 |
By Jim Carr
September 4, 2003
|  |
Business Profile: Flextronics International
Headquarters: Singapore
Web address: www.flextronics.com
Industry: Turnkey manufacturing services
Project leader: Bing Dong, corporate IT director
Technology in Focus: Communications services outsourcing
Size: 2002 revenues of $13.1 billion
Business Challenge: As one of the electronics industry's premier contract manufacturers, Flextronics provides services for industry heavyweights such as
Microsoft, Casio, Ericsson, and Motorola, just to name a few. To meet its customers' rapidly changing needs, Flextronics must have access to sufficient
levels of bandwidth to link its global facilities and support their critical applications and operations.
In order to centralize a new enterprise data center and introduce the company's new Baan Enterprise Resource Planning (ERP) application to its worldwide
network of offices and manufacturing facilities, Flextronics needed to rebuild its costly and poorly performing frame relay-based WAN. Flexibility, cost
efficiency, and reliability were key requirements for the new network architecture.
Solution: Flextronics worked with Configure, a small Silicon Valley-based consultancy, to develop, provision, and deploy a worldwide ATM backbone network
from AT&T. The three-tiered WAN allows Flextronics to cost-effectively connect its global network of operational and manufacturing facilities to a centralized
data center in Sacramento, CA. Since its deployment in December 2000, the ATM-based network has saved Flextronics about $1 million annually in communications
costs. It has also resulted in reduced "soft" costs (such as shortening the amount of time it takes for accounts payable to process bills), as well as lowered
the overhead entailed in dealing with multiple vendors. Working with Configure helped Flextronics leverage its purchasing power to gain better support for its
communications services.
When you're one of the electronics industry's largest and most successful providers of outsourced manufacturing services, you're not averse to seeking outside
assistance when you need services beyond your core competency. At least, not if you're Flextronics International, one of the contract manufacturing industry's
top players.
Flextronics, Singapore-based but with operational headquarters in San Jose, CA, serves as an assembly-line-for-hire to some of the most recognizable names in
the electronics marketplace. With 2002 revenues of $13.1 billion and approximately 95,000 employees, Flextronics is neck-and-neck with another Silicon Valley-based
company, Solectron, as the premier provider of design, engineering, and manufacturing services for electronics firms.
Flextronics's factories build a wide assortment of devices for a multitude of global electronics giants, shipping up to a half-million units a day worldwide,
according to the company. Firms such as Microsoft, Ericsson, Casio, Alcatel, Motorola, HP, and W. L. Gore & Associates are among those with big-ticket deals
that call for Flextronics to build, box, and ship their products. These companies rely on Flextronics to design and produce electronics as diverse as the Xbox
game console from Microsoft, a wide range of consumer electronics from Casio, multichannel optical transmitters and receivers from W. L. Gore, a prototype
third-generation (3G) wireless Universal Mobile Telecommunications System from Ericsson, and large-format printers from HP.
When Flextronics decided in 2000 to upgrade the communications capabilities among its 180 locations, including 100 manufacturing plants located in 29 countries,
its IT staff had few qualms about outsourcing the project-from negotiating a contract to provisioning and deploying a new ATM backbone network-to a consultant.
But has outsourcing the responsibilities for the ATM network paid off for Flextronics? That's a resounding yes, according to Bing Dong, the company's corporate
IT director in charge of communications infrastructure.
Dong says that off-loading the deployment and development of the ATM backbone project to Configure (www.configureinc.com), a 20-employee Silicon Valley-based
consultancy, has saved Flextronics a half million dollars or so in consulting fees. Add to that the huge reductions in communications services outlays in the
two-plus years that the ATM network has been up and running, plus numerous operational benefits, and you've got heady Return on Investment (ROI) numbers.
Here's a look at how outsourcing key parts of its communications infrastructure has saved Flextronics those big bucks.
OUTSOURCING WITH A TWIST
Typical consulting agreements call for the customer to pay for the consultant's service. But Configure spares its enterprise customers these costs. That's because
the company's business model is such that the telecom firms it represents pay for the services it provides to enterprise customers. While the exact amount it
collects varies from project to project, Configure generally gets a small percentage of the monthly communications charges its customers pay to the service providers
over the length of their contract.
"The carriers think of us as an extension of their sales force, and they compensate us for selling their services to customers," says Rudain Arafeh, Configure's CEO.
But he agrees this model is fraught with potential for conflict of interest-after all, with the vendor footing the bill, it's likely to expect Configure, as its agent,
to side with it on disputes.
Configure gets around the issue with full disclosure up front, says Arafeh. The company informs customers that it's compensated by carriers for selling contracts.
Rosario Lingle, the Configure regional manager who handles the Flextronics account, agrees that she "walks a fine line" when dealing with her clients. "I partner with
AT&T but also consult to Flextronics, and that line needs to be managed very well."
However, the fact that Configure represents more than one carrier provides a number of advantages. "We can explain the pluses and minuses of each carrier and its
network, and the customer has the information to make a better decision," says Arafeh.
It's not a model that works for companies with their own personnel trained to deal with large communications systems, he adds. But it does appeal to companies that
lack a large staff with telecom expertise.
A MOVING TARGET
Configure had to use all of its resources to get Flextronics's ATM network up and running in the fall of 2000. The ever-changing nature of Flextronics's operations wreaked
havoc with the planning process, particularly in the months preceding the deployment of the ATM backbone. During this time, the company announced a series of acquisitions
that expanded both its business capabilities and its connectivity needs.
As the company grew acquisition-by-acquisition, the deployment of Flextronics's ATM backbone circuits became "a fluid situation," says Dong. With Flextronics personnel
playing a leading role, Flextronics and Configure would develop a network design, but before they could reach the implementation phase, something would change. For example,
a Flextronics purchase would add plants to its operations in Asia, or a site would grow by a factor of five times because the company had moved a manufacturing facility
there. "It made for a dynamic and unique application," notes Dong.
CONSOLIDATION CAMPAIGN
The driving force behind the ATM network was Flextronics's desire to centralize its database resources into a Sacramento, CA data center, which houses the company's
business-critical Baan Enterprise Resource Planning (ERP) application. The Baan system "is very much the bread and butter of our operations," says James Simpson, Flextronics's
senior director for e-business. "We use it to run our factories worldwide. The centralized data center is critical to containing IT costs and maintaining consistency across
sites for its customers," he says.
Another benefit of centralization in the Sacramento data center was that it made the resources there readily and rapidly accessible to company employees regardless of their location.
The Baan system now supports engineering, ordering, manufacturing, inventory control, finance, and customer relations. It has also helped the company improve its efficiency
and competitiveness in an industry characterized by rapid technology change and short product life cycles. "By combining centralized applications and standardized manufacturing
processes, Flextronics provides customers worldwide with a consistent experience across the company, even while driving down costs and speeding global product launches," says Dong.
In addition to traditional ERP functions such as financials, Flextronics relies on the Baan software to handle sales and work orders, shipping information, and other activities
related to e-commerce. All of the company's manufacturing sites, regardless of their location, are running on the network connected to the Sacramento data center.
But when Flextronics began rolling out the ERP system from Baan in mid-2000, it became clear that the company's communications infrastructure was insufficient in terms
of bandwidth and flexibility. At that point, Flextronics relied on a wide range of technologies-including leased lines, frame relay, and ISDN-to connect the company's
global grid of sites, says Dong. Problems arose due to ISDN and frame relay's low bandwidth (1Mbit/sec and less), which posed severe technical limitations in the rollout
of the centralized Baan application.
MAKING THE CALL
According to Dong, flexibility, cost efficiencies, and reliability became the essentials of network architecture and design when Flextronics started to centralize the
enterprise data center and introduce the new Baan application worldwide.
Consequently, "We started thinking about which technology to switch to, and which carriers could help us," she says. It quickly became apparent that an ATM backbone
would be the technology of choice.
"ATM technology became the first choice because of its reliability, consistent performance, and flexibility," says Dong. In particular, the last feature was critical
because it enables the company to increase its bandwidth dynamically as business expands, she notes.
"We needed the high bandwidth available with ATM to support Flextronics's mission-critical ERP system, intranet/extranet, data warehousing, supply chain management
applications, and audio and video services," says Dong.
"ATM deployment across our network provides a simplified and consistent equipment platform with fewer interfaces and points of failure," she adds. "A simplified wide
area network and equipment infrastructure allows us to build new global Flextronics facilities faster to support our customers."
According to Simpson, the ATM backbone essentially shortened the distance of many circuits into the company's centralized data center, enabling Flextronics to consolidate
more traffic at a regional level, similar to how airlines leverage their hubs.
Costs also proved to be a major plus. At the time, "ATM pricing had dropped a lot," says Dong. "It was 25 percent to 50 percent less, depending on country, compared to
frame relay. ATM provided Flextronics cost efficiencies unavailable with other high-bandwidth technologies such as private lines," she says. "For example, ATM data transfers
of up to 3Mbits/sec from Europe to U.S. cost a fraction of what a 3Mbit/sec point-to-point private line connection would be."
THE PERKS OF PARTNERSHIPS
In the summer of 2000, Flextronics invited several global telecommunications carriers to bid on its project. MCI WorldCom, Sprint, and Global Crossing were among the contenders.
A key factor in Flextronics's selection of AT&T was the company's global footprint and its strong presence in Europe and Asia. "AT&T had ATM network nodes in pretty much each
country we're in, and it was able to provide the 45Mbit/sec ATM bandwidth for us," says Dong.
Initially, Dong wasn't eager to work with Configure, account manager Lindle confides. She says Dong doubted that an outside company working for the vendor could provide value.
But Configure was able to negotiate with AT&T to get pricing for ATM services within Flextronics's acceptable range, says Lindle.
Lindle expedited the contract negotiation process by handling the paperwork that AT&T needed to get to the right price, she says. "I showed AT&T how large Flextronics is, the
pricing from the competition MCI WorldCom was the principal one, and the price point AT&T had to come up with or it'd lose to the competition." In essence, Lindle became a
salesperson to AT&T as well as a customer advocate.
For Flextronics, Lindle was also the point person for managing the rollout of the ATM backbone. As the project manager, Lindle placed orders for Flextronics's ATM circuits,
ensured they were provisioned, and "mother-henned" their deployment. This included dealing with people in various departments at AT&T to expedite delivery of services. For
example, if she was told a circuit normally takes 60 days for provisioning and Flextronics needed it in 30, Lindle would contact AT&T staff in other locations (and sometimes
other countries) to see if she could obtain the services faster.
During the deployment phase, which began in August 2000, Lindle initiated weekly telephone calls between Flextronics's IT personnel and AT&T's project manager. By checking
the project's status regularly, Lindle and AT&T were able to resolve potential problems more quickly, she says. Flextronics's new ATM backbone was up and running by December,
a month or so ahead of schedule.
Flextronics wound up with a WAN built around a three-layer architecture. The core, or fully meshed backbone layer, contains five ATM nodes, located in Singapore, the
Sacramento data center, Hong Kong, London, and Karlskrona, Sweden.
The second layer, the distribution layer, is formed by country hub sites and generally runs on frame relay circuits, although ATM has been used in this layer as well, according
to Dong. Circuits in this layer carry all of the company's network traffic within the appropriate country, she says.
The third layer is the access layer, where the company's end nodes (for example, servers, end-user PCs, and the like) reside in offices and manufacturing facilities. Depending
on each country and what's available, a variety of technologies, including ISDN and frame relay, are used in this layer, says Dong.
One of Configure's services is the ongoing process of reviewing service provider bills with clients. According to Lindle, she reviews every month's bill from AT&T for
Flextronics. This review can run the gamut, from a high-level explanation of a charge to more in-depth analysis of AT&T's fees.
While seemingly a minor point, billing issues are anything but, says Lindle. "Vendors make it very difficult to understand their bills," she explains. "Each vendor has
a separate format, and while it makes sense to the vendor, whether it's AT&T or Sprint, it doesn't necessarily make sense to the customer. I think most IT folks don't
have a grasp on their bills."
In the ever-shifting sands of the global telecom marketplace, Configure has also been a source of consistency for Flextronics. In 2003 alone, Flextronics has had
three separate AT&T account managers; Lindle is thus the only AT&T representative with in-depth knowledge of Flextronics's WAN architecture and the services it subscribes to.
ATM AMENITIES
Working with Configure has led to major savings in consulting and telecom services fees for Flextronics. "If I had hired a consultant to manage the ATM project for
Flextronics, it would have cost $500,000," says Dong. "And that was just for project management."
The move to ATM also paid off in lowering ongoing operational outlays substantially, says Dong. She estimates Flextronics has saved about $1 million a year in telecommunications
spending since moving to ATM.
There's more to the new ATM networking infrastructure than communications savings, however; Flextronics has also saved money in ways that are hard to pin down in terms of
dollars and cents. These include operational efficiencies, especially with the ability to centralize all data resources in the company's Sacramento data center.
"Consolidating most of our traffic onto AT&T's ATM network solved many issues," says Dong. These include increased network stability and cost efficiencies, in addition to
gaining global support, lowering "soft" IT costs (such as reducing the amount of time it takes for accounts payable to process bills), reducing IT overhead associated with
dealing with multiple vendors, and leveraging purchasing power to gain better support and discounts.
"ATM also has given us the ability to efficiently use Flextronics's network bandwidth to the fullest capacity," she says. "ATM's asynchronous multiplexing allocates
bandwidth on an as-needed basis, ensuring that existing empty bandwidth is not reserved when it could be used. This makes ATM transmissions faster and more efficient
than technologies that use other types of multiplexing."
Flextronics CIO Mike Webb says the new infrastructure has been an operational boon as well. "We can now generate most management reports within an hour," he explains.
"That increases our visibility into the state of our global business and helps improve overall cost control. We are able to monitor our critical inventory very closely
on a global basis. This provides us with an early warning if a supplier's production is out of line with the production necessary for us to meet our customer requirement."
The ATM network also helps future-proof the company's communications infrastructure, says Dong. "As bandwidth needs increase at our locations, we can more quickly increase
network speeds without the headache of waiting for foreign access installations," she says. "This fits into our corporate strategy of being able to offer our customers
global turnkey services in an expedient manner."
Jim Carr is an Aptos, CA-based freelance business and technology writer. He can be reached at jecarr13@charter.net.
Configure Inc. is a Silicon Valley-based communication consultancy company specializing in network design and deployment, transport service implementation, project management
and outsourcing such tasks as Bill Review and Resolution. For questions and comments, please contact us.
|
|
|
