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Ten Guiding Principles of Reducing Network Costs

Catalyst - July 14, 2005. Ten Guiding Principles of Reducing Network Costs. Sorell Slaymaker Director Network & Security Architecture sorell_slaymaker@uhc.com. Outline. Introduction Overview of United Health Group 10 Principles of Reducing Network Costs

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Ten Guiding Principles of Reducing Network Costs

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  1. Catalyst - July 14, 2005 Ten Guiding Principles of Reducing Network Costs Sorell Slaymaker Director Network & Security Architecture sorell_slaymaker@uhc.com

  2. Outline • Introduction • Overview of United Health Group • 10 Principles of Reducing Network Costs • Costs – Know what your component costs are • Compare – Get industry rates and compare with yours • Competition – Bid out those services that are not competitive • Control – Task outsource • Consumption – Manage demand as well supply • Centralize – Get the technology & support out of the field • Consolidate – One IP network for all services • Catalog – Offer services not products or technologies • Clean-up – Get rid of unused circuits, hardware, maintenance • Communication – Publish or perish • Conclusion • Appendix

  3. Introduction • Our challenge - Cut costs while: • Adding services with business value • Improving reliability & performance • Adopting new technologies & products • Increase bandwidth demand • It is possible – But, cutting costs does not make you popular. Improving reliability & performance does, so do not sacrifice these. • Disclaimers: • The 80/20 rule works 80% of the time • 50% of all numbers are made up…. Or is that 60%? • Your mileage will vary, for it is all up hill

  4. Overview of United Health Group Who is UHG? • Diversified Health Care Company • 41B in revenue (Fortune #40) • 11B in acquisitions in 2004 • 6 Primary divisions with 150 offices, primarily in the U.S. • 42,000 employees - 5,000 in IT • Serve Healthcare to 55 million Americans • Use technology as a competitive advantage • 4 primary and 11 secondary data centers • 500 business applications, key applications are home grown • Goal of IT infrastructure is to be reliable, efficient, cost effective • In-sourced voice & data network starting in 2003 and have achieved a 70M/year savings with a 25% improvement in network availability and performance. These savings go directly to the bottom line!

  5. Costs Understand what your component costs are • 10 most common component costs: • Long distance voice – 800, On-On, On/Off • Access – T1, DS-3, OC48, GigE • WAN Bandwidth – Cost per Megabyte – 512K,1M, 6M, 20M • ISP Bandwidth – Dial, Broadband, 1M, 45M • Conferencing – Audio, Web, Video • Local Service – C.O. & FB lines • Cellular – Voice, Data • People – Contractors, Staff • Maintenance – Hardware, Software • Depreciation – 3 or 4 years

  6. Compare Benchmark your costs to industry rates Examples: Your Cost ?

  7. Competition Put up for bid services that are not competitive • MAC - Keep minimum annual commitment <50% of projected • Strong SLAs – Procurement, delivery, availability, reporting, billing • Term - Keep contract period short (3 years) but have option of a couple of 1 year extensions • History - Understand that demand will go up, so per unit supply cost must go down. History has shown this for the past 15 years • Rate Reduction - Avoid the good deal year 1 and the bad deal year 3 by scheduling yearly rate reductions • Contracts - Have a strong legal contract with options to get out if need be. You are the customer!

  8. Control Task outsource some things, but retain control • Installation & Operations - are areas for task outsourcing • Architecture & Engineering is where you and your team provide value for the business. Use consultants to help if needed. • Cookie Cutter - For all new services (technology & products) build a “cookie cutter” and once baked, crank them out. • Financials – Billing, charge backs, budgeting should be a core competency. You must understand every penny. • Common – Anything done once can be repeated & standardized • 10/25 rule – With cost, quality, and delivery as your measures, if something is within 10% of how you do it today, then stick with it. If it is greater than 25%, look seriously at changing. • Outsourcing - Companies who have outsourced or insourced everything, struggle. The ones who retain control, but task outsource and bring in consultants, for specific engagements, have done the best over the long run. [My experience]

  9. Consumption Manage demand, not just supply • Users • VPN - Users who have multiple VPN access connections – Broadband & Dial and only use 1 or users who spend >$75/month on dial when Broadband is available • Audio Conferencing – Users who use audio conferencing for 2 or 3 person conferences. Monthly reporting and reminding helps enforcements • Cellular – Users who plans do not match up to their demands – Unlimited vs. minute based • Sites • Voice Lines – Local & Long Distance – P.01 in & P.05 out • Data Network – Use QoS to size network for what runs the business vs. that which is used to administer the business • Maintenance – 8-5 vs 24/7, self sparing

  10. Centralize Centralize all network services to two sites • Centralize • Voice Mail • Call Centers • PBXes • Keep the edge of the network optimized, for most of the value comes in the core • Example – UHG Virtual Contact Center • 62 call center sites supporting 9,000 agents with technology at every center consolidating down to 2 sites • 600 servers to support environment (Routing, Call Recording, Training, Reporting, IVR, PBX) reduced to 80 • Agents can now work at home, offshore, new real estate site, or 3rd party and as long as an agent has a good network connection, they can be an agent anywhere. • Interstate vs. Intrastate Toll – 1M in routing calls out of state • See Appendix 1 for more detail

  11. Consolidate With IP, all networks can be consolidated to 1 • Voice – IP telephony is coming – UHG will be 100% IPtel (except call center - VCC) by end of 2006. • Data – Consolidate parallel data networks (UHG had 5 parallel data networks – Corporate FR, Corporate ATM (higher speeds), Private Line, ICM FR, & Storage) • Conferencing – Audio, web, video • Economies of scale – Getting an entire enterprise on one shared network lowers per unit costs • Active/Active - Move to an active/active model (2 sites that back each other up) • Staff & Support – People work better together when they are together. Staff where the equipment is saves maintenance and enables faster changes.

  12. Catalog A Service Catalog enables the organization to mature • What your customers want: • Description of what to provide – Service Catalog • Process to acquire service – Service Request • SLA’s for quality & delivery w/ reporting – Service Level Management • Market competitive costs – Service Based Charging • What we want: • Provide and encourage a shared infrastructure to be used across all business units that is standardized and simple • Make requests standard and repeatable vs. stand alone projects • Separate technology/products from the service offered – Customers should list functional requirements, not technical specifications • Standard way to define, market, and deliver services • Educate customers on how their consumption impacts cost • See Appendix 2 & 3 for examples

  13. Communication We are in the communications business? • Output • External Web Site – Publish your catalog, reports, org charts, …. • Internal Web Site – Publish all documentation, process, circuit IDs, vendor contact & escalation information, …. • Roadmaps – Everyone needs to know where you are going • Technology – Other IT Groups • New Services – Business Groups • Input • Vendors & Partners – Win/Win relationship takes lots of communications and negotiation • Consulting Groups – 2nd opinions, keeping on top of the trends

  14. Clean-up Pay for only what you use • Inventory – Account for all hardware, software, and circuits • Audit – Make sure above inventory is correct • Billing – Compare bill to inventory • Update – Every project must have clean-up as a step before project ends • Maintenance • Self Spare – Edge ethernet switches, phones, • 8-5 vs. 24/7 – Is full redundancy good enough • Time & Material – If you are planning on replacing it in the next 6-18 months, why pay maintenance on it

  15. Conclusion It is possible to cut costs & improve quality • UHG cut 70M from a 180M/year network budget by: • Control – In-sourcing primary network functions – 20M • Competition – 2nd Carrier, VXML Hosting, … – 10M • Centralization & Consolidation – VCC, MPLS – 10M • Consumption – VPN, Conferencing, … – 10M • Clean-up – Circuits, Billing, Maintenance … 10M • Costs & Comparisons - yearly rate reviews – 5M • Other – 5M • UHG improved quality by: • Catalog – We talk about services and business needs, not vendor products & designs • Centralize & Consolidate – Less to support & fail • Control – Full accountability – One stop point for business • Communication – Getting all documentation in one place and publishing it. Helped MTTR with outages. • Competition – Redundant carriers for a redundant network

  16. Appendix

  17. Appendix 1 – Virtual Contact Center • Lower Costs • Transport - No more take back & transfer, pre routing • Hardware - Fewer voice switches and voice servers • Maintenance & Support – 2 sites, not 62 • Economies of scale – trunking, licensing, • Agent Staffing - Optimized acrossed all sites • Queuing - International calls queued domestically • Business Value • Simplicity - Common infrastructure, fewer devices, • Flexibility - Agents can be anywhere and access any application • Customer Service - Consistency across all channels • Scaleable – Balance load across multiple channels & sites • Greater Reliability - Dual carriers & platforms in a data center

  18. Appendix 2 Creating a Services Catalog Services ServiceCatalog Relationship Managers Service Owners Are documented in Define and manage Delivered according to Charge Backs Marketed by SLA’s Metrics & Reporting

  19. Appendix 3 – Service Catalog Example UHT Service Catalog Email Service Definition • Index • Who we are ………………….……………….1 • How we do business …………………………2 • Individual Private Services: • Network Services • Data – LAN, WAN, Internet, Remote Access • Voice – Telephone, Voice mail, Audio Conf • Call Center – IP Agent, Reporting, IVR, • Computer Services • Mainframe Hosting – Database, Storage • Distributed Hosting – Presentation, Application • Desktop & Groupware Services • Desktop – Laptop, Software Distribution • Collaboration – Email, IM, Calendaring • Security Services • User – Virus, Firewall, Spyware, • Site – Firewall, IDS, Event Correlation • Other Services • Consulting – Network, Security, Architecture … • Procurement - • Help Desk • Project Management • Public Service Solutions: • Employee – Move, Add, Terminate, Work from Home • Real Estate – New Site, Site Expansion • New Data Application – Small, Medium, Large • New Voice Application – Small, Medium, Large • End ……………………………………………… 120 Electronic Messaging – Used to send messages both within and outside the company. It refers to the ability to receive, send, & store email. What is Included • A. Basic Service • Lotus 6.3 Suite • 200MB Storage • Spam & Virus Filtering • B. Premium Service • PDA Synchronization • 500MB Storage • eFax Service Service Levels Response Time – 10 min Availability – 99.99% Cost Unit of Charge – Fixed price per user per month Major Cost Drivers – # of Accounts, Support, Filtering, Maintenance Cost Saving Steps – Delete or Archive old messages, Use file sharing to copy multiple internal users on a large file Current Charges – Cost per account per month $17 $14 $14 $12 2003 2004 Premium Basic Delivery Setup Time – 5 Business Days, (2 Business Days Expedited) Acquire Service - http://frontiers.uhc.com/uht/servicecatalog/eamil More Information http://frontiers.uhc.com/uht/servicecatalog/eamil p. 57

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