To Hell and Back: MCI

By Elizabeth Wasserman  |  Posted 04-01-2004 Print Email
Everyone knows the story of Bernie Ebbers and the alleged $11 billion fraud that drove MCI (then WorldCom) into bankruptcy in 2002, but few know the story of the IT execs who led the Herculean effort to integrate the 1,000 IT systems WorldCom accumulated
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MCI's Network Operations Center in Ashburn, Virginia—the nerve center of the telecom giant's IP backbone—is a large, dark room filled with rows of desks that face massive, overhead screens. The giant screens display world maps of the company's 98,000 network route miles, the Weather Channel and CNN. On the day of my visit, one CNN headline announced that the company's former Chief Executive Officer, Bernie Ebbers, had been indicted on federal charges for allegedly orchestrating the biggest accounting fraud in corporate history. Almost two years ago, that fraud, estimated at 11 billion dollars, coupled with the debt it concealed, forced MCI (then WorldCom) to file for bankruptcy. Still, few of the engineers in the Operations Center bothered to notice the news.

"I'm saddened to see it again," says MCI acting CIO Jim Gwinn, when I mention the CNN headline minutes later in a conference room a few corridors away. He sighs, and adds, "Those of us here have no insight as to what happened or why it happened, and it will forever be just one of those things we just have to put behind us."

Gwinn, 44, lives in Nashville, but he spends a significant amount of time on the road in Virginia, Colorado and at other MCI facilities. He's been with the telco for 16 years, but was only named acting CIO last fall. Prior to that, Gwinn served as vice president of IT Business Systems and oversaw MCI's network traffic collection, mediation, rating, billing and e-commerce systems. As such, he had a huge challenge on his hands even before the scandal broke. WorldCom's rise, after all, had been as steep as its fall; by July 21, 2002, when the company filed for Chapter 11, it had acquired 70 companies and amassed more than 1,000 disparate IT systems.

With all the bad news, it's easy to forget how dominant MCI was as WorldCom. From humble beginnings in 1983, Long-Distance Discount Service (LDDS) became, under Ebbers (an early investor, and CEO as of 1985), a "growth through acquisition" juggernaut. By the time regulators put on the breaks in 2000, barring a proposed merger with Sprint Corp., LDDS had absorbed IDB Worldcom, Resurgens Communications Group, Brooks Fiber Properties Inc., CompuServe Corp., UUNet Technologies Inc. and MCI Communications Corp.

At its peak in 2000, WorldCom earned nearly $40 billion in revenue and served more than 20 million customers, chief among them the U.S. government. Through its purchase of UUNet, in particular, the company claimed—and still does—the largest footprint in Internet Protocol, owning more than 4,500 points of presence (PoPs) worldwide. The future seemed bright.

But then WorldCom entered a long, hot season in business hell. For starters, the telecom sector collapsed. Even as it raked in almost $40 billion in 2000, WorldCom lost $48.9 billion according to adjusted figures that MCI filed with the U.S. Securities and Exchange Commission in March 2004; it would go on to hemorrhage another $15.6 billion in 2001, and $9.2 billion in 2002. In 2001, the company laid off 6,000 workers—the first of 34,000 employees it has either let go or lost to "attrition," including 4,000 more layoffs announced March 29, 2004. In 2002, the SEC came knocking about the missing billions. The Department of Justice soon followed. Ebbers resigned in April 2002, and former UUNet CEO John Sidgmore took over. (Sadly, Sidgmore, 52, died in December 2003.) Finally, on March 2 of this year, former CFO Scott Sullivan pleaded guilty to securities fraud, conspiracy to commit securities fraud and misleading the SEC.

Begun well in advance of the losses and scandal that engulfed the company, Gwinn's efforts to consolidate WorldCom's IT systems became even more essential once havoc struck. The task was immense. Over the years, the conglomerate had accumulated not only 1,000 IT systems but 11 different IT organizations. Each one had its own budget, administrative processes and department head. There was no common architecture, no standards and no centralized leadership or strategy—that is, aside from scrambling to coordinate an ever-widening array of services. Gwinn's mission improbable: to reduce all of those systems and divisions by one-half to two-thirds and to get all of them coordinated. Only, post-Chapter 11, he had to accomplish this with slashed budgets and fewer personnel.

"It's still not like everything will be completed in a 12-month period," Gwinn says. "But we have intense focus on where we need to be and how we're going to get there."

Though daunting, MCI's "IT transformation," as Gwinn calls it, has nevertheless represented an incredible opportunity. Sure, cutting costs remains a huge motive, but Gwinn's plan is also intended to fix MCI's ordering-thru-billing process (an historical trouble spot), to reposition itself as a customer-friendly company, and to prepare for the Voice over IP future.

"MCI needs to do this IT transformation to cut costs dramatically and transform their business," says Scott Cleland, head of the Precursor Group, a Washington, D.C. research firm. "They have to do it—to stay ahead of the latest guillotine."



 

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