e-mail network and is progressively being undertaken for the LAN environment.
But while he's confident both measures will lead to real ongoing savings, Bull says he would be hard-pressed to say which would lead to a greater reduction in costs. "I am currently doing more analysis, but I suspect that it's hard to disentangle them. Having less LAN servers translates to a greater ability to use remote tools and so they go together to some extent.
"One reinforces the other, because the history is that we once had all these little boxes all around the country and people physically located near them who did things to them. Now what we're doing is increasingly bringing the people into service centres so they can remotely support those things at the same time that we're reducing the number of things they have to support, and standardising so there's less differences between them.
"All of those things together are going to help you end up having lower labour costs, less maintenance, less depreciation, and to some extent lower software licence fees, because you've got fewer boxes on which the software runs," he explains.
He notes that while the IT industry is driving the cost of products down, the cost of labour continues to rise. Increasing improvements in productivity, as measured by the number of desktops supported per person, remains a tight focus.
And Bull is confident Telstra can continue to surge ahead of the rest in driving its costs down.
"I wouldn't say by any means that we've completed the task. In fact we've got a lot of activity going on at the moment, particularly around getting to do more and more remote support," he says.
As that work continues, Bull is confident the cost savings will go on, well into the future. Only this time, it's unlikely Telstra will need to revisit its own past in order to continue to reap the ongoing benefits.
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