Amtrak CIO offers outsourcing advice

What are your top priorities with regard to your voice and data networks?

What advice would you offer to CIOs who are thinking about outsourcing their voice and data networks?

The biggest problem they will end up having is personnel issues. They’re going to either be replacing a number of their employees, or their employees are going to be moving over to the new company. How many people are still working for IBM that worked for Amtrak [back in 1994]? I only know of one.

In setting up the deal, make sure you have a really good set of lawyers. Shakespeare said: “Kill all the lawyers.” That’s exactly what you don’t want to do in this situation.

When we sat down with IBM’s management, the first thing I told them is I don’t want any lawyers in the room when we negotiate what the business deal is. I didn’t want the lawyers to start bringing up all the detail that they have to deal with. But you’ve got to get to that detail. After you agree on the business deal, you need a really good set of lawyers [to finalize it]. These are generally outside counsel who specialize in this [area].

If it’s a big deal, you want to get a consultant in to help you with what’s the best practice in the industry. You have to have a good idea of what kind of telecom rates you should be expecting, what kind of management fees, how much things should be costing you, and what are prevalent SLAs. You may be satisfied with 98.5% [reliability], but it’s good to know where the industry is. And this information isn’t readily available. We used the Outsourcing Institute. We were really satisfied with them.

What concerns about your voice and data networks keep you up at night?

There aren’t any, actually. We have a lot of old systems, but they run pretty well. From a reliability perspective with our network, I think we’re right up with the best. It doesn’t keep me up at night at all. I don’t carry a pager. I don’t carry a cell phone. I’m not worried about those kinds of things. I also have really good people managing the vendors, but I think the vendors put very good people in those slots.

Amtrak has had an IT outsourcing deal with IBM since 1994. Six months ago, you renegotiated, expanded and extended that deal for seven more years. What were the main reasons that Amtrak wanted to renegotiate this deal?

I wasn’t the one who outsourced [our network infrastructure] in the beginning. We had the Outsourcing Institute help us do an analysis of what it would cost to take it in house. We weren’t financially in a position to do that because we don’t own a lot of the assets. We would have to go out and buy or lease a tremendous amount of assets. That wasn’t an option.

There were four things I wanted to get accomplished with renegotiating the contract:

• I wanted a better contract because we were spending way too much energy — as was IBM — in disputes. That very high noise level went down to where it’s almost nonexistent because things are so well-defined.

• Second, our relationship with IBM wasn’t a good one. I needed to abruptly change things. Our relationship was with our project executive; it wasn’t with IBM; and this was a big issue. We weren’t getting the full value that we could have from IBM. [The renegotiation] got a lot of attention in IBM. The relationship between myself and my staff and senior executives at IBM has really blossomed into a good relationship. We’re getting people who we wouldn’t normally see every day on our contract come in and help us with [architectural] issues.

• Third was cost. The old contract was set up so that the more services we used, the more it cost us per unit, which is just the opposite of what everyone else has. The new contract brought [volume discounts] into place. We got a lot of cost savings, especially in the data and voice area.

• The last thing that we wanted to increase was the quality. We see indicators that we are much better now.

You are six months into the new contract. What’s your overall analysis of how it’s going so far?

Our overall analysis is that it’s going well. There are certainly always areas where it has to go better, but the trend is definitely up. A lot of it again was that people needed a clear understanding of what it is they need to be doing both from our side and their side.

In the press release announcing the IBM deal, you said Amtrak hoped to save $85 million over the life of the IBM contract. What progress have you made in reaping these cost savings?

We are absolutely on target with the savings. It comes out to about $1 million a month.

What metrics do you use to measure how well IBM is doing?

We’re using the service-level agreements almost solely because that really tells us what they’re delivering and what they’re not delivering. It’s more stick than carrot. There are penalties if they don’t meet service-level agreements, and we look at the service-level agreements from a prioritized basis. There’s a pool of their fee that’s at risk every month. We weight the SLAs because some things are much more important than others. If the reservation system is up 99.9% of the time, that’s much more important to me than whether some router goes out someplace for a small segment of the network. So we prioritize the things that are important, and there’s a pool of money at risk.

Which three SLAs are the most important?

The reservation system is first. Our other mainframe that our business systems are on is second. And the network — WAN and LANs — is third.