A new angle on provisioning

Telecom executives everywhere know it: Planning, designing and constructing new network capacity is a complex process that costs more than it should and often does not achieve its intended results. Worse still, it doesn't lend itself to quick or easy fixes.

At most telcos, engineers engineer and construction crews construct, and in between is a no man's land of tens of thousands of work projects awaiting action, some of them for as long as a year. Construction supervisors complain about inappropriate design packages. Design engineers bemoan the time they must spend on administrative rather than design tasks. The process snags are decades old, and changes to organizational structure offer only partial-if any-relief. In most cases, legacy information systems are too slow and limited to do more than hold the problems at current levels. Conversion to more effective systems takes two to 10 years.

Yet capacity provisioning is an area where profound improvements are occurring at telcos-even before new information technology is deployed. These companies are experiencing rapid improvements in efficiency and effectiveness in capacity provisioning through a combination of structural changes and process improvements.

Among service sectors in the United States, telecom companies were quick to embrace process re-engineering and to apply it broadly across their enterprises.

With cost and personnel reductions as the objectives, the early focus was on overhead and operations. Processes in areas such as customer service, activation, repair and administrative support were the early targets.

Although many telcos took on the significant and broad challenges of enterprisewide initiatives, few were able to follow through completely in the face of new industry turmoil and internal resistance. Today, few are inclined to resume or initiate these massive efforts and instead are turning to more targeted opportunities. Chief among these is the capacity provisioning process, including the financial planning and tracking processes related to capital expenditures.

Initially, capacity provisioning was spared re-engineering because profit-and-loss improvement took the highest priority and because capital creation was viewed as a telecom core competence. The engineering domain was considered too complex to tinker with and realize any short-term gains. In addition, several companies attempted overly ambitious transformations that failed.

This view has changed recently. Provisioning process changes can result in large gains when budgets are in the billions (Figure 1) and deployed personnel are in the tens of thousands.

The provisioning problem The outside plant provisioning process includes five major steps through which a demand forecast moves from a tactical plan to a design and finally to new allocation of capital through construction (Figure 2). The management of this process and the organization of the activities are fairly similar throughout the industry. Functional units or groups such as construction and engineering, each with its own performance metrics and supervisory structure, are the prevailing frameworks used for planning and control. Sometimes the functions are grouped by state or territory, but they are nonetheless strongly functional.

The most significant functional barrier separates engineering design from construction. The most common engineering design situation at telcos is a productivity-driven function organized to leverage the relatively high cost of engineers. Productivity is equated with the number of design work packages completed, so typically a large work-in-process queue awaits the attention of construction. This queue results from an engineering push rather than from a coordinated plan to control work flow. The projects in queue accumulate costs, whether value-added or not, and as they age they require retrofits to reflect technological modifications and accommodate shifting field situations and priorities.

Furthermore, where controls and accountability for standards and processes are insufficient, these queues tend to be burdened with design work packages that have been over-engineered: Designers planned more capacity than needed or ordered new plant where repairs or adjustments would have provided the capacity required.

Coopers & Lybrand found 50,000 to 75,000 work packages in process at several telcos, the equivalent of six months' to a year's worth of construction time. Cycle times for jobs approach a year even though the construction time for the jobs average only several weeks.

Telcos typically take a structural approach to this situation-that is, they attempt to address the backlogs by changing the organizational charts, not necessarily changing what people do. One telco formed teams to coordinate job activities. Team membership included the various functional players required to bring an improved job design to construction completion. Through successful team coordination, jobs were done faster once they were scheduled for construction. But because the teams worked only on scheduled jobs, there was no effect on the overall number of jobs in queue.

Another telco introduced a program management office, essentially a third organizational area charged with acting as a liaison between marketing, engineering and construction. It soon became evident that separate and very different performance measures within each function resulted in conflicting functional behavior. New performance measures were resisted, and when additional measures were introduced, they diluted the primary focus of the functions.

When functional barriers are strong, the typical method of communication between the areas is ad hoc or indirect, through memos and forms. Given the lack of real-time communication or valuable feedback, the functional areas subsist on error loops of inadequate, dated communication. Scheduling and resource issues cannot be resolved without spending considerable time in meetings and discussions. Without a managed job flow, the process requires frequent intervention, thus causing engineers to spend time in non-engineering activities.

Figure 3 benchmarks engineering work distributions for a variety of commercial U.S. companies that are engineering-intense. The percentage of time spent by engineers doing actual engineering work is greater outside telecom. Some telcos have recognized this situation as an opportunity to reduce the number of engineers by providing lower-priced administrative support so that engineers can focus on engineering.

Telcos embrace manufacturing solutions Structural remedies such as those previously described, however, do not get to the root cause. Telcos have been slow to realize that capacity provisioning process improvement requires changes in work practices as well as in accountability for solutions: The same work overlaid with a different structure yields no gain. The industry is beginning to adopt work practices that commonly appear in the manufacturing sector, such as those associated with flow-through or just-in-time manufacturing. The philosophical underpinning of this highly successful approach suggests that work-in-process waiting time adds no customer value and therefore should be eliminated. This is accomplished by moving from a push process to a pull process.

In a just-in-time manufacturing setting, the pace of engineering is managed to avoid work-in-process buildup. The net result is a managed job flow with significant reductions in cycle time and cost, as well as a decreased need to redesign aged work packages.

Telecom's processes and systems are complex because the business is technology-based, regulators impose detailed information requirements and a new competitive environment brings challenges and uncertainties. Capacity provisioning processes, in particular, are quite complex. In most cases, the information systems that support them have been in place for decades and often do not provide the level of accuracy and timely information needed for better planning and control. While legacy systems represent a replacement challenge, a close look at the process suggests opportunities for simplification without major disruption.

Time reporting for engineering is one area where significant improvement can result. To track asset cost buildup, job time is charged by the hour and reported by time period. With hundreds of engineers and 50,000 jobs in process, it's easy to see why telcos generate tens of millions of transactions for determining OSP job labor content. Tremendous effort goes into tracking engineering time, even though it is a small part of a project's overall costs. Furthermore, the jobs are relatively homogeneous, so an elaborate system designed to capture uniqueness is expensive overkill.

Manufacturers have selectively discontinued time reporting, deeming it unconstructive and have vastly simplified factory processes. In the provisioning environment, for example, only actual material cost would be tracked by job.

Because hourly costs such as design engineering are relatively fixed over the cycle time required for job completion in a flow-through process, the engineering hours are calculated at job completion. The basis for the hourly cost calculation is the material cost, with allocations added on. This provisioning cost process frees engineers of a painful administrative burden so that they can focus on the quality and timeliness of completed design work packages.

Other simplification examples abound. Often jobs pass through the same sequence of steps, regardless of size or complexity, and incur the same depth of detailed documentation. Telcos have successfully routed simpler jobs-those that don't require significant design elements or that make use of existing plant-directly to the field, bypassing design engineering. Simplification provides clarity and enables managers to deal with meaningful issues. Complex or over-engineered solutions can prompt managers to overrule or change engineering solutions, but shared accountability between engineering and construction can eliminate this behavior. Likewise, the same performance metrics should be used for both construction and engineering, along with effective controls ensuring adherence to standard configuraions and models.

Controls are critical in the capacity provisioning process. We typically find provisioning controls that are organized by function. Functional controls usually deal with budgets, spending, approvals and adherence to policy. These add value, but the controls needed in this new paradigm require an end-to-end process view and are custom-designed to zero in on the critical steps to convert an input to a desired output.

Applying this definition to capacity provisioning, the task is to control key steps in the conversion of a design work package to achieve a desired cost per new access line added or some other similar planned process outcome. Controls take many forms. They may be reports that provide visibility into compliance with a policy or activity. Authorizing signatures and periodic audits are common controls. Ideally, controls are built into the process and are directly or indirectly linked to an individual's performance metrics.

The effectiveness of existing controls To determine the adequacy of existing controls, it is vital to understand each control point and its effect on the process, its timing and its associated costs. Effective provisioning controls help manage the risk of large-scale performance departures from budget and planned job cost. The following terms and questions can help assess the existing controls.

Control point. Which critical points in the process have the greatest effect on the ability to plan and manage a desired outcome?

Control objective. What is the objective of the control: authorization, compliance or review?

Control mechanism. What is the actual control put in place to address each objective at each control point? A management authorizing signature would be an example of such a mechanism.

Responsibility. Who or what system is responsible for maintaining control? Who will enforce control?

Risk. What are the consequences of the absence or failure of the control?

In developing provisioning process controls, it is necessary to determine which specific process steps are the drivers for the cost per new access line added. This cost is determined when engineering standards are applied to the design of a work package. Deviating from engineering design standards can cost a company $50 million a year, far more for a multibillion-dollar company. Additional process control points are identified as the design work package moves forward in the process. Table 1 shows these decision points and the impact of departing from standards.

Process management approaches are emerging as a new model for planning and control in capacity provisioning. Telcos should ask the following questions as they plan a direction for process improvement:

* Work distribution. How much of the design engineer's time is administrative or non-engineering?

* Process flow. Do design engineers produce more designs than construction capacity and budget permits?

* Job variation. Do all jobs receive the same process treatment although size and complexity vary significantly?

* Standards. Do engineers depart from standards and over-engineer?

* Cycle time. Is cycle time a process-performance measure, and are aged jobs re-evaluated?

* Productivity. Are your engineers doing engineering?

* Benchmarking. Are process metrics and performance measures compared across states or regions?

* Accountability. Do metrics and information systems provide the visibility needed to support cost performance accountability across the process?

* Controls. Are contractor and procurement controls in place?

* Outsourcing. Can another organization perform the function at a lower cost and with improved service? (See sidebar on page 83.)

The industry should not assume that it takes millions of dollars worth of new information systems to achieve significant levels of improvement. As a result of moving the planning and control focus from function to process, three elements surface as critical change enablers: the need to manage the process flow, simplify the support systems and custom-design process controls. There are substantial benefits, including reduced cost and cycle time and increased customer responsiveness. One telco has achieved nearly $100 million in annual savings (a combination of capital avoidance and expense reduction) and a 25% reduction in cycle time.

Engineering time can be reduced drastically in some cases; in many instances, engineers can be redeployed. This will be increasingly important as telecom moves into a new era in which operators provide both wholesale and retail services.

The FCC has mandated that local exchange carriers provide nondiscriminatory access to their networks. In Europe and other countries where markets are opening to competition, network owners will also face new demands for interconnection.

The requirements of providing interconnection-and maintaining the quality and integrity of networks-will increase demands on engineering resources. In the emerging service delivery model, telcos can benefit significantly by taking a process view of capacity provisioning.