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02:29 PM
Paul Travis
Paul Travis

AT&T Seeks To Cut Costs Through IT Automation

Standardizing systems and automating self-service should help AT&T serve customers and reduce redundancies.

Like many CIOs, Hossein Eslambolchi has a legacy IT problem. But as the CIO of AT&T, a 125-year old American icon, his legacy problem is much bigger than most.

For more than a century, AT&T and the local phone companies that made up the Bell System were government-regulated monopolies that had little incentive to keep costs down or operate efficiently. State and federal regulators set prices for the local and long-distance services based on the amount of capital the companies invested in the network and the cost of providing the services, with a government-set profit margin tacked on top. The more money the companies spent, the higher the rates they could charge and the greater their profits.

It was a sweet deal that produced the best phone network in the world, affordable phone rates, a reliable and growing dividend that made AT&T's shares the most widely owned stock in the country. It also produced hundreds of custom-built, single-purpose IT systems that had little in common and didn't share information. Just about every new service got its own sales system, ordering system, provisioning system (to set up and tear down circuits), billing system, maintenance system, and customer-care system.

"We ended up with a set of silos of systems that each supported one or at most two services," says Behzad Nadji, AT&T's chief architect and a VP at AT&T Labs. "They didn't talk to each other, and there were problems coordinating things and sharing data. Customers ended up in several databases."

That approach worked fine for a monopoly. It doesn't work so well in a highly competitive industry selling what many argue is a commodity product, bandwidth, where the lowest price often wins contracts.

So cutting costs became one of CIO Eslambolchi's top priorities, and standardizing AT&T's IT systems became a key tactic. To reduce the number of systems the company used, Eslambolchi implemented what he calls the Concept of One: Do it once, do it right, and use it everywhere.

"We're shifting the paradigm 90 degrees, moving from vertical silos to horizontal platforms for our services," Nadji says. The goal is to have one companywide system for each crucial task that can be used for all of the services the company sells. The company already has retired several hundred legacy systems, he says. "We're going from 800-plus systems to no more than 100 systems by the end of 2006."

Another major cost-cutting effort is the company's BusinessDirect portal, an XML-based, self-service site that lets business customers order circuits and services, report problems, run diagnostics, and check network performance. "Three years ago, our customers had to go to a dozen or more different portals," Nadji says.

Not anymore. "I do everything through that piece of software," says James Romines, IT director for the Shaner Hotel Group, which owns 23 hotels in the eastern United States. Shaner uses a variety of AT&T services and in September hired the company to deploy high-speed Internet connections and wireless Wi-Fi systems at each hotel. "I can order new services, monitor circuit usage, and close trouble tickets. I don't like the extra work, but if you need something done quickly you can get on the portal and do it."

More than 600,000 customers conduct more than 25 million transactions on BusinessDirect annually, eliminating "25 million calls, E-mails, faxes, and manual entry of data into AT&T systems," Eslambolchi boasts. At an average cost of $15 per transaction, that saves the company more than $375 million a year, he claims.

BusinessDirect "lets us bring all of our accounts together under one umbrella and we can get information about any account," says Michael Dyson, IT director for Construction Specialties Inc., a Lebanon, N.J., maker of shades, screens, and other products for buildings, that has 1,500 employees and facilities in several foreign countries. The company uses a number of AT&T services, including its global IP network. The portal "is very convenient," says Dyson. "We can just log on and get the information we need."

BusinessDirect is "the top portal in the industry," and saves customers money and improves customer satisfaction, says Rob Rich, an executive VP at the Yankee Group and a former network manager at Digital Equipment Corp. Many businesses don't have an accurate inventory of all of the circuits and services they buy from a company like AT&T, he says, so consolidating all of that information in one portal can help identify redundancies and cut costs. "It also can deepen the relationship with the customer," he says.

Customers now use a global order-management system to add, move, and change circuits, including 75% of switched circuits, for many of AT&T's services, all without the involvement of AT&T employees. "We reduced the head count involved in supporting those switched orders by 86% in the past two years," Eslambolchi says. The company is moving to automate management of frame-relay and permanent virtual circuits, though that process isn't as far along as switched circuits. About 5% of virtual circuits, or 20,000 a month, are handled automatically, and 10% to 15% of new frame-relay orders.

The deployment of automated systems has let the company cut its workforce while maintaining quality, Eslambolchi maintains. AT&T is cutting 12,000 jobs this year alone. "Our costs go down and our quality, performance, and reliability go up," he says. "Automation has helped us reduce our workforce by 40% and cut the time to implement those orders by 50%." The ultimate goal, according to Eslambolchi, is to set up a "dark factory," where end-to-end order-management systems can handle just about any request from a customer.

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