Subject: [NEXTEL-1] Nextel Communications' multiyear, multimillion-dollar IT project known as the Business-System Overhaul

From: Marcel <[email-masked]>
Date: Fri, 03 Jan 2003 01:57:28 -0500

January 2003, Issue 15

Nextel Communications' multiyear, multimillion-dollar IT project known as the
Business-System Overhaul
involved reengineering 800 business processes and integrating 14 legacy databases into
one. In many
companies this project would have had "career ender" written all over it. In fact, not
only did IT survive and
thrive, but the company is now positioned to save millions of dollars thanks to the
project's successful
on-time and on-budget implementation.

The system overhaul, which began three years ago, will reduce IT as a percentage of
overall corporate
revenue despite a huge infrastructure investment and improvement over the next several
years. Major
process-and system-reengineering projects like Nextel's need many levels of support, and
we had full buy-in
from corporate management and assistance from our technology partners. Most of all, we
began with great
determination and a clear corporate mandate to revamp our systems to accommodate growth,
and we
accepted the challenge.

Nextel had reached a critical point in its history. As a provider of fully integrated
wireless-communications
services targeting the most valuable customer in the wireless industry—the business
customer—Nextel had
$3 billion in revenue and approximately 4 million subscribers. But we were poised for
explosive growth: We
have 10.1 million subscribers, and 2001 domestic revenue was $7.01 billion. We needed to
provide the
company with a sound infrastructure that, among other things, our 10-year-old billing
systems could never
manage.

Grand goals

But our plan went well beyond billing. From the time I joined the company about a year
before, our goal was
to stabilize and drive as much cost out of the operational-IT infrastructure as possible
and reach a level of
flexibility and scalability that would support long-term business objectives. These
included successfully
implementing a fully integrated end-to-end business platform, standardizing business
policy and process,
gaining operational efficiencies, improving the customer experience, and reducing time to
market to
implement new marketing initiatives and products. The overarching business goal was to
scale the systems
to meet the pace of the business growth and to increase shareholder value. Achieving these
goals required
better customer support, driving costs out of the business, and redirecting the IT
investment.

Nextel At A Glance
Business Overview:
Nextel Communications, Reston, Va., is a leading provider of fully integrated
wireless-communications
services and digital mobile-phone service. With its partners, Nextel serves 10 million
digital
subscribers in the United States.
Financials
2001 year-end revenue: $7.01 billion from domestic operations; net loss, $2.6 million
3Q 2002: Revenue up 26% to $2.3 billion over the previous year's 3Q
2001 employees: 13,000 U.S.
IT organization
Richard LeFave, CIO and senior VP, oversees 550 Nextel employees and 250 contractors.

The existing platform was out of gas. It included 14 legacy databases that were owned by
different groups,
such as billing, collections, customer care, customer operations, and sales. Multiple APIs
and interfaces
created inefficiencies and a frequent need to go into reactive mode when things broke.

While many companies make a best-in-class argument for bolting together separate
applications, we
believed we would achieve much greater efficiency, flexibility, and
scalability by integrating our legacy systems. As a high-growth
technology company, we didn't want islands of information and
applications bolted onto legacy systems, which ultimately cost more in
training, interface development, and maintenance. So we forged ahead.
The overhaul affected roughly 60% of the applications in the back office,
involved software and hardware changes, an outsourcing arrangement
with Amdocs, and business-process reengineering.

An extensive project-management office had full-time oversight of
multiple vendors and consultants. The effort was also helped by
comprehensive new software tools that let the IT department run as a
business unit committed to driving cost from the infrastructure and
delivering true value to the company. Business-technology optimization
(BTO) software from Mercury Interactive let us measure performance,
test systems, and analyze results as we went along.

The overhaul spanned 11 vendors, three countries, and six time zones.
During the three years, we logged 2 million hours of software
customization and managed 700 team members from 25 organizations
within Nextel and Amdocs. We reengineered 800 business processes and trained 25,000 users
to deliver a
total of 3,200 business requirements.

Despite the size and complexity of the project, it met time and budget parameters, and our
new system is
far easier to use and manage than before. It provides scalability and flexibility, while
also offering easy-to-use
national rate plans and the ability to scan a single database for customer information. In
addition to
hard-dollar savings, ROI is also measured in improved quality and performance and reduced
staff-turnover
rates.

But more significant, both executive management and our project team have new confidence
in IT's ability to
successfully complete projects that will benefit the business. The process has
strengthened our business
and built up the muscle tone of the company. We've even embarked on a new initiative to
overhaul our
financial systems beginning this year, and we'll use the same BTO solutions and
methodology to do it.

Widespread challenges

The challenges we faced are certainly widespread. According to a 2002 survey conducted by
Forrester
Research see sidebar, below, only 15% of 122 senior IT executives described their
organizations as very
successful at ensuring that applications and the business processes they support meet
service-level and
business goals. Equally revealing, only 25% of the executives said their organizations did
very well at
defining and measuring the IT performance of automated business processes against service
levels that
matter to business.

I've watched the evolution of IT for more than 25 years and managed large-scale projects
at American
Express, Boeing, and Southern New England Telephone. I'm happy to say that the bad old
days—when
software was more art than science, and underperforming IT projects were tolerated—are
clearly over. Today,
the pressure is great to control costs, align IT with business goals, and create an IT
infrastructure that truly
enables the business processes it was designed to support.

Until recently, however, the inability to accurately measure, monitor, and test ongoing
application
performance often made it impossible for organizations to understand the impact on the
infrastructure—or
more important, on the business—of introducing new IT-enabled business processes. This
made it nearly
impossible to ensure the success of projects like the one we implemented.

Companies now recognize that IT projects must deliver measurable value. Average response
time,
throughput, peak response time, hits, and sessions per second all contribute to
anticipating system and
business operations, and should be viewed as key performance metrics. Even as new
technologies, such as
XML and Web services, make network architecture increasingly complex, distributed, and
interdependent, IT
managers are under budgetary pressure to do more with less. This really isn't news to most
CIOs who have
worked for years with these limitations, but we lacked the solutions to achieve the goals.

Business-process tools can be used as an integrated approach to running IT as a business.
The key is to
measure, manage, and maximize IT-enabled business processes, while reducing the overall
cost of
technology. By leveraging solutions that accurately measure and monitor applications based
on their impact
on the business, companies can fully optimize the portfolio, while ensuring that major
changes to the
infrastructure don't cause major disruptions. An application that responds well when
implemented makes a
huge difference in its acceptance by the customer—and in future acceptance of technology.

BTO is a mind-set that everyone on the project team shares. It starts with the development
of key
performance indicators, such as application response time and network performance. These
can be used to
validate progress throughout a project or to monitor the impact
an existing IT-enabled business process has on the company.
In the past, improvements in IT-project management were
almost exclusively process-based: a new verification process or
a new methodology for structured walk-throughs of an
application. While these activities were beneficial, they simply
couldn't simulate real-world usage. We stressed the system to
ensure software is running at optimum levels. The BTO tools are
relatively easy to use, provide in-depth training, and can
integrate into the total project plan.

On the business side, the system conversion involved
significant business redesign. The approach brought together
the multiple business managers and integrated their
requirements along with the new technology. We established a
group to ensure we covered as many of the business-process
change requirements as possible, and they addressed areas
such as customer care, engineering, finance, operations, and
sales. The senior representatives, along with their teams, reviewed the changes affected
by the new system
and drove new processes, which required significant coordination and communication. A
major system
redesign brings to the surface all the issues that directly and indirectly relate to the
technology. It means
changing the way folks do business, and with that comes an opportunity to simplify
operational activities that
were layered over the evolution of the legacy system.

The benefits

It's always been easy for management to say, "We're going to develop Application X and
roll it out in a year."
But the testing group—those tasked with ensuring the application really works—has always
struggled to find
the best solutions and methodology. At Nextel, we simulated 7,000 to 10,000 users and
created tests that
detected many of the problems typical of large-scale IT implementations early in the
process so we could
correct them and still complete the project on time.

When the new billing system went live in the first region, it was immediately usable, and
the overall
satisfaction level was extremely high. The company now had customer information we could
never access
before, improving both quality and scheduling while controlling project costs.

Maximizing the value of IT processes also involves the highest degree of planning and
project management
as well as executive commitment and communication; the larger the project, the more
crucial these become.
For example, we had to think strategically about IT instead of merely reacting to
problems.

A project of this scope involves some risk—most such projects run significantly over
budget or never get
finished. To be successful, we couldn't stay in a reactive mode trying to bolt on new
solutions as problems
cropped up. Instead, we had nearly 100 people involved in planning every phase and aspect
of the overhaul.

Speaking the language

The advantage of the new measurement and monitoring solutions is they deliver information
in language that
business managers can understand and track over time. With a good business case to justify
the project
initially, we could then use these solutions to tie progress back to the business case and
keep executive
management constantly informed about our status and needs.

In the end, the real, practical benefit was that the tools and strategies met our
criteria: They let us drive
costs out of the existing infrastructure and shift dollars to the top line of application
development for new
projects, products, and services. We lowered IT costs as a percentage of revenue even
while making new
infrastructure investments.

In business, evaluating performance is always critical. Our new measurement and monitoring
solutions let us
develop and track key performance indicators and evaluate how IT affected line-of-business
performance both
during and after development. This means IT can now play a more prominent, proactive role
in ensuring the
health and strength of the company—and we can move on to our next big challenge: revamping
the financial
system.

Richard LeFave is senior VP and CIO at Nextel Communications.

Sidebar: Survey: Businesses, IT still struggle with alignment

Though the pressure is huge to align IT with business goals, control costs, and create an
IT infrastructure
that truly enables business processes, few businesses are achieving these goals, according
to a recent
Forrester Research survey.

The results validated Nextel's experiences and the general notion about most IT efforts.
Despite one-third of
the 122 senior execs reporting that improving product and/or process quality is among IT's
top priorities, only
15% said their companies are very successful at ensuring that applications and the
business processes they
support meet service-level and business goals. This number fell to 5% for the largest
organizations.

The survey, conducted in August and September, included senior IT executives from midsize
and large
companies in Europe and the United States; most represented companies in the $500
million-to-$10 billion
range. Mercury Interactive, a provider of business-technology
optimization, commissioned the study.

Most executives (70%) want new tools to achieve their testing
and optimization objectives. For example, only 30% said their
organizations are very successful at testing the quality of
applications before deploying them, and a mere 16% said they
do a good job optimizing the performance of applications and
the business processes they support. Of those with tools,
nearly half of IT executives said their top priorities were
lowering overall costs or improving product and/or process
quality, and 51% plan to transform IT into a service-driven or
business-centric model over the next two years. An
overwhelming 83% said they plan to upgrade existing
applications, and more than half will purchase new
applications.

IT executives ranked all of the following as "huge" challenges: integrating IT into
business processes (35%),
moving from a reactive to a proactive business role (37%), keeping their top projects on
course (34%),
ensuring that IT plans support business needs and strategies (34%), and evaluating IT
performance (29%).

The 90-Day Plan

How can other companies get started on major IT project overhauls? Begin by setting
achievable goals and
getting corporate support and buy-in. But don't overlook getting the right technology
tools and business
processes in place as criteria for ensuring success.

First month: Shore up your internal organization

Understand what's driving the need for the project, and make sure it's clear and well
defined.

Build a business case for large projects, and keep it updated throughout the project life
cycle.

Develop a project-management office with a manager empowered to oversee the progress—and
to
troubleshoot the problems.

Get buy-in from executives and their agreement to participate in regular update sessions.

Develop a workable plan that illustrates progress at each milestone level.

Second month: Work on solutions

Develop excellent communication throughout the organization.

Check specifications and simplify the plan to the lowest level.

Identify solutions to measure and report consistently. The mantra: Measure it; manage it.

Don't underestimate change-management issues. Create new processes to accommodate the
changes.

Make sure all constituencies (customer operations, finance, IT, and sales) are tied into a
corporatewide
project.

Third month: Emphasize performance

Consistently monitor the plan to include new resource allocations.

Try out the testing plans to ensure resources are integrated.

Keep communicating regularly at all levels; no news is bad news.

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