Thinking Strategically

John Nallin is the Vice President in Information Services responsible for Business Continuity, Corporate Repositories, Technical Architecture and Telecommunications for UPS worldwide. He is a member of the UPS Information Technology Governance Committee, which oversees the direction of UPS technology and aligns it with the company's business vision and strategy. Business Management caught up with him to discuss the company’s approach to telecom management, and why telecommunications are so vital to UPS’ strategic direction.

BM. According to a recent survey of IT execs, telecom contracts are the source of most CIOs’ greatest long-term strategic confusion and biggest all-around tactical, day-to-day administrative frustration. Why is telecoms management such a potential minefield?

JN. First of all, I’m not sure I necessarily share that view. We’ve looked at telecoms as one of the key elements – from a business perspective – to help us meet the challenges surrounding the delivery of merchandise. For the last 10-12 years, telecom has been a facilitator for us to be able to do a lot of things for our customers, and it’s been a strategic area for as long as I can remember. We’ve looked at it as an opportunity to do some things we may not have been able to do without a robust infrastructure.

Because of our lines of business, there’s never really been a question as to what we expect from our telecom systems. We’ve got to be worldwide, robust, reliable and available 24/7. From my perspective, my primary role in the first 20 years of the business has always been in application development. You had to develop an application but then you had to deploy it and then make sure that it was up and running. Having subsequently taken on some of the telecoms roles, I wanted to take the telecoms out of the critical path to be able to provide services. I think that we have been able to pretty much do that across the globe.

BM. What approach have you used in terms of your telecoms management?

JN. We’ve obviously looked at where we thought the various vendors were from a technology perspective. But if a specific vendor could not provide service in a particular area of the world, we also looked at whether they could be the prime and have them work with the local provider to provide us with service. I think in a lot of cases it has worked out very well.

BM. So you think it is important to spread your telecoms and network services to a number of players?

JN. In a lot of cases, there is not one single carrier that can provide 100 percent service. In the US, for example, with such a high internet use we have two ISPs that provide data services. That obviously gives us a contingency plan in case of an outage in one or the other.

Everyone expects dialup tone service in our landline voice traffic, but anyone who uses a cell phone knows that you don’t have that same reliability when it comes to wireless. We are constantly pressing the vendors for 100 percent uptime; I’m sure we will get there but it is important to have a contingency plan on everything, and that’s what we try to do.

We are always testing the market to see what is the best rate for a specific service, and we do that on an ongoing basis. We know pretty much who is paying what because we are not looking for the cheapest – we want the best overall value. As long as our vendors know that we are on top of the market they will not try to sneak something by us. We are a big player so we get a pretty good deal. They also know that if we have a unique requirement we are going to go to them and look to see if we can leverage that partnership in getting that part of the deal included. Maybe we could have gone individually to a vendor and purchased it and saved a few bucks. However, often we will bundle it under another deal and get a bigger discount from the prime and have a better service agreement.

BM. So how can companies ensure they get the best value from their telecoms carriers?

JN. We belong to a couple of councils that share information within the industry. We are constantly looking to see what other deals are around and we have a very good sense of what people are paying for various services, but it is a never-ending cycle. Over the last five or six years, we have seen our rates continually go down in certain areas. Every year it looks like it is going to stop going down and go up again, but we haven’t seen it yet. It’s a never-ending review of the marketplace, and there are companies that provide that type of intelligence to the industry.

BM. You are currently looking at utilizing the services of a telecoms expense management vendor. How are you tackling the increasingly complex world of telecoms management at UPS?

JN. We have a good accounting group here that has been working on this stuff for 10-15 years, so it’s not like it is brand new. When we come in with a new subsidiary or we purchase a new group, we know where we can make some beneficial moves and combine what our new subsidiary was paying for into our deals. We have done that over the last two years, primarily in the international market.

It used to be that you would have four or five different telecoms organizations within a corporation. We have been fortunate to have one. We run worldwide telecoms out of a single facility; everything has to come through the planning group and we manage it from there.

BM. What would you be looking for from a vendor to sway your decision?

JN. Since they do it for a living, they understand the specifics of certain areas of the business. We concentrate on our big-ticket items such as voice and data. Some of these other companies are obviously looking at where they could use video or teleconferencing. It is the old thing of ‘I don’t know what I don’t know’, and I think this is a lot of what these vendors can provide. It is their business. We don’t do it as a profit center, we are doing what we think is the right thing but these guys do it as a full-time job.

BM. Why is telecoms such an important element to get right? What strategic advantages does effective telecoms management offer?

JN. We have an international project where we run around 200 facilities out of our data center here in the US. Two or three years ago, those operations would have been running locally, but through the combination of the bandwidth being available and the reliability of our network and the technology that is now around, we are able to run applications in our data center and provide a better service. From a telecoms perspective, we are getting to a point where it really does not matter where the user or the customer is, because we can provide equal service wherever they are. That is a far cry from where we were a few years back.

BM. Do you think that senior executives appreciate the strategic importance of telecoms in terms of the efficiency and productivity gains an effective telecom system enables, not to mention the benefits of having a reliable service?

JN. For the most part, they are happy that it is there but don’t want to know what is underneath. When we had a hurricane up here a few years back, we ended up having diversity in our network with two different providers. We ended up losing both of them for a period of time and the first question we were asked was why we didn’t have a third. Well, because we would probably have lost that one as well. There are certain things where you can have a strategy but it is not 100 percent guaranteed and that is part of the telecoms industry. We have to be willing to look at it and be willing to change our infrastructure to provide the service levels that we are expecting.

BM. What trends do you foresee on the horizon that are going to shape the way that companies manage and pay for their telecoms infrastructure.

JN. We are moving to MPLS with all of our data and I think that is going to provide the next-level of sophistication from a quality service standpoint. I don’t believe that we have taken advantage of voice over IP opportunities and I think that is because they are really not there quite yet. Over the next few years, the convergence of a lot of the services will come into play. We, for the most part, separate our voice and data on a high level and I think that will start converging more and more over the next few years. When you have a company that has 2500-3000 facilities worldwide, it is not something that you do overnight – it is done almost on a continuous basis. And you always have to have a bit of the old and new. It is not a ‘one service fits all’ approach, so you have to be able to manage both.

BM. What impact has the recent industry consolidation had on companies’ ability to keep track of their telecoms expenditures?

JN. I personally think that it will help some of the companies that are currently using multiple carriers. It will force them to come together. This could be a blessing for some guys that may not have been as diligent in managing their telecoms in the past. I think the carriers will start managing it for them.

BM. Finally, what would be your top tips for companies looking to get hold of their telecoms expenses? What advice would you offer?

JN. First of all, you have to have a strategy and know where you want to go. I think you have to identify one or two key players who know the business along with the vendors. You need to work with them to iron out where you want to be in a year or two.