Boeing's Jumbo Phone-System Overhaul
With 160,000 employees in 70 countries, the $52 billion company is now building what looms as one of the world's largest Internet-protocol telephone networks.
Boeing expects it will save money by having to manage only a single, converged network infrastructure for both voice and data, and offer flexibility to mobile workers who consistently need to connect from different locations.
"Cisco's family of products will be the foundation of the next-generation network required to replace Boeing's aging voice infrastructure," said Christopher Kent, head of Boeing's computing and network operations, in a press release issued when the two companies announced the deal.
But how well will the system stand up to real-world issues? Will Boeing actually see the trumpeted benefits?
On the big questions, the jury's still out: Boeing doesn't expect to complete the project until 2011.
But with more than a year of experience and thousands of IP phones now dropped on workers' desks, the company already has learned lessons about what worksand what doesn't.
Heading up the rollout is Cliff Naughton, director of network services in Boeing's central information-technology services group.
In this post, which he has held since 2000, the 20-year Boeing veteran oversees more than 400 network engineers who support the company's global voice, video and data communications infrastructure.
To date, Naughton says, Boeing has switched 20,000 employeesabout 13 percentover to IP phones, with another 15,000 to 20,000 planned for 2006.
It expects gradually to retire 125 circuit-switched phone systems, including several from AT&T and Avaya, over the life of the project; about a dozen have been taken offline so far.
They will be replaced with between 25 and 30 Cisco CallManager clusters, each composed of four Intel-based servers.
Boeing won't say how much it's spending on its IP telephony project, but according to rough industry estimates, the tab will probably exceed $150 million.
Naughton says a major reason for spreading the project over seven years is to not blow a hole in the company's information-technology budget.
"We have to manage this investment within the profit and loss of the corporation," he says. "The amount of investment we make year to year will vary. A higher priority may come along and we'll have to say, 'buy fewer phones this year.'"
In general, Cisco's IP telephony system provides all the basic functions Boeing expected. But Naughton says some advanced features were missing at first.
For example, executive assistants couldn't see from their own phones the incoming Caller ID of someone dialing up their boss, to help decide whether to interrupt a call in progress. (Cisco has since added the capability to certain models.)
"We found the most important folks you have to impress are the receptionists and executive secretaries," Naughton says. "If they don't like it, their bosses won't like it."
Cisco also only recently added the ability to encrypt sensitive phone conversations, a major requirement for Boeing as a large government contractor.
Cisco's CallManager 4.1, officially released in March 2005, provides two-way encrypted conversations and meets Department of Defense telephony specifications.
Naughton and his team are testing those features. For now, he says, "We tell folks, 'Do not have [sensitive] conversations over the telephoneperiod.'"
Boeing also found that Cisco didn't have a way to display location information for 911 callers, which was critical for its Puget Sound facilities near Seattle where Boeing security personnel are "first responders" for emergencies.
For those locations, the company chose a system from Xtend Communications that integrated more easily with the existing 911 infrastructure, according to Naughton.
Cisco says its CER (Cisco Emergency Responder) system is designed to send location information for callers on the IP telephony network to 911 systems; it refers customers that need a system for responding to emergency calls to a partner, CML Emergency Services.
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Naughton's team figures Boeing's IP telephony project will have an IRR (internal rate of return) of 49 percent over seven years.
It means, in general terms, that over that period Boeing would save an average of 49 cents per year for every dollar invested.
That's a fairly high return for an information-technology project. But financial analysts say Boeing's seven-year time span indicates its biggest projected savings will come in the project's latter stages.
They also point out that IRR assumes returns can be reinvested into a project, which is not always the case. (Boeing declined to detail its IRR calculations.)
Boeing expects its biggest gains in the reduced cost of moving, adding or changing employee phones.
A Boeing worker moves an average of 1.7 times per year; that's 272,000 instances per year when a technician must help a person relocate his or her phone, a function the company has outsourced to IBM Global Services.
With IP telephones, in theory, moving is as easy as unplugging the phone, taking it to the new location and plugging it back in. Assumingconservativelythat each MAC (move, add or change) in an IP telephony system would cost half the industry's standard estimate of $100 per MAC in a circuit-switched environment, that's a potential annual cost reduction of at least $13.6 million.
Second, Boeing anticipates reduced long distance costs once it's able to route phone calls among offices in the U.S. and abroad over the corporate IP backbone (though the company declines to provide a dollar figure).
A third source of savings is cabling, as the new system will require only one wire to go to every desk.
Naughton also estimates that maintaining a multivendor environment is 20 percent more expensive than using a single vendor for voice, data and video infrastructure.
"The general drawback with multiple vendors is you have to build a support organization around each environment," he says, adding that, at Boeing, "it seems like we have one of every phone switch that was ever manufactured."
But the company will be paying considerably more for the IP phone sets employees use. Traditional circuit-switched phonesanalogous to dumb terminals that connect to mainframescost between $5 and $10 each; Cisco's IP phones start at around $100. "We're expecting that the industry will drive the cost down over time," Naughton says.
Next Page: Unsupportable Optimism??">
Jay Lassman, a research director at Gartner who specializes in enterprise IP telephony, thinks Boeing is being optimistic.
He wonders what hidden costs the company will encounter that it didn't factor into original estimates, such as the labor involved in software upgrades.
Lassman also questions the assumption that maintaining a mixed-vendor network is 20 percent more expensive than a single-vendor one.
"How do they know that? That's the Cisco pitch," he says, pointing out that even if such savings are realized, being tied to one supplier carries its own risks.
Finally, he adds, there's no guarantee Boeing's data network will be able to handle the phone traffic generated by 160,000 employees since it may not have been originally engineered to handle voice.
"Companies jumping into IP telephony whole-hog have really relied more on faith than on business reality," Lassman contends.
Naughton, for starters, is fully confident the network will hold up. "Voice is a very efficient protocol, in our view," he says.
Of the 18 petabytes (18 quadrillion pieces of data) that traverse the Boeing backbone network per month, he says, voice amounts to less than 1 percent.
Also, Boeing isn't forever tied to Cisco. The airplane maker's IP telephony contract with Cisco runs for three years, through 2007, with options for two one-year extensions.
By then, industry standards could let Boeing use other vendors' phone equipment in its network. For example, with the SIP (Session Initiation Protocol), a standard for setting up Internet-based phone calls, any SIP-compliant phone should be able to work with phone switches that support the specification.
Ultimately, according to Naughton, Boeing's business decision to move to IP telephony globally was based on the realization that a growing number of its older telephone switches have been phased out by vendors.
It calculated the cost of sustaining existing phone systems instead of migrating to IP telephony.
While Naughton wouldn't disclose that cost difference, he notes that over the long term it becomes much pricier to keep older technology running. "We know we can't leave the environment static," he says.