Bechtel is a great example of the “enterprise cloud” version of Cloud Computing – building its own enterprise cloud rather than using a cloud computing service provider.
With projects in 50 countries around the world, and teams collaborating around the clock, Bechtel’s challenge is to operate a seamless Project Service Network (PSN) authorizing employees, contractors, customers, and partners to access their global network with any device at any time through an Internet portal. There were two main challenges to IT service delivery: 1) the distributed nature of global project execution, and 2) people – enabling collaboration between permanent and temporary employees, as well as vendors, customers, partners, even competitors.
It all began three years ago when CIO Geir Ramleth questioned the state of Bechtel’s IT strategy.
He asked himself the classic strategy question: If you could build your IT systems and operations from scratch today, would you recreate what you have?
Instead of being satisfied with meeting or exceeding his industry’s benchmarks, Ramleth decided to think bigger. According to this article, Ramleth researched 18 companies and developed benchmarks against many of them, including: YouTube, Amazon.com, Google, and Salesforce.com.
Why would a engineering and construction company like Bechtel even think about comparing itself to leading-edge Internet companies? In his December 2008 keynote presentation at the Network World IT Roadmap Conference, Ramleth explained why.
We operate “as a service provider to a set of customers that are our own [construction] projects,” Ramleth says. “Until we can find business applications and SaaS models for our industry, we will have to do it ourselves, but we would like to operate with the same thinking and operating models as [SaaS providers] do.”
In his mind, Ramleth believed that “to bring SaaS-like services to our projects, we will have to become our own SaaS provider and possibly integrate with other SaaS providers.” Bechtel would have to migrate its IT and its thinking from the bottom left to the top right corner of the service diagram below.
In other words, Ramleth isn’t content waiting for SaaS and Cloud Computing offerings to work their way up from consumer-ready, to SMB-ready, to enterprise-ready. Ramleth knows the underlying technologies can reduce his costs and increase his service levels now, but that integrating the right solution for an enterprise like Bechtel is the only remaining hurdle. Ramleth took the pioneering step of clearing that hurdle himself.
After benchmarking Bechtel against the best, here’s what Ramleth found:
– For the wide area network, YouTube was paying $10-15/megabit while Bechtel was paying $500/megabit. It was clear to Ramleth that Bechtel needed to entirely re-architect their approach to bandwidth capacity and adopt a more service-provider-like model.
– Google employed one systems administrator for about 20,000 servers whereas Bechtel employed one systems administrator per 100 servers. The reason? Google has a standardized server infrastructure, while Bechtel was customizing everything.
– Amazon sold storage to external customers for 15 cents/GB/month, while at Bechtel costs were $3.75/GB/month. The difference could be explained by higher utilization levels at Amazon.
– Salesforce.com provides one version of one application for 1 million users. Upgraded four times/year with minimal downtime or training, whereas Bechtel ran 230 applications, up to five versions of each–nearly 800 different application versions altogether. Upgrades and training were constant with little or no version management.
The transformation was not easy. In 2007, Bechtel built three new standardized data centers –one in the United States, one in Europe and one in Asia–and began decommissioning the seven that it had just recently revamped.
In 1998, Bechtel had 35,000 sq ft of datacenter capacity across a distributed footprint. Today, less than 1000 sq ft of datacenter space is required for their virtualized foundation. And, in today’s virtual environment, servers are using an average of 70% of CPU capacity. Current savings on IT total spending was 25-30%. Says Ramleth: “On top of all that it provides a massive simplification for the business!”
“In the past we had brought the network to the data,” adds Ramleth. “But with the PSN, we wanted to bring the data to the network. We moved closer to the traffic aggregation points.”
The reaction from IT guru Nick Carr is on target: “For the largest enterprises, the very first step into the Internet cloud may well be exactly what Bechtel is doing: building their own private cloud to try to get the cost savings and flexibility of this new model… Large companies have such enormous scale in their own IT operations that the outside providers, the true utility providers, just aren’t big enough yet . . . to make them a better option.”
For his efforts, Ramleth is now honored in the CIO Hall of Fame, a fitting testimony to the vision and courage he has displayed. You can read more on Bechtel’s cloud journey: Cloud Computing to the Max at Bechtel.
In my mind, there are several important takeaways from Ramleth’s inspiring story:
1) CIOs must think like service providers: perhaps it’s because Ramleth was the founder of a service provider – Genuity, that he has the right mindset – thinking of his customers as a service provider would. Bechtel acquired Genuity in late 1995, taking it from start-up company to a leader in the Internet industry, and later selling it to GTE.
2) Cloud Computing is a competitive reality: if a traditional company like Bechtel can use cloud-computing to radically change the cost dynamics of its IT infrastructure, so can you!
3) The “Big Switch” is on: Author and provocateur Nicholas Carr is right – the big switch has begun. The sooner you start thinking about your roadmap, the better.
4) Service providers must offer cloud-based services: by now, alarm bells should be going off for IT hosting companies, MSPs, SaaS companies and yes, Telcos. If you don’t have cloud-based offerings in your near future, you may not have a future.
5) Even in a recession, moving to the cloud makes sense: why spend money on capital expenditures when you can pay as you go? The cloud helps your bottom line, period. And now is a great time to get started on your company’s journey to the cloud.