Two years ago, the merger of Virginia Power and Consolidated Natural Gas created Dominion, one of the nation's largest and most diversified energy companies. Lyn McDermid, Dominion's senior vice president for IT and CIO, spoke recently with Network World Senior Editor Carolyn Duffy Marsan. They discussed:
What do you see as your role with regard to the network infrastructure?
My role on the network is not so much a technical role but a budget management role. I also work strategically with the business units regarding new acquisitions and where the network needs to go from a geographic and reliability standpoint. I rely on the technicians to do the design, deployment and management of the network.
Because of the major merger we did two years ago, we had two independent networks that we had to bridge together. The network for the Virginia area was SONET, redundant and very reliable. The network on the Ohio, West Virginia and Pennsylvania side had single points of failure and not a lot of redundancy. Now we're upgrading that network.
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We have several key locations that are network hubs: New Orleans, Pittsburgh, Houston, Cleveland and Richmond. We have server farms at each of our five major sites, and our main mainframe data center is in Richmond. We're a heavily fiber network, and a lot of it we own. We're seeing traffic growth rates of 15% to 20% a year.
We had an ATM network that really wasn't working well for the volumes we have. We put it in about three years ago. We're upgrading to Gigabit Ethernet. We're using Cisco routers and taking out Bay Networks equipment. We started that project about a year and a half ago. The main hubs will be upgraded to Gigabit Ethernet by the end of this year. We're probably 60% done.
On the gas side of the company, we had the network going down once a week in the early stages of the merger. Now it's rare for it to go down at all. Servers still crash, but the network itself is up. And the router redundancy that we put in is really paying off. We had a failover in Pittsburgh about three weeks ago that worked great. We have duplicate routers at each of our five main locations. Because the network is fairly redundant all the way around, it fails over to a completely different city.
How did you justify the Gigabit Ethernet upgrade to upper management?
Because of the network problems on the gas side, it was really easy to sell the upgrade. We don't do a lot of [return on investment] on network infrastructure investments. We do metrics. We do capacity utilization. We do downtime. [Metrics] that can easily communicate to executives that we're reaching a point where the network may affect their business. It really is a risk/reward type of analysis, as opposed to a pure financial ROI.
What can other network executives learn from your experience handling the IT side of Virginia Power's merger with Consolidated Natural Gas and subsequent acquisition of Louis Dreyfus Natural Gas?
Thinking of the network as strategic and fundamental to the merger is key. It's the circulatory system of the company, and therefore it has to be solid. So we have to have enough capacity to take on additional companies. We need the reliability and the redundancy to take on critical functions. Certainly, nuclear power plants are critical functions. We have to have the people who know how to do it. We have a couple of key people dedicated to doing due diligence [when we hear about a merger]. They're evaluating [the network infrastructure], so when the actual deal is done, we're ahead of the game.
We have to understand the applications that run on the network. Standards are key. We don't spend a lot of time evaluating 'Are we going to go to Outlook or Notes?' We know what we're going to go with, and we implement it. Relationships with vendors [help us] go ahead and interconnect. We lease lines very quickly. We have good relationships with [WorldCom] and Sprint so we can get on the top of their priority list.
How is Dominion's network infrastructure a strategic asset for the company? How does it differentiate Dominion from its competitors?
We've always thought of the network as strategic. When we're in an acquisition mode, the quicker we can integrate the networks, get information out to employees and streamline processes through applications being deployed across the network, the more we can get the synergies that we expect. It really does work well. The other area where the network is strategic is in our relationships with customers. We have several initiatives under way regarding Internet communications with customers, Internet billing and having contractors place service orders over the Internet. If we can do more of that customer relationship over the network, that is of value.
In terms of competition, the big guys - Duke Energy, Southern Company - are all moving together [to new network technologies.]
The smaller energy companies that can't afford to are not. It's an investment. We're investing $20 million to $30 million in a network upgrade when we'd rather be buying new power plants or growing the business. It's something you really have to justify. We are very lucky that we have a team of executives who understand the value of information, the value of technology.
What are your top priorities with regard to your network infrastructure?
Security is No. 1. We're past the reliability crisis. We need to make sure that we create an efficient way to secure the network. We've had two [external] security evaluations, and we're in the middle of a third. We're looking at: Where are our weak spots? Where are our vulnerabilities? The [U.S. Department of Energy] is helping us on our [Supervisory Control and Data Acquisition] systems. We're looking at: Where are our firewalls and how are we using them? What's our [demilitarized zone]? How can we make it efficient? We can't lock it up so tight that people can't get through it. By midyear, we want to look at whether we need to invest more money in next year's budget.
As CIO of Dominion, what have your biggest challenges been?
It's keeping the focus. It's running the business while growing the business. It's risk management. And all that's about people. When the gas network was going down once a week, I didn't worry about what technology are we using so much as: Are the people doing the right things? Are we reacting right? Do we have the right tools? Do we have the right focus? Are we making the right decisions? When we had an operational problem, everyone jumped on it. So we lost sight of what we should be doing to look to the future. We weren't preventing fires. We were just putting them out. The lesson we learned is to plan better during the integration process and to look for the weak spots. The other lesson is that a problem is not going to go away. You have to persevere and fix it.
What is Dominion's strategy with regard to outsourcing network infrastructure operations or support?
We benchmark annually. We went through a LAN and field services outsourcing analysis last spring. We saved probably 15% by insourcing. CNG had outsourced, and Dominion insourced. We also looked at the strategic value of knowing the network, knowing how to manage it and knowing how to grow it. When you're in an acquisition mode, outsourcing can really bite you because you have a fixed contract with certain parameters. As you acquire companies, you get back into renegotiation. We use contractors for peak [periods] and [specific] expertise. But we save money by hiring employees; so the economics is a real driver.
How have you altered Dominion's disaster recovery/business continuity plans following Sept. 11?
As an energy company, we're kind of a disaster recovery company. Our culture and our mindset are to think of ice storms and other events that can happen. We had a transformer blow up in Northern Virginia recently. We know how to react to those kinds of things.
We use an outsourcing service from Sunguard for our mainframes. And we do have redundant systems for our major client/server applications. But we're always looking at it. We have one person 100% dedicated to just keeping our business continuity plan up to date.
We have identified key [personnel] resources, and we are training backup for them. We started that a year and a half ago. We had about 20 people identified as critical, and we've hired junior-level people to learn what they know. It's working well in two ways: It's providing some redundancy, and these 20 people were working 24-7, so it gives them some relief.
Last year, around April 1, we put together a group called risk management. We now have a director of risk management for IT, and under that [person] comes security, disaster recovery and change management. We found that change management was a key part of protecting the network as much as application migration and application enhancement, so we organized in a way that put the focus on it.
What do you see as the most promising network technologies on the horizon for Dominion and why?
Voice over IP. Everyone's talking about that. Because voice over voice is so cheap, it's hard to justify voice over IP right now. It's more the speed and the future growth of the network and the elimination of old technology that we're looking at.
We're looking at the Web for employee self-service to reduce costs and put more information in the hands of employees. We've struggled with the Web a bit on the applications side. Most of our legacy systems are traditional mainframe or client/server systems, so there's no real benefit to putting them on the Web until somebody asks for it. We do have some external demand for [Web-based information.] The [Federal Energy Regulatory Commission] and other regulators are demanding that as competition opens up, more [information] be out on the Internet and available to them.
We also need to look at wireless communications. We have 150 people with BlackBerries. That's something we really need to manage and understand the implications of to the network. We have automated meter reading for about 430,000 meters. As I'm thinking of technologies, that's something that we have to keep our eye on.
Getting
personal
Margaret “Lyn” McDermid
Title:
Senior
vice president of IT and CIO since January 2001.
Organization:
Dominion,
a $10.6 billion energy company
Responsibilities:
Oversees
all IT functions, including network infrastructure, for the company’s
13 business units.
Network
infra-structure budget:
$20
million to $30 million on WAN, LAN and voice annually.
Staff
size:
1,000
employees and 250 contractors.
Previous
jobs:
Vice
president of IT and acting CIO. Joined Virginia Power’s engineering
and construction department in 1982 and held various management positions
including director of administrative services and director of IS client
services.
Background:
Bachelor’s
degree from Mary Baldwin College. Master’s degree in business
administration from the University of Richmond.
Fun
facts:
Q.
What was your first computer? A. An IBM PC. I bought my first
computer for home four years ago when my son demanded it.
Q. When was your first experience
with the Internet? A. Four or five years ago. It
was surfing the Web helping my son do his school work.
Q. What does your home network
look like? A. We have DSL, with two PCs networked
together.
Two years ago, the merger of Virginia Power and Consolidated Natural Gas created Dominion, one of the nation's largest and most diversified energy companies. Lyn McDermid, Dominion's senior vice president for IT and CIO, spoke recently with Network World Senior Editor Carolyn Duffy Marsan. They discussed:
