Bethlehem Steel's top net exec shows mettle during tough times

One of the country's oldest and most innovative manufacturers, Bethlehem Steel faces unprecedented challenges as it struggles to emerge from bankruptcy proceedings and compete in an industry flooded with low-cost imports. Network World Senior Editor Carolyn Duffy Marsan recently spoke with Senior Vice President Thomas Conarty, Jr. about the importance of flexible networks, how to keep staff motivated during tough times and why the company's dot-com investments weren't a mistake.

The need for network speed
IT staff and organization
The impact of the Chapter 11 filing
Keeping an IT staff motivated during tough economic times
Why an initially unsuccessful e-business investment can pay off
Security and disaster recovery after September 11

Bethlehem Steel's Sparrows Point plant in Baltimore recently upgraded its campus-area network from FDDI to Gigabit Ethernet, and its Burns Harbor, Ind., plant is conducting a similar upgrade. What applications will these networks support?

We have a fairly extensive training program in Six Sigma [a statistics-oriented quality program for manufacturers], which is a data-driven process. We're also investing in data warehousing technology. At the heart of these efforts is the need to effectively move large volumes of data.

As we move materials from [one plant to another], we need good coordination and scheduling. We need to track orders, and we need to move data. That's another reason we need a robust and standardized network architecture. As we increase the linkages and information flows with our customers, we need high-speed networks. In the Customer Corner section of our Web site, we give our customers a view into our operations and the status of their orders. It's pretty exciting that a manufacturer like ourselves can give that kind of information. But to do that, we have to have access to a network like this. You have to have a high-speed network to provide more transparency of your supply chain, to have automated replenishment from suppliers and vendor-managed inventory.

Also:
Bethlehem Steel net upgrade combines speed, savings

How does the upgraded campus-area network at Sparrows Point fit into the company's overall network architecture?

The refresh is in keeping with a strategy we set out in 1996-97, when we put fiber-optic cabling into this facility. We put in the proper pipe size and the physical media that we can use as we grow. We planned to upgrade the electronic components as technology changed and opportunities arose. This was one of those electronic upgrades that we did in partnership with Cisco and Electronic Data Systems. We have two major plants - here in Baltimore and in Burns Harbor - along with our corporate offices [in Bethlehem, Pa.] and our R&D center. We use a lead/follow strategy, where sites leapfrog each other as we do network upgrades.

How big is your IT staff and how is it organized?

We have less than 500 people across Bethlehem Steel, and that includes employees of Electronic Data Systems and Bethlehem Steel. We are in year nine of a 10-year outsourcing contract with EDS. EDS manages all the mainframes, application development, desktops, network operations and some of the process-control networks. At each location, we have an EDS and Bethlehem Steel person in charge of the network. At the corporate level, we have a voice and data telecommunications manager [who reports to me]. Our IT budget is $60 million per year.

What's the impact of the Chapter 11 filing on your IT department?

The most critical part of a Chapter 11 filing is to create a robust plan for reorganization and restructuring. There's no better base to build on than a network that's reconfigurable. We can change the information flows. We can decrease processing at one location. We can do joint ventures or engage in [merger and acquisition] activity. There's no better way to technologically pull that off than having a flexible network. If we allowed our networks to deteriorate, and if we didn't lead in this area, it would hurt our chances of a successful plan of reorganization. However, our IT resources are going to be constrained, and there will be a high degree of public scrutiny on our budget. We did the recent upgrades with operating leases. The new lease cost is less [than the previous technology], so it was a no-brainer.

Why didn't Bethlehem Steel's innovative strategy help you be more competitive and avoid a Chapter 11 filing?

Over 25 U.S. companies have gone into Chapter 11 in the steel business. It's arguable that these [network] investments have allowed us to put off Chapter 11 for this long. It's serious industry fundamentals that are driving the [steel companies] that had to file for Chapter 11. Those issues need to be addressed for reorganization plans. Those issues involve the labor unions and industry consolidation to meet the supply and demand for steel. And we may need some form of governmental support.

When I started my career at Sparrows Point almost 28 years ago, we probably had five times the amount of people to produce steel here. And we probably produce today as much steel as we did then. The whole data networking infrastructure has facilitated those kinds of changes. And the network infrastructure we have today gives us tremendous flexibility. It removes information flow constraints from facility decisions.

What are you doing to keep your IT staff motivated given all the uncertainty surrounding the company's future?

The way you keep IT staff motivated is threefold. First, you have to maintain a high level of professionalism. You have to respect your staff and give them challenging activities to work on. Second, you have to try to achieve something. We were all disappointed the day we filed for Chapter 11 because it went to this aspect of achievement. Third, you have to provide your staff with technological awareness. In the refresh we just finished, people got excited and it was a challenge. Some of them got training and were allowed to implement something new. The Chapter 11 filing is a bit of a gut-check for the people working here. But in the end, if we give them [opportunities] to feel like they're growing, they'll stay motivated.

Bethlehem Steel made major investments in e-business during the past three years. In hindsight, were those investments a mistake? Do you wish you had that money back now?

No. The game is played on the playing field, not in the parking lot. If you want to play the game, you have to pay the right of admission. Otherwise, you can't be a player in the underlying philosophy of e-business. E-business is a notion that will be advanced through other buzzy names. For e-business to work, you have to examine the intersection of people and customers and suppliers. You can't do that by watching. You have to experience it.

The issue with MetalSite had to do with how a new company gets funded. Bethlehem Steel is a $4 billion company. We took a write-down of $3 million on the MetalSite investment, and we are still holding an equity relationship in it. We're still going to [sell] some steel through there. That story is not over.

What have you done to beef up network security and disaster recovery since Sept. 11?

We reviewed our network security strategy, up to the chairman level. This time last year we did a security audit, where we hired hackers to try to find vulnerabilities. As a result of that review, we've done a lot of enhancements. Physical security of our plants has always been a concern. We've already taken most of the precautions possible. We also have full redundancy across our network. Because steel-making is inherently dangerous, we've already been thinking about fires and explosions - the kinds of things that terrorists might do to you. We hope we have them covered.

We have a back-up and recovery test annually. That's largely done through our contract with EDS, which has data centers in Plano, Texas, and Dayton, Ohio, and a hot site in Las Colinas, Texas. We've always set out for a full recovery within 24 hours, but we can do it in closer to 12 hours. In our network design, we eliminate single points of failure, but there's always one out there.

The events of Sept. 11 point to the need to think about business continuity vs. disaster recovery. You have to balance the likelihood of occurrence against the cost.

Getting personal
Thomas Conarty, Jr.
Title:	Senior vice president
Organization:	Bethlehem Steel
Responsibilities:	Procurement, IT and logistics.
Annual budget:	$60 million
IT staff:	Just under 500
Previous jobs:	In a 26-year career with Bethlehem Steel, Conarty�s previous posts include: vice president of IT and CIO; director of IT; and technical management roles in Bethlehem�s research department.
Education:	Undergraduate and graduate training in chemical and mechanical engineering at Lehigh University and Johns Hopkins; management programs at Harvard and Penn.
Professional affiliations:	Founder and president of the International Information Technology Users Group.
Other:	He holds several patents related to steelmaking.

Bethlehem Steel's top net exec shows mettle during tough times

Related Links