The Google-ization of Bechtel

How the construction giant is transforming its IT operations to emulate Internet leaders and embrace SAAS.

If you could build your IT systems and operation from scratch today, would you recreate what you have? That's the question Geir Ramleth, CIO of construction giant Bechtel, asked himself three years ago.

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The question — and the industry benchmarking exercise that followed — prompted Bechtel to transform its IT department and model it after Internet frontrunners Amazon.com, Google, Salesforce.com and YouTube. After all, these companies have exploited the latest in network design and server and storage virtualization to reach new levels of efficiency in their IT operations. Ramleth wanted to mimic these approaches as Bechtel turned itself into a software-as-a-service provider for internal users, subcontractors and business partners.

After researching the Internet's strongest brands, Bechtel scrapped its existing data centers and built three facilities with the latest in server and storage virtualization. Bechtel also designed a Gigabit Ethernet network with hubs at Internet exchange points that it is managing itself instead of using carriers. Now, Bechtel is slashing its portfolio of software applications to simplify operations, as well as the user experience.

Dubbed the Project Services Network, Bechtel's new strategy applies the SaaS computing model internally to provide IT services to 30,000 users, including 20,000 employees and eventually 10,000 subcontractors and other business partners.

We operate "as a service provider to a set of customers that are our own [construction] projects," Ramleth says. "Until we can find business applications and SaaS models for our industry, we will have to do it ourselves, but we would like to operate with the same thinking and operating models as [SaaS providers] do."

Nicholas Carr, author of several books including The Big Switch: Rewiring the World from Edison to Google, which chronicles a shift to the SaaS model, calls Bechtel's strategy a smart move.

"For the largest enterprises, the very first step into the Internet cloud may well be exactly what Bechtel is doing: building their own private cloud to try to get the cost savings and flexibility of this new model," Carr says. "Large companies have such enormous scale in their own IT operations that the outside providers, the true utility providers, just aren't big enough yet . . . to make them a better option."

Carr predicts, however, that Bechtel's do-it-yourself SaaS strategy will be an interim step until the company is able to outsource its IT infrastructure fully. That may take as long as 10 years, he adds.

"My guess is that over time — and maybe it will start with the HR system — Bechtel will look outside and start running some aspects of its IT operations off of [SaaS] sites," Carr says. "Then its cloud will start to blur with the greater Internet cloud." Many enterprises like Bechtel are interested in the SaaS model for applications that don't differentiate them from their competition, says Bryan Doerr, CTO of utility computing provider Savvis.

"The move to SaaS is simply a different delivery model for an application that has little to do with intellectual property or innovation," Doerr says.

Business drivers for SaaS

Several business challenges are driving Bechtel's SaaS strategy. Bechtel is a construction, engineering and project-management firm with 42,500 employees and 2007 revenue of $27 billion. The privately held company is working in an increasing number of far-flung locations, and it has difficulty finding and retaining talented employees to work on its projects.

Bechtel's employees are demanding business software that is as intuitive as popular Web sites. The company doesn't have time to train users in software applications, nor can it afford to maintain hundreds of applications.

"We needed a different way of doing applications and supporting them," Ramleth says. "We have more employees coming into the organization, and we need to get them up to speed fast." Another key business challenge is protecting Bechtel's intellectual property when so many subcontractors and business partners have access to its network and data.

"A third of the people on our network are non-Bechtel employees. That exposure forms a security risk," Ramleth says.

Bechtel started its transformation by trying to figure out how to revamp its software applications to operate more like leading Web sites. What Bechtel discovered, however, is that it had to fix the underlying IT infrastructure — including data centers and networks — before it could change its applications.

"Not only do you have to solve the IT architecture and the way you operate it, but you have to make sure that IT is accommodating Web applications that can operate more in an Internet mode than in an Intranet mode," Ramleth explains.

Perhaps most impressive is that Bechtel is transforming its IT operations without additional funding. Bechtel would not release its annual budget for its Information Systems & Technology (IS&T) group, but the company said it has 1,150 full-time employees in that group and 75 to 100 contractors.

"We've mostly paid for this by re-allocation of the budgets that we otherwise would have used for refresh and maintenance," Ramleth says. We're "doing a total change of the traditional way of doing things, and we have done it with very little, if any, incremental funding."

Benchmarking the leaders

The transformation began with the IS&T group spending a year trying to figure out how to drive faster adoption of such consumer technology as Google's and Amazon.com's across the company.

"We asked ourselves: If we started Bechtel today, would we do IT the same way we are doing it today? The answer was no. If we had a clean slate, we wouldn't do it the way we were doing it," Ramleth says.

Ramleth decided to benchmark Bechtel's IT operation against leading Internet companies launched in recent years. He zeroed in on Amazon.com, Google, Salesforce.com and YouTube. The IS&T staff studied the available information about how these Internet leaders run their IT operations, and they interviewed venture capitalists with experience investing in consumer applications.

Bechtel came up with estimates for how much money YouTube spends on networking, Google on system administration, Amazon.com on storage, and Salesforce.com on software maintenance. What Bechtel discovered was that its IS&T group was lagging behind industry leaders (see graphic, right). "What we found were tremendous discrepancies between our metrics and what these guys were dealing with," Ramleth says. "You can learn a tremendous amount from [companies] that have the privilege of starting recently."

When Bechtel researched YouTube, it concluded that YouTube must be getting much less-expensive network rates, because otherwise it wouldn't be able to send 100 million video streams a day for free. Bechtel estimated that YouTube spent between $10 and $15 per megabit for bandwidth, while Bechtel was spending $500 per megabit for its Internet-based VPN.

YouTube was "paying a fraction of what we were paying," Ramleth says. "We learned you have to be closer to the high-bandwidth areas and not haul the data away. We decided we better bring the data to the network, rather than bring the network to the data." Next, Bechtel studied how Google's servers operated. Google had one system administrator for every 20,000 servers, while Bechtel had one for every 100 servers.

"What we learned is that you have to standardize like crazy and simplify the environment," Ramleth says. "Google basically builds their own servers by the thousands or gets them built in a similar fashion, and they run the same software on it. So, we had to get more simplified and standardized."

Bechtel studied Amazon.com and determined that it must have a better storage strategy if it was offering disk space for a fraction of Bechtel's internal costs. While Amazon.com was offering storage for 10 cents per gigabyte, per month, Bechtel's internal U.S. rate was $3.75 per gigabyte, per month.

Ramleth says the key to reducing storage costs was not only to simplify and virtualize the storage environment, but also to drive up use.

"Our average utilization was 2.3%," Ramleth says. With virtualization, "we now expect to have utilization in the 70% to 75% range." However, the new virtualized storage environment is "more complex to operate," he adds.

Bechtel turned to Salesforce.com for its expertise in running a single application with millions of users. In contrast, Bechtel operates 230 applications, and it runs 3.5 versions per application. That means it maintains approximately 800 applications at any given time. "When you look at Salesforce.com, not only are they running one application, but they are running one version and they are only running it in one location," Ramleth says. "They upgrade that application four times per year, and they don't disrupt the users by having to retrain them. Every time we have a new version, we have to retrain our users."

With its benchmarking data in hand, Bechtel revamped its IS&T operations to model itself as closely as possible after the SaaS model pioneered by these four Internet leaders.

"If you take the ideal world, everything is done as a service: computing, storage, software and operations," Ramleth says. "It's maybe the ultimate goal . . . but if you start where all the enterprises are today, that's a very long road to go."

A trinity of data centers

Once Bechtel committed to the software-as-a-service model, the firm realized it needed to revamp its data centers to copy Google's standardized, virtualized model.

Bechtel was operating seven data centers worldwide, but last year it replaced those with three new data centers, one each in the United States, Europe and Asia. The data centers have identical hardware from HP, Cisco, Juniper Networks and Riverbed Technology. On the software side, Bechtel is using Microsoft and Citrix Systems packages.

"The hardware is the same, the software is the same, and the same organization [is] managing all of them," Ramleth says. "It's like one data center, but it operates in three different locations."

The data centers have virtualized servers with utilization of around 70%, Ramleth says. These centers have the most energy-efficient design possible, so they are a fraction of the size of the old data centers and use significantly less electricity.

"In square footage, we're down by a factor of more than 10," Ramleth says. "Two-thirds of the power in a data center is chilling, and if I don't have to chill that extra space . . . I get a dramatic reduction in power needs."

The new data centers are operational, and Bechtel expects to close all the old data centers by the end of 2009.

Ramleth says one of the hardest aspects of the IS&T transition was closing data centers upgraded as recently as 2005.

"Six of our data centers were relatively modern. That was a tough thing. We finished a [data center] consolidation in 2005, and already in 2006 we started talking about doing a re-do of our data centers again. [Our IS&T staff] felt like they hadn't really gotten dry from the last shower before they started getting wet again," Ramleth says.

Do-it-yourself networking

At the outset of its research project, Bechtel was operating an IP VPN that it had installed in 2003. To drive down the cost of its network operations, Bechtel has redesigned that network using YouTube's do-it-yourself model.

Bechtel has a Gigabit Ethernet ring connecting the three new data centers, with dual paths for failover. The company is buying raw bandwidth from a variety of providers — Cox Communications, AboveNet, Qwest Communications, Level 3 Communications and Sprint Nextel — but it is managing the network itself.

"We buy very little provisioned networking," Ramleth says. "We do it ourselves because . . . it's less costly than buying from others. . . . We go to the Internet exchange points, to the carrier hotels, where the traffic terminates."

So far, Bechtel has migrated the three data centers to the new network, along with nine offices in San Francisco; Glendale, Ariz.; Houston; Oak Ridge, Tenn.; Frederick, Md.; London; New Delhi and Brisbane.

The new network "[costs] about the same as what we paid before, but it offers a heck of a lot more capacity," Ramleth says, adding that Bechtel is getting around 10 times more capacity for the same amount of money.

The biggest cost-saving of the new network design came from aggregating network traffic at Internet exchange points, which is what leading e-commerce vendors do, Ramleth says. "We found that for the amount of traffic and the amount of capacity that we put it in, we could do it cheaper ourselves," Ramleth says. "This not something for a small or midsize enterprise, but we found that we were big enough to be able to do it ourselves."

Simple, secure software

The next aspect of transforming Bechtel's IS&T operations is migrating its applications to the new SaaS model.

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