`Tis the season for the U.S. Postal Service network to deliver

By Carolyn Duffy Marsan, Network World
December 13, 2006 04:08 PM ET

The U.S. Postal Service expects to ship 20 billion packages and letters this holiday season. Behind that massive workload is an equally massive VPN that is at the forefront of telecom industry trends, including dual sourcing and long-term contracting.

USPS has one of the largest networks in the world, connecting 38,000 locations nationwide and supporting 335,000 users. It spends around $180 million per year on its network infrastructure.

USPS overhauled its data and voice networks in 2006. The independent federal agency renegotiated and expanded its primary data network contract, while using a secondary contract to upgrade 3,000 sites. The outsourced network is being upgraded to support T-1 and above connections at all of its sites.

``In the last year, we upgraded almost everything, got additional services and saved $22 million,’’ says Robert Otto, CTO of USPS. ``For the next three years, we have achieved $73 million in cost avoidance because of the contracts [awarded this year]. I’m not only increasing my capabilities, but I’m avoiding additional costs.’’

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For USPS, the network is critical for processing, delivering and managing mail movement. So much of the organization's operations are automated that if a post office were to lose its network connectivity, it would have to switch over to an old-fashioned manual process for handling mail and retail transactions.

``The network is either your strength or your weakness,’’ Otto says. ``It’s really key in our organization because we want to move to self-service to allow employees and customers to do almost everything for themselves. If you don’t have a robust network, you have a problem.’’

Outsourcing and dual sourcing

USPS was an early advocate of network outsourcing, awarding a contract to MCI to handle its WAN infrastructure in 1997. The contract, dubbed MNS, for Managed Network Services, worked well for USPS until MCI’s parent company WorldCom hit the financial skids in 2002.

5 penny-pinching tips
Robert Otto, CTO of the U.S. Postal Service, has the reputation of being a penny pincher when it comes to negotiating contracts with vendors. Otto offers the following tips for driving down costs on network contracts:

•	Wait until right before a vendor's fiscal quarter or year-end to sign deals to get your best deal. "Every week you make them sweat by not signing up, the deal gets better," Otto says.
•	Demand discounts. Otto won't sign a contract without a 30% to 40% discount. Some of his discounts are as high as 95%.
•	Be willing to walk away. "I've had to walk away from two contracts over the last seven years," he says. "You better be prepared, because it will cost you more to set up an alternative solution. But in both cases, after six months, the companies came back and wanted to renegotiate."
•	Sign a long-term deal to get bigger discounts. "If you are willing to sign a five- or seven-year deal instead of a three-year deal, you'll be surprised at the discounts," Otto says. He includes a clause so he can terminate contracts at his convenience.
•	Benchmark your prices. USPS demands the best pricing in the industry and benchmarks those prices with Gartner. Ottois looking forward to the award of the 10-year, $20 billion federal Networx telecom program expected in March 2007 so he can benchmark his rates against Networx rates.