'Breakthrough' VoIP project breaks down

Dow Chemical has replaced EDS with IBM as the lead contractor on the project

In 2001, The Dow Chemical Co. unveiled plans to create a voice-over-IP network that would also provide data and video capabilities. In a chest-thumping announcement, Dow said its converged network would be a "breakthrough solution" that would be "setting the standard for other Fortune 100 companies."

What a difference three years can make. Lead contractor Electronic Data Systems Corp. is now off the project, replaced last week by IBM, which is being tasked with building what Midland, Mich.-based Dow expected to be substantially completed by now: a VoIP network serving its 46,000 employees in 63 countries.

"It was really the pioneer days in 2001," said Jim Slaby, an analyst at The Yankee Group in Boston. Dow "is one of these unfortunate casualties of living out on the edge."

IBM officials said they don't know how much of the prior work will be useful. The company, in its discussions with Dow, focused on setting requirements and not on prior work. "We're not obligated by any previous architecture and design," said Todd Kirtley, general manager of the industrial sector at IBM Global Services.

All Kirtley would say about the prior work was that Dow "did not get the traction they were hoping to get."

IBM's seven-year outsourcing agreement, which it declined to value, covers operation of Dow's global IT infrastructure. That includes supporting servers, desktops and e-mail; providing storage and network bandwidth under a utility pricing model; and building the converged network.

The odds may have been against Dow from the start. Analysts say it was just too far ahead of its time. In 2001, "people didn't understand all the issues" involved in deploying a converged network, said Bob Hafner, an analyst at Gartner Inc. And some core technologies were unavailable. For instance, "we didn't have the tools to do network certification," Hafner said.

A third-party consultant who worked on the DowNET VoIP project, who spoke on condition of anonymity, said the project ran into delays because replacing legacy systems proved to be very difficult, and there were unanticipated problems. For instance, security systems that used analog technology didn't necessarily work on a VoIP network. "There was definitely a lot of poor planning," the consultant said.

Moving On

EDS, Dow and Cisco Systems Inc. -- the main technology provider under the original contract - all declined requests for interviews to discuss the project.

How much was lost by any of those companies is difficult to determine. On July 28 EDS said it had reached an agreement to terminate a commercial contract that it didn't identify and reported a $135 million pretax termination-related charge.

But whatever problems EDS encountered with the Dow project, they apparently haven't affected its outsourcing deal with Bank of America Corp. Indeed, that relationship was recently expanded. EDS and Bank of America are building a converged network that appears to be bigger than Dow's, serving about 180,000 employees.

Last month, EDS signed a $1.1 billion outsourcing deal with the bank, which is an addendum to a 2002 outsourcing agreement valued at $4.5 billion that was intended to integrate FleetBoston's communications infrastructure with Bank of America's. Charlotte, N.C.-based Bank of America announced its merger agreement with FleetBoston last year.

Steven Venezia, managing director of the network computing group and network services at Bank of America, said the bank is thoroughly planning and testing every aspect of the network project.

"I'm confident [because] nothing will forge ahead unless it's proven," said Venezia, noting that the bank has multiple pilots in progress. If all goes according to plan, the bank could have an initial rollout at selected locations next year.

Venezia said EDS has met 97% to 98% of the bank's service delivery requirements.

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