EXHIBIT 99.469
August 31, 1999
Mr. Daniel A Yee
Chief Information Officer
California Power Exchange Corporation
200 Los Robles Ave., Suite 400
Pasadena, CA 91101-2482
Dear Dan,
Perot Systems is excited to have this opportunity to propose to you a service
agreement for providing IT program management, applications development and
computer operations services to the California Power Exchange. We believe that
one of the key advantages to such a venture will be to allow CalPX to focus on
remaining the world leader in energy exchange.
We applaud your vision and willingness to consider and solicit our proposal for
this service agreement in order to offer your corporation and ultimately CalPX
customers the best solutions as measured in both services and costs. Our
proposal outlines a 36 months service offering to provide program management,
applications development and computer operations services to CalPX. We foresee
the transfer of these services from current CalPX IT departments co Perot
Systems to take place in a phased approach starting around November 1, 1999,
Perot Systems is extremely interested and open to exploring with CalPX other
permutations for smooth and caring transition of these services.
We see this initiative as an opportunity to bring to CalPX our extensive, world
class experience and skills in information services. The chance to combine these
talents with our deep understanding of the California marketplace and
specifically deep knowledge of CalPX and California ISO businesses, processes
and information systems offers the means to bring a new comprehensive dimension
of quality to the business outcome.
Our personal commitment to CalPX's success and our ability to work as part of
your larger team can be observed through our existing relationship, We look
forward to joining with you to build on these foundations and jointly create for
both our companies the reputation we each seek in the market place - that of a
premier services provider.
The proposal that follows details our approach to achieving these objectives. We
welcome the opportunity to discuss our proposal with you in greater detail, and
look forward to working with you, Please contact me, at (626) 537 3214 should
you have any question regarding our proposal.
Sincerely,
Dariush Shirmoharnmadi
Account Manager, California Power Exchange
cc: Ken Scott
Linda Curts
Terry McManus
Jim Cribari
Chuck Bell
A PROPOSAL TO
California Power
Exchange (CalPX)
August 31, 1999
[PEROT SYSTEMS LOGO]
DISCLOSURE PROTECTION NOTICE
This proposal to the California Power Exchange (CalPX) is the property of Perot
Systems and contains confidential and/or proprietary information of Perot
Systems. It shall not be disclosed outside of CalPX and shall not be duplicated,
used, or disclosed-in whole or in part--for any purpose other than to evaluate
this proposal. CalPX's review of this material is considered acceptance of this
Disclosure Protection Notice. Should this be unsatisfactory, please return this
material to Perot Systems. Ibis response and any contract subsequently awarded
to Perot Systems as a result of--or in connection with-this submission shall be
subject to the agreed confidentiality, proprietary rights, and nondisclosure
provisions of the resulting contract.
Perot Systems and the perotsyetems logo are trademarks of Perot Systems.
All other brands, product names, and trademarks arc &he property of their
respective owners.
Copyright (C) 1999 Perot Systems Corporation. All rights reserved.
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Perot Systems Confidential August 31, 1999 Page ii
TABLE OF CONTENTS
EXECUTIVE SUMMARY .......................................................... 1
Implementation Timeline ................................................ 1
Pricing ................................................................ 3
Benefits ............................................................... 4
Perot Systems' Major Achievements at CalPX ............................. 5
Our Approach ........................................................... 9
INTRODUCTION ............................................................... 11
Our Company ............................................................ 14
THE CURRENT ENVIRONMENT AT CALPX ........................................... 16
OUR SOLUTION ............................................................... 23
Overview of Solution ................................................... 23
Employee Transition .................................................... 24
Program Management Approach ............................................ 30
Organization ........................................................... 36
Applications Management ................................................ 38
Computer Operations .................................................... 43
Plan and Schedule ...................................................... 51
FINANCIAL SUMMARY .......................................................... 54
Pricing ................................................................ 54
APPENDIX A: PEROT SYSTEMS' QUALIFICATIONS .................................. 57
North American Independent System Operator (ISO) ....................... 57
North American Reliability Coordinator ................................. 57
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Perot Systems Confidential August 31, 1999 Page iii
International Car Rental Company ....................................... 58
APPENDIX B: ADDITIONAL PROJECTS ........................................... 62
APPENDIX C: SAMPLE SERVICE LEVEL AGREEMENT ................................. 66
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Perot Systems Confidential August 31, 1999 Page iv
EXECUTIVE SUMMARY
CalPX is seeking an IT service solution that would enable it to have:
- A predictable performance with agreed upon service levels for
its information systems;
- A predictable expenditure for its information systems;
- The ability to quickly respond to the changing business
requirements of the California energy marketplace; and
- The ability to rapidly introduce new products and services
both for the California energy market and other energy markets
worldwide.
We hereby propose an IT service solution that not only would meet all the above
desired outcomes but also is expected to provide CalPX with significant cost
savings.
Our solution calls for Perot Systems to provide IT program management,
applications development and computer operations services to CalPX initially for
a 36 month time period. We would phase in these services over a six month time
period beginning around October 18, 1999 - see below for our proposed
implementation timeline. Our approach is described in the body of this proposal.
Perot Systems' customer first service philosophy and proven track record at
CalPX, our credibility and smooth working relationship with business
organizations at CalPX, our worldwide experience with providing IT services and
our established IT processes and methodologies will underwrite the success of
our proposed solution.
Finally, we look at this proposal in terms of a long-term partnership with
CalPX, not only in providing IT services but also a potential business partner
in ventures that are highly beneficial to both companies.
IMPLEMENTATION TIMELINE
We propose to provide IT program management, applications development and
computer operations services to CalPX for a period of 36 months beginning with
the execution of the "Services Contract", which is expected to be around October
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18, 1999. Our proposal calls for a phased transfer of CalPX IT services to Perot
Systems according to the following timetable.
CALPX IT SERVICE PROVISION IMPLEMENTATION TIMELINE
MONTH 1 2 3 4 5 6 7 8 9 TO 36
< --------------------------------------------------------------------------- >
- - CalPX accepts the proposal
- Contract negotiation and due diligence review
- Contract is signed
- Transition period for Program Management and
Applications Development
- Program Management and Applications
Development by PSC
- Study Computer Operations
- Transition Period for Computer Ops
- Computer Operations by PSC
According to our proposal:
1. CalPX and Perot Systems will start the Services Contract
negotiations immediately after the acceptance of this proposal
by CalPX - expected to be around September 17, 1999.
2. We foresee contract negotiations to last for about one month
during which time Perot Systems will conduct a due diligence
study under the existing Task Order 5 between CalPX and Perot
Systems. All funds collected for the due diligence study will
be credited to CalPX should CalPX agree with the Services
Contract with Perot Systems. Once signed, the Services
Contract will supercede Task Order 5.
3. We would start the transition of all program management and
applications development services to Perot Systems immediately
after the Services Contract is signed. This transition,
described later in this proposal, is expected to last one
month.
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4. At the end of the transition time period IT program management
and IT applications development services for CalPX will be
provided by Perot Systems.
5. We will conduct a careful study of the computer operations
starting with month three and completing by month six. At the
same time period we will conduct's series of studies as
indicated in Appendix B ("Additional Projects") of this
proposal. At the end of this time period, either party may
decide not to agree with the transfer of computer operations
to Perot Systems. Failure to reach an agreement by both
parties to transfer computer operations, should it occur, will
have no bearing on the transfer of program management and
applications development services to Perot Systems.
6. Should both parties agree to transfer computer operations
services to Perot Systems, we would transition computer
operations to Perot Systems over a one month time period
during month six.
The details of our proposed IT solution described in the body of this proposal,
PRICING
Our pricing is meant to help CalPX with predictability of its IT expenditure
while greatly improving business systems' reliability and enhanced service. In
short, our pricing is as follows:
1. Starting with the transition period for transfer of program
management and applications' development services to Perot
Systems, CalPX will pay Perot Systems one million dollars
($1M) per month for the services of up to 50 Perot Systems'
associates and contractors. This payment will also cover all
travel costs to the Los Angeles area for these 50 associates
and contractors - but will not cover travel costs outside the
Los Angeles area on CalPX business. Services of additional
Perot Systems associates will be charged on time and material
basis using Perot System's published rates for such resources
at a 25% discount. This will include additional services
rendered for studies enumerated in Appendix B.
2. Starting with the transition period for transfer of computer
operations to Perot Systems, CalPX will pay Perot Systems one
million three hundred and fifty thousand dollars (%1.35M) per
month adjusted annually based on IT Salary Index for the
services of up to 70 Perot Systems associates and
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contractors. This payment will cover all travel costs to the
Los Angeles area for these 70 associates and contractors - but
will not cover travel costs outside the Los Angeles area on
CalPX business. Services of additional Perot Systems
associates and contractors will be charged on time and
material basis using Perot System's published rates for such
resources less a 25% discount.
3. If computer operations services are not transferred to Perot
Systems, CalPX will continue to pay Perot Systems one million
dollars ($1M) per month adjusted annually based on IT Salary
Index for the services of up to 50 Perot Systems associates
and contractors. The remaining pricing features will remain
the same as clause 1 above.
We will develop specific baseline staffing numbers for each area of program
management, applications development and maintenance and computer operations as
a part of our contract negotiation.
BENEFITS
Our proposed solution will enable CalPX to have predictable IT performance and
costs and to have the flexibility to address CalPX business requirements in
California and beyond. In addition, we believe that our solution will bring
substantial savings to CalPX compared to its current IT expenditure.
The following table compares the cost of our solution with what we have
estimated to be the baseline CalPX IT expenditure under status quo - we have
conservatively assumed that CalPX baseline IT expenditure will remain constant
over the next three years. The table illustrates a savings of more than six
million dollars ($6M) over the next 3 years for CalPX.
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YEAR 1 YEAR 2 YEAR 3 TOTAL
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CalPX Current Baseline IT $18,742,000 $18,742,100 $18,742,100 $56,226,200
Expenditure
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Payments to Perot System $14,530,000 $16,200,000 $ 16,200.00 $46,930,000
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CalPX Retained costs $ 2,986,000 $ 117,400 $ 117,400 $ 3,220,800
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Total Perot Solution Cost $17,516,000 $16,317,400 $16,317,400 $50,150,800
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Savings for CALPX $ 1,226,000 $ 2,424,700 $ 2,424,700 $ 6,075,400
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We believe that there are other substantial savings that can be realized through
our solution, These are:
- Saving in the cost of major financial liability for CalPX due
to what we believe to be an inevitable major system crash at
CalPX in the foreseeable future;
- Savings due to potential restructuring of MCI and IBM
contracts;
- Saving due to the potential for housing the entire CalPX staff
in Pasadena that could result from streamlining of IT
personnel and equipment; and
- Saving due to potential elimination of backup disaster
recovery site at Folsom; and
- Savings due to total consolidation of all IT services and
elimination of all "phantom IT organisms" throughout the
company.
PEROT SYSTEMS' MAJOR ACHIEVEMENTS AT CALPX
Some of our major achievements at CalPX are enumerated below. These achievements
underscore our deep knowledge of CalPX business, our strong commitment to our
customers, our wide ranging information systems and project management
expertise, and our complete dedication to our service We have delivered on all
our commitments at CalPX at record time on budget.
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BLOCK FORWARDS MARKET (BFM)
Perot Systems played a key role in the development and deployment of the BFM for
CalPX. The Block Forwards Market provides CalPX's participants a means to trade
standardized monthly block electricity contracts on a forward basis - up to six
months ahead. Perot Systems developed the real-time ticker information system,
and the CalPX specific settlement and credit system for the CalPX BFM. BFM
brings significant benefits to CalPX participants including:
- Block forward contracts serve as a tool to protect market
participants against future price variations for both
purchases and sales in the Day Ahead Market.
- BFM allows CalPX to expand its energy trading services and
enhance overall market efficiency. The BFM market also
positions the CalPX to provide more innovative trading
services to participants.
- BFM allows California ratepayers to benefit from a more
competitive and dynamic electricity market place.
IS0 DATA BRIDGE (BUCKEYE)
We completely designed and developed the IS0 Data Bridge (ISODAB, aka Buckeye)
for CalPX, Buckeye provides a seamless data interface between CalPX and the
California Independent System Operator (ISO) scheduling systems. Based on the
IS0 schedule data template specifications, the Buckeye application generates all
required input data templates and uploads the templates to the IS0 Intranet Web
Server, automatically or upon request. Buckeye also downloads all output data
templates available in the IS0 Web Server and inserts the data into CalPX
trading system. Additionally, Buckeye allows the automatic download of IS0
settlements data files.
The Buckeye application provides ease of use through a user-friendly graphical
user interface. By automatically executing mundane and repetitive tasks, it
allows CalPX traders to focus on more important business issues. Due to its
flexible design, it has provided CalPX the capability to easily adapt to changes
in the Trading CORE applications and in the IS0 interface. It has also
simplified IT operations by eliminating a layer of server hardware and database
that was used in a previous implementation of an IS0 gateway. Finally, Buckeye
enabled CalPX to retire very costly hardware and software systems that were used
to serve as the original CalPX data bridge to the ISO.
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ZONAL PRICE CALCULATOR (ZPC)
We designed and developed the Zonal Price Calculator before the launch of CalPX.
ZPC determines Market Clearing Prices (MCP) in different zones of the California
Power Energy market. The proper pricing of energy and transmission usage charges
is essential in establishing a fair and efficient energy market as well as
providing proper economic signals for future resource and transmission
allocation.
BOOKOUT
We designed and developed the Bookout application for CalPX, Bookout
automatically matches the schedules of participating imports and exports and
creates net schedules of matched imports and exports as well as their equivalent
adjustment bids, These net schedules are submitted to the IS0 for use in
congestion management and power flow scheduling with neighboring control areas.
The application also translates the final values of the net schedules determined
by the IS0 back to the corresponding values of imports and exports before the
matching, so that participants can schedule their respective resources.
Bookout enables the CalPX participants to save 10% to 20% in IS0 Grid Management
Charge and wheeling charge on exports and save varying degrees of transmission
loss obligation for imports. Such savings are expected to lower the price
barrier for trading in the CalPX energy market, thus contributing to maintaining
and expanding the trading volume in CalPX energy market.
REAL TIME DATA COLLECTION SYSTEM (RTDC)
We designed and developed the RTDC system to handle CalPX's real-time
operational transactions, and to speed up and improve the accuracy of the real-
time transaction process. The RTDC system centralized all transaction data into
one database while providing a user-friendly interface. RTDC allows the
operator to add new and modify previous transactions, track past transaction
information, Cancel incorrectly entered transactions, generate daily transaction
and daily summary report for real time operators and managers, and generate
Powerhouse report for PX data warehouse system.
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INTER-TIE TRANSMISSION OVER SCHEDULING (ITOS - PIT O'BULL)
We designed and developed the ITOS to monitor CalPX participants who schedule
energy beyond the available transmission capacity across various IS0 inter-ties
in CalPX Day-Ahead Market. ITOS has been helping PX Day-Ahead Market operators
to identify the over-scheduling situation and to prevent the possible market
gaming activities.
PX SETTLEMENT REPORTER (PXSR/TO DEBIT)
We designed and developed CalPX Settlement Reporter for CalPX settlement group
to handle the following tasks:
- For both PX Day-Ahead and Hour-Ahead markets estimate the
total PX congestion payment to the IS0 or credit from IS0 for
each operating hour. This estimate helps CalPX settlement
group verify the congestion settlement charge received from
ISO and reduce the possibility of financial dispute regarding
the congestion charge.
- Calculate the TO Debit charge to CalPX due to derating of one
or more inter-zonal interface(s) in the Hour-Ahead Market.
These charges are used to settle with CalPX Participants
according to the PX forward market settlement timelines.
BUSINESS CONSULTING
We have capitalized on our deep understanding and long time experience with the
California energy markets to design and refine business protocols for CalPX,
interact with California ISO on behalf of CalPX and to provide regulatory
supports to CalPX. Our business consulting team has played major roles in the
design and development of CalPX zonal pricing mechanism, TO Debit calculation
and distribution, Bookout business processes, ancillary services redesign and
the assessment of almost every IS0 initiated market change. We have also been
providing support for CalPX regulatory filing since Tariff Amendment 5. An area
of our efforts has been to help CalPX initiate critical market changes in order
to retain its market participants, increase market efficiency and expanding
services both in functionality and geography.
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OUR APPROACH
Perot Systems' approach is described in the body of this proposal. We find it
appropriate to broadly describe our solution by referring to the questions in a
recent survey of IT services at CalPX.
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<Table>
<Caption>
Survey Item Business Perception Proposed Perot Systems Actions
(quoted in the IT survey)
IT Performance It is our perception that IT looks for Program Management Methodology (PMM) is a Perot Systems
reasons to delay deadlines vs. trying to standard program and project delivery mechanism within
find ways to meet deadlines. the customer engagement lifecycle. This will increase
the percentage of project success and help control costs.
We will Use our Project Definition/Initiation workshops
(PIW/PDW) to establish and communicate requirements and
build achievable schedules.
Quality- Systems and Applications are Our infrastructure has internal quality goals of
Stability and sound but not easy to use maintaining the most current versions of hardware and
Reliability software. This ensures availability and reliability. We
also track system availability to validate that service
targets are being achieved.
Proven Methods Sometimes yes, sometimes no, but Perot Systems has developed proven methods and tools in
and Processes the main issue is IT never gives you all the aforementioned areas. Our methods combined with
what they say they are going to give you. continuous improvement allow us to bring you the
industries "Best Practices" to meet your needs. We are
developing a knowledge store of the practices and tested
processes.
Organizational At the level of Application Development "We Treasure Our People" is one of our founding
Development staff roles are well defined. But at the principles. To keep lines of communication open and we
IT Director level the roles are undefined. hold regular meetings at the team and supervisor level.
I don't understand how the IT works. We report our progress to the customer and the team often
and hold monthly customer status meetings and employee
Some group seem to control process. "All-Hands Meetings" to ensure that everyone is
Therefore, some projects gets slowed by one constantly updated on the current program status.
person's unwillingness to share
responsibilities.
Alignment Does not feel that IT and business Our leadership style requires that our teams align with
strategies/priorities are integrated. the customer vision. Service is the cornerstone of our
business. To further ensure that the needs of the
business are being met we will establish a service level
Too much time spent on IT finger pointing. agreement between IT and the business units. Service
Focus should be on resolving issues. levels will be tracked and reported to CIO and other
executives on a frequent basis. Additionally, we will
implement a Change Review Board and IT steering
committee that will over time, remove the perceived
barriers between IT and business.
Measurement Has never been solicited for feedback In addition to establishing service levels with the
prior to this survey. business units, we will introduce the "Customer
Satisfaction" surveys and conduct them on a regular
basis. An outcome of these surveys will be a concrete
action plan intended to improve performance and
effectiveness.
Skills Some very talented people but, no Perot Systems prides itself on our "World Class"
organizational skills or cohesiveness. Recruiting and Training programs. These programs
provide us with a constant steam of technical and
business talent within the IT industry. Our intensive
recruiting process ensures that we attract and retain
the best people in the industry.
Costs Poor accounting systems. Using our PMM methodology we construct an understandable
set of plans, deliverables and cost models. We will
We are still learning what cost of provide CalPX a better understanding of costs and ways to
ownership is for many projects. further improve them.
IT never met a $ it did not want to spend.
Has no known idea what it takes to make a buck.
Communication Lack of communication/coordination contributes Our Program Office team, rich with business knowledge,
to the high cost. will forge strong links to the business units. The
implementation of the Change Review Board and IT
Overall IT does not take the initiative to do Steering Committee will provide the framework for
things and then report back to stakeholders. improving communications and developing a strong
partnership.
Links exists but often fail to check with all
parties.
</Table>
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INTRODUCTION
Information Technology constitutes the foundation of the California Power
Exchange (CalPX) business. To survive and thrive, CalPX must have a robust
information system that is predictable in both performance and cost and that can
be readily expanded in functionality and performance in response to the needs of
a rapidly changing energy marketplace in California an elsewhere. A recent
message from CalPX CEO, in which he enumerated the major achievements of CalPX
since inception(1), clearly emphasizes the pivotal role of information
technology in present and future successes of CalPX.
A robust, cost effective and flexible information system is no accident. It
requires knowledgeable, experience and dedicated IT professionals, proven
processes and methodologies and a smooth and constructive working relationship
with business side of the company. Experience has shown that meeting all these
requirements is a major challenge for CalPX today. Lack of brand recognition in
technology area has made it difficult for CalPX to bring in and retain skilled
IT professionals. At the same time, a hasty start-up made it impossible for
CalPX to put all the needed IT processes and methodologies in place and the
haste with which CalPX has had to respond to marketplace changes made it
impractical to introduce such processes and methologies later. In the meantime,
cooperative relationship between the business and IT organizations by and large
fell victim to both these factors. The result, to our opinion, is a fragmented
information system that fails
- --------------
(1) In his message Mr. George Sladoje said, "As we near the end of our
seventeenth month of successful operation, this is a good time to
reflect on what we've accomplished so far this year:
New Products:
- Launch of Bookout Service
- Launch of Block Forwards Market
- Launch of Green Exchange Service
- Launch of Post Close Quantity Match
We replaced the ABB gateway to the ISO with our own "Buckeye" system --
something we control and own.
From a systems standpoint:
- Stages 4 & 5
- Refinements to our core software.
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to fully meet CalPX business needs today, particularly as related to cost and
performance predictability, and is becoming exceedingly difficult to expand
tomorrow.
Perot Systems hereby reposes to provide CalPX with an IT solution free of many
impediments fat by CalPX IT organization. Our solution will enable CalPX to meet
all the business challenges that it faces today and in the future. Implementing
our solution will enable the IT organization to be viewed by the business units
as a vital asset, and an enabler of business solutions in line with its
expectations for an IT service that has:
- A predictable performance with agreed upon service levels for
it information system;
- A predictable expenditure for its information systems;
- The ability to quickly respond to the changing business
requirements of the California energy marketplace; and
- The ability to rapidly introduce new products an services both
for the California energy market and other energy markets
worldwide.
Perot Systems has been a key player in both the design and implementation of
California's restructured energy market. To start, we designed many of the
business protocols that form the foundation of today's energy market in
California. We then played a pivotal role in the timely and successful start of
the California ISO and CalPX, As many CalPX veterans are aware, we are credited
for removing the last major hurdles for the start of the CalPX market on 4/1/98,
by timely deployment of the Zonal Price Calculator and Overgeneration Management
applications at CalPX. We have also played an ongoing major role ensuring a
successful smooth operation of CalPX since its start.
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In fact, an examination of CalPX major accomplishments enumerated by the CalPX
CEO clearly recognizes the magnitude of Perot Systems' contribution in realizing
all such accomplishments. For majority of these contributions we were the main
party responsible for developing and deploying the needed business protocols and
information systems(2).
- --------------
(2) In his message Mr. George Sladoje said, "As we near the end of our
seventeenth month of successful operation, this is a good time to
reflect on what we've accomplished so far this year:
New Products:
- Launch of Bookout Service (around 90% of design and
development by Perot systems)
- Launch of Block Forwards Market (around 90% of design
and development by Perot systems)
- Launch of Green Exchange Service
- Launch of Post Close Quantity Match
We replaced the ABB gateway to the ISO with our own "Buckeye" system --
something we control and own [around 100 percent of design and
development by Perot systems].
From a systems standpoint:
- Stages 4 & 5 (major design and development work by
Perot system]
- Refinements to our core software.
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OUR COMPANY
Perot Systems is a worldwide provider of infomation technology sersrices and
solutions to a broad range of clients. Perot System delivers our services
primarily through our industry groups, including four target
industries--financial Services, Energy, Healthcare, and Travel and
Transportation--and other industries in which we have significant clients. We
serve our clients by delivering solutions focusd on their needs, with particular
emphasis on helping clients more effectively serve their customers.
To achieve this, Perot Systems provides an "integrated service offering"--a
combination of core disciplines, including business integration, systems
integration and applications development, and information technology
infrastructure services. This offering helps clients improve their business
operations or create new business offerings.
Using this approach, we are able to create long-term relationships with clients
beginning with an analysis of their business strategies and continuing through
the implementation of information technology solutions and the realization of
the clients' goals.
Several of Perot Systems' characteristics have been key to our success in
building an information technology services company with nearly US$1 billion in
revenue in just over eleven years. These characteristics include:
- Culture of business people grounded in technology.
- Flat and open management structures that drive decision-making to the
field.
- Aggressive and flexible approach to business development combined with
accountability and discipline in execution and delivery.
- Sense of urgency in our approach to clients' business issues.
- Reward structure that encourages and supports risk-taking and
initiative.
- Focus on dynamic industries in the private sector in numerous
geographies worldwide.
- Values that support and balance serving our clients, people, and
stakeholders.
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- Commitment to operate in the center of the field of ethical
behavior--never on the sidelines.
For additional information about Perot Systems' experience, see Appendix A
("Perot Systems Qualifications").
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THE CURRENT ENVIRONMENT AT CALPX
The following sections concisely illustrate our understanding of the current IT
environment. We also highlight several challenges and issues facing program
management, applications development and computer operations in this
organization.
APPLICATIONS INVENTORY
CalPX information systems enable the following business functions:
- Establishment of the marketplace for electrical power
- Marketplace access
- Bidding and contract acknowledgement services
- Participant and bid validation
- Trading energy in portfolio blocks
- Scheduling with the IS0 at resource level
- Price calculation and setting
- Real-time support services
- Contract settlement services
- Billing, invoicing and clearing services
- Administrative support systems
An inventory of the current applications at CalPX is presented below - Figure 1.
The applications consist of:
- Applications developed/maintained by the CalPX IT Organization. These
applications mainly support the Settlements Business Unit.
- Applications developed/maintained by Perot Systems under their current
contrac/task order. These applications mainly support the Trading
Business Unit.
- Core applications developed/maintained by OM Technologies, which
support both the Trading and Settlements Business units.
Figure 2 illustrates how they interact to support CalPX's business initiatives.
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<Table>
<Caption>
BUSINESS DEV OR MAINTAINED
SYSTEM NAME OR PROJECT AREA/FUNCTION CRITICALITY MAINT? DEVELOPED BY BY
CALPX APPLICATIONS
- ----------------------------------------------------------------------------------------------------------------------------
Power Base All Core Maint CalPX CalPX
- ----------------------------------------------------------------------------------------------------------------------------
Data Warehouse (Powerhouse) All Core Dev & Maint DWCG DWCG/CaPX
- ----------------------------------------------------------------------------------------------------------------------------
PEP+ Settlements Core Dev & Maint CalPX CalPX
- ----------------------------------------------------------------------------------------------------------------------------
POP Settlements Core Maint CalPX CalPX
- ----------------------------------------------------------------------------------------------------------------------------
MDAS (Metering & Data Acquisition Settlements Core Maint Energy Energy
System) Interaction Interactive/CalPX
- ----------------------------------------------------------------------------------------------------------------------------
SEWeb (Settlements Web System) Settlements Core Maint CalPX CalPX
Extranet, phase II All Core Maint CalPX CalPX
Intranet All Secondary Dev CalPX CalPX
Market Clearing Prices (MCP) Trading Core Maint SBK SBK
Technology Technology/CalPX
PeopleSoft Financials - GL, AP, AR & Finance & Core Maint Third-party CalPX (upgrades
Billing Settlement vendor with PeopleSoft
support)
- ----------------------------------------------------------------------------------------------------------------------------
WIDGET Marketing Secondary Maint CalPX CalPX
- ----------------------------------------------------------------------------------------------------------------------------
PEROT SYSTEMS APPLICATIONS
- ----------------------------------------------------------------------------------------------------------------------------
BFM - Reporting, Ticker Trading Core Dev & Maint Perot Systems Perot Systems
- ----------------------------------------------------------------------------------------------------------------------------
Zonal Pricing Calculator Trading Core Maint Perot Systems Perot Systems
- ----------------------------------------------------------------------------------------------------------------------------
BUCK EYE Trading Core Maint Perot Systems Perot Systems
- ----------------------------------------------------------------------------------------------------------------------------
Real-time data log Trading Core Dev & Maint Perot Systems Perot Systems
- ----------------------------------------------------------------------------------------------------------------------------
Inter-Tie Over Scheduling (ITOS) Trading Core Maint Perot Systems Perot Systems
PX Settlements Reporter/TO Debit Settlements Core Dev Maint Perot Systems Perot Systems
(PXSR/TODebit)
Manta-Ray Trading Core Dev Perot Systems Perot Systems
QF EA (PG&E sponsored) Trading Core Dev Perot Systems Perot Systems
OM APPLICATIONS
Trading Application Trading Core Maint OM OM
Settlements Application Settlements Core Maint OM OM
TITAN Project Settlements Core Dev OM OM
CORE DB Trading Core Maint OM OM
BFM Backend Trading Core Maint OM OM
</Table>
FIGURE 1. CALPX SOFTWARE APPLICATIONS INVENTORY
<Table>
<Caption>
APPLICATION USER OPERATING DEVELOPMENT PURCHASED DATABASE
SYSTEM NAME OR PROJECT ARCHITECTURE INTERFACE SYSTEM TOOL/LANG COMPONENTS SYSTEM
CALPX APPLICATIONS
- -----------------------------------------------------------------------------------------------------------------------------------
Power Base 3-tier Browser NT VB, ASP, T-SQL Active File 2.0 by SQL Server
Proc & Triggers Infomentum
in DB
- -----------------------------------------------------------------------------------------------------------------------------------
Data Warehouse (Powerhouse) 2-tier Client/Server HP-UX ERWIN, Sybase Informatica Sybase 11.5
stored procedures, PowerMart, CA
(few C++ programs) AutoSys, Business
Objects 4.1
- -----------------------------------------------------------------------------------------------------------------------------------
PEP+ 3-tier Client/Server NT VB Sybase
----------------------------------------------------------------------------------------------------------------------------------
POP 2-tier Client/Server NT PERL Scripts SQL Server
- -----------------------------------------------------------------------------------------------------------------------------------
MDAS (Metering & Data 2-tier Client/Server NT C++ SQL Server
Acquisition System)
- -----------------------------------------------------------------------------------------------------------------------------------
SEWeb (Settlements Web System) 3-tier Browser NT VB 6.0, ASP, ActiveFile 2.0 by SQL Server
T-SQL, ActiveX Infomentum
Extranet, phase II 3-tier Browser NT ASP/HTML SQL Server, I
Intranet 3-tier Browser NT ASP/HTML/ SQL Server, I
JavaScript
Market Clearing Prices (MCP) 2-tier Browser NT
PeopleSoft Financials - HP-UX Peoplesoft (C, Peopletools, Crystal SYBASE
GL, AP, AR & Billing COBOL, SQL used Reports, SQR
in Peopletools?)
- -----------------------------------------------------------------------------------------------------------------------------------
WIDGET
- -----------------------------------------------------------------------------------------------------------------------------------
PEROT SYSTEMS APPLICATIONS
- -----------------------------------------------------------------------------------------------------------------------------------
BFM - Reporting, Ticker 2-tier Browser NT Java, ASP, SQL Server
Business Objects
- -----------------------------------------------------------------------------------------------------------------------------------
Zonal Pricing Calculator 2-tier Client/Server NT VB, C Sybase
- -----------------------------------------------------------------------------------------------------------------------------------
BUCK EYE 2-tier Client/Server NT VB, C++ Sybase
- -----------------------------------------------------------------------------------------------------------------------------------
Real-time data log 2-tier Client/Server NT VB, C++ SQL Server
- -----------------------------------------------------------------------------------------------------------------------------------
Inter-Tie Over Scheduling 2-tier Client/Server NT VB, C++ SQL Server
(ITOS)
PX Settlements Reporter/ 2-tier Client/Server NT VB, C++ SQL Server
TO Debit (PXSR/TODebit)
Manta-Ray 2-tier Client/Server NT VB, C++ SQL Server
QF EA (PG&E sponsored) 2-tier Client/Server NT VB, C++ SQL Server
OM APPLICATIONS
Trading Application Flat Files
Settlements Application SYBASE
TITAN Project
CORE DB SYBASE
BFM Backend SQL Server
FIGURE 1. CALPX SOFTWARE APPLICATIONS INVENTORY
</Table>
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Perot Systems Confidential August 31, 1999 Page 17
California Power Exchange The Current Environment at CalPX
- --------------------------------------------------------------------------------
<Table>
[COMPUTER ARTWORK]
Other Misc. Perot
Scheduling and Zonal Pricing
Master/Master Real-Time Calculator (ZPC)
Applications
BUCKEYE
(ISODAB)
Trading App CORE DB
(TA) PX_SPECIAL I
S
O
Metering & Data
Acquisition System
Energy Auction DataWareHouse (MDAS)
[COMPUTER ARTWORK]
Settlements
Statements
Flat Files
Settlements
Web POP Settlements
System
Billing PEP PLUS
Files
PeopleSoft
Billing BFM Reporting [COMPUTER ARTWORK]
System System
BFM Backend
Invoices
MCPs [COMPUTER ARTWORK]
</Table>
FIGURE 2. APPLICATION TOPOLOGY MAP
- --------------------------------------------------------------------------------
Perot Systems Confidential August 31, 1999 Page 18
California Power Exchange The Current Environment at CalPX
- --------------------------------------------------------------------------------
CHALLENGES IN PROGRAM MANAGEMENT AND APPLICATIONS DEVELOPMENT
In the process of reviewing both the applications and the applications-related
organizations, several issues and challenges were identified and discussed.
These challenges were identified through interviews with the IT Directors, a
review of the 1999 IT Survey Results, and discussions with Perot Systems
Associates who have been associated with the CalPX organization for some time.
The challenges we identified include the following:
o Communication between IT and the business areas is not effective and
was identified by the 1999 IT Survey as one of the two major
challenges.
o Due mainly to above projector program planning and tracking are neither
effective nor consistent. The other major challenge identified by the
survey, this issue highlights three areas of concern:
- No consistent, updated, and communicated IT project plan is in
place.
- No time is recorded and no project accounting is captured, making
it difficult to track actual efforts against a plan.
- Project funding and expense application is difficult to control and
track, especially as they relate to capital versus operating
funding.
o Roles and responsibilities between applications, operations, testing,
and business areas are unclear.
o There is many levels of IT activity that occurs outside of the IT
organization.
o Application standards are neither implemented nor enforced across the
organization.
o Configuration management, while being addressed, is not implemented
organization-wide.
While these challenges clearly exist, it should be noted that the IT
organization is working hard and doing its best to deliver results to the
business areas.
CHALLENGES IN COMPUTER OPERATIONS
The CalPX IT environment is fast-moving and dynamic, driven by business units
requiring quick product development and delivery. The CalPX IT environment
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California Power Exchange The Current Environment at CalPX
- --------------------------------------------------------------------------------
evolved quickly and often without specific process or controls. As a result of
the organization's rapid growth, the current operations environment at CalPX
contains what we believe to be significant risks compared to current IT industry
standards--specifically, components of data security, change and process
management, and systems management. Through improved processes in the day-
to-day management of the operational environment and a more comprehensive
approach to data security, CalPX would maintain a r&able production environment
for the business units.
Your Level I Help Desk manages customer calls, resolves customer technical
problems, monitors critical systems, and interfaces with hardware and soBware
vendors. Problem management is being implemented using the Remedy system, and a
central change coordinator is managing the application and system changes. These
functions are all essential components for every IT Operations team.
Areas where improvements are definitely needed are:
DATA SECURITY - Access to production data is marginally controlled fiorn
applications and the software development community. This increases an
opportunity for data corruption and/or production outages.
CONFIGURATION MANAGEMENT - The current environment lacks the security and
controls to effectively provide a stable environment, and changes are
implemented in an ad hoc fashion. New software releases are not properly planned
or scheduled. This may compromise or regress production software at all Ievels.
SEVICE LEVEL REPORTING - Since service levels are not established and reported
to the business units, CalPX is unable to assess the overall effectiveness in
delivering IT services.
PERFORMANCE MONITORING - For mission-critical systems and applications,
performance metrics must be tracked and measured constantly to avoid unnecessary
service impacts caused by under-performing business systems.
PROGRAM MANAGEMENT - Utilizing a predefined methodology in which projects are
managed using a common set of processes will help ensure that projects are
completed on time and within budget.
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Perot Systems Confidential August 31, 1999 Page 20
California Power Exchange The Current Environment at CalPX
- --------------------------------------------------------------------------------
CAPACITY PLANNING - By enabling CalPX to measure and benchmark current computer
resources, you will be able to forecast this usage based upon business growth
and expected service levels.
Figure 3, on the next page, illustrates our understanding of the system
configuration supporting the California Power Exchange.
- --------------------------------------------------------------------------------
Perot Systems Confidential August 31, 1999 Page 21
California Power Exchange The Current Environment at CalPX
- --------------------------------------------------------------------------------
Alhambra CA Cal PX
System
EMC 7800 Configuration
450 Gb NT Clusters
| | | | | |
K460 K460 K460 K460 K460
MC Service Guard
Cluster
| | | | | MCI Network
| | | | | | |
Sun Solaris
K460 K460 K260 Sun Solaris | Folsom CA
|
K260 EMC 7800
450 Gb
|
| | | | | | | |
DEC Alpha DEC Alpha DEC Alpha DEC Alpha K460 K460 K460 K460
Cluster Cluster
MC Service Guard
Cluster
Figure 3. CalPX's System Configuration
- --------------------------------------------------------------------------------
Perot Systems Confidential August 31, 1999 Page 22
OUR SOLUTION
In addition to an overview of our proposed solution, we offer a discussion about
the success-critical employee transition, our program management approach, and
the organization we anticipate implementing. We also present our plan and
schedule, as well as anticipated roles and responsibilities for both Perot
Systems and CalPX.
OVERVIEW OF SOLUTION
We propose a full 36 month services agreement to provide program management,
applications development and computer operations services to the California
Power Exchange. We will establish a baseline level of service that includes the
services discussed in this proposal. Additional incentives, to be agreed upon
later, will be included to achieve and exceed service levels. We will offer
discounted rates on all services that CalPX requires and that are not a part of
the baseline services. All application development projects will be evaluated
against the baseline of services. If additional resources are required, they
will be identified through the change control process and approved or rejected
as a part of the change process. Each project will require a business unit
sponsor that will work with the Program Office to establish the requirements,
and IT will jointly take these new projects forward to the IT Change Review
Board.
The principal elements of our solution are:
o Transition process
o Establishment Program Management Office
- Control Review Board
- IT Steering Committee
- Business Consultants
o Realignment of Roles and Responsibilities
o Realignment of Applications Development and Maintenance
o Realignment of Computer Operations
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EMPLOYEE TRANSITION
Over time, Perot Systems has gained important experience in transitioning people
from one work environment to another. Regardless of the circumstances
surrounding the transfer of employment, we recognize that, by nature people are
resistant and sensitive to change, and considerable care must be taken to ensure
that transitioning employees receive timely, specific communication throughout
the process.
One of our guiding principles at Perot Systems is, "We treasure our people."
Thus, we are committed to achieving a smooth transfer of all employees who are
identified to transition to Perot Systems from a client. Our approach is based
on a flexible three-phase process tailored to fit the specific needs and
logistical requirements of our individual clients.
The actual transition plan is based on a high degree of open communication and
coordination between all parties to minimize any disruption to empIoyees or to
the client's ongoing business operations.
EMPLOYEE UTILIZATION
Perot Systems' transition methodology has proven succassfu1 at blending the
specialized application and business expertise of our team with our culture and
reliable service methodology. To quickly infuse the Perot Systems methodology
and culture into the transitioning team, Perot Systems adds to the team our most
seasoned leadership with direct experience in the industry at hand. Based on an
assessment of team needs, Perot Systems also augments the team with specific
seasoned technical expertise.
Subcontractors are used in isolated roles when a specific expertise is needed
immediately and is not readily available. In these cases, Perot Systems will
select a consultant fkom a business partner for a limited period of time.
One advantage Perot Systems provides is that we will periodically provide new
perspective for the client by using new hires or Associates transferred into the
existing staff. It is important to manage Associates' experience and to ensure
that they continue to grow professionally. By managing Associate career
movements, we ensure vitality in our clients' organization by constantly
exploring ways to
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improve their service, as well as sharing the benefits of experience from
previous settings.
THE TRANSITION PLAN
We believe that a successful employee transition:
- Creates a strong foundation on which to build our client relationship.
- Assures that the client's employees have a smooth, comfortable
employment transition.
- Assists employees in moving through the various phases of change.
- Provides continuing development, care, and opportunities for the
transitioned employees.
Perot Systems strongly recommends a partnership approach where we work side-
by-side with CalPX to develop a detailed transition plan, We believe a
successful employee transition plan centers around three key elements:
- Communication to the employees
- Care of those employees
- Careful, comprehensive change management
Perot systems recognizes the importance of addressing the cultural aspects
involved with integrating two companies' principles, philosophies, and
processes. Transitions of any nature will require a major adjustment on the part
of all concerned. Employees may generally resist change and have difficulty
working in new ways, Over time, comfortable work patterns and routines are
established. These patterns become an integral part of employees' daily
professional life, becoming the unwritten "rules of the game" by which they will
conduct their daily work.
When confronted with the prospect of a transition, there is no question that
CalPX's employees will benefit from knowing and understanding the business
rationale behind the decision. However, once informed of this business decision,
each employee will personally internalize the situation and ask the question,
"What happens to me?"
This is a natural and expected response. Perot System' transition process
addresses this question, as well as many others, so that the employees know
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California Power Exchange Our Solution
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exactly where they stand, understand their importance in the overall success of
the business agreement, and are comfortable with their new employer, TO achieve
a successful transition, we encourage transition employees to follow these
steps:
- Think about it.
- Examine their feelings.
- Seek information.
- Take charge,
The actual process of transitioning employees cannot be I& to happen over time.
Proper planning and careful attention must be given to the emotional and
cultural aspects of the changes that will be taking place. Detailed planning,
consistency, and superior change management is vital to the success of the
transition and the overall long-term success of the partnership between CalPX
and Perot Systems,
Perot systems uses a multi-phased approach to employee transitions.
PRE-TRANSITION PHASE
The amount of time allocated for this phase can vary greatly from several weeks
to a few months. During this phase, the key activities center around gathering
and analyzing information, building relationships with our partners, and
planning logistics and communications. In particular, we will look at the
following areas:
- Benefits
- Compensation
- Employee data
- Corporate culture and policy
Benefits and compensation are of particular importance to everyone. Perot
Systems is guided by a commitment to transition employees at their existing base
salary and with a benefits package that--taken as a whole--is at least
comparable to that which they were accustomed to receiving. Part of this process
will involve the completion of a side-by-side benefits analysis with input from
CalPX's human resources personnel. By completing this side-by-side analysis, we
can harmonize the benefits and identify and resolve any potential issues prior
to meeting with the employees. The challenge we face is to examine all corporate
practices and establish a fair, consistent compensation and benefits package
that respects all
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California Power Exchange Our Solution
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local, state, and international legislation and is favorable for the
transitioning employees.
Finally, we must look at corporate culture. Perot Systems is a global
corporation, and as such, employs a workforce that is not restricted by
geographic or corporate lines. This open atmosphere is ideal for transition
situations, as it readily permits the "blending" of two corporate cultures.
Perot systems' biggest challenge and foundation for growth is the attraction,
retention, re-skilling, and motivation of excellent information technology
professionals, It is Perot Systems' motivation to keep Associates employed and
engaged at Perot Systems, whether at CalPX, or at another client.
LOGISTICAL PLANNING
Transitioning employees from CalPX to Perot Systems requires a great deal of
detailed, logistical planning. The first impression formed by CalPX's employees
will be critical. All Associate-related issues must be resolved prior to the
transition meetings. During the Pre-transition phase, Perot Systems will work
ery closely with the management of CalPX to ensure we have the answers your
employees will be seeking. This period of time also allows us to build critical
relationships with our counterparts within your company, which is key to the
Overall success of the transition.
COMMUNICATIONS PLANNING
Another component of the Pre-transition phase is communications planning. With
input from CalPX, Perot Systems will customize a communications plan using the
took and techniques that have traditionally been most effective with your
employees. Current CalPX communication tools may be supplemented with additional
tools as needed.
Examples of supplemental tools and strategies might include:
- Linkage of internal and external communications
- Regular employee roundtable sessions
- Change adaptation workshops
- Employee telephone hotline
- Transition question and answer documents
- Employee orientation sessions
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Perot Systems Confidential August 31, 1999 Page 27
California Power Exchange Our Solution
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- Leadership forums
- Current CalPX leadership involvement
LEADERSHIP
Successful change requires the full commitment of the leaders of both companies,
The leadership at CalPX and the leadership at Perot Systems must support the
transition 100 percent for it to succeed. Thus, Perot Systems will rely on any
transitioning CalPX leaders to assist with positive communication of the
transition message.
Throughout the process, the transitioning employees must never feel forgotten,
alone, or lost. The Communications Plan we develop together must be guided by a
commitment to make some form of communication available to every employee each
day during the critical first weeks and months of the transition.
TRANSITION
The acceptance of this proposal by CalPX marks the beginning of the Transition
Phase. By this point, all employee-related issues will have been identified,
analyzed, and resolved, The Transition Phase is characterized as a series of
meetings designed to bring transitioning employees `"into the loop." During this
phase, the Perot Systems delivery manager and team will be onsite, A fill-time
Perot Systems' Transition team, consisting of human resources personnel,
transition experts, and recruiters familiar with Perot Systems' current
requirements at other accounts and engagements, will also be on site at CalPX
during this phase to conduct a series of transition meetings.
Employees facing a transition have a strong need and a right to know as much as
possible about this new business relationship, as well as the values and
practices of their new employer. The purpose of the transition meetings is to
provide the employees with facts, address any rumors head-on, and provide:
counseling to facilitate the transfer, At a minimum, the following meetings
should occur during the Employee Transition Phase:
- Group meetings
- Individual sessions, including interviews
- Administrative sessions, including weekly updates
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California Power Exchange Our Solution
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GROUP MEETINGS
Group meetings ensure that all transitioning employees are on the same "playing
field," hearing the same information at the same time, Topics to be discussed
in these meetings should include the following:
- Formal announcement of the CalPX/Perot Systems agreement
- Overview of Perot Systems, including organizational history,
principles, benefits, compensation, and training
- Schedule of transition events
- Question and answer period
- Distribution of informational packets
The group meeting is one step in the communications process and is an excellent
tool to control the rumor mill and to provide employees with a taste of their
new employer.
INDIVIDUAL SESSIONS
Although the transitioning staff will have the opportunity to ask questions
during the group meeting, Perot Systems has found that some employees may feel
too intimidated or uncomfortable to ask questions in a group setting. For this
reason, we: also include an individual, private session as the second component
of the Employee Transition Phase. This session is not a formal interview, but an
additional means of clearly communicating with employees in a less formal and
more private setting.
The importance of physically meeting one-on-one with every employee who
transitions to Perot Systems cannot be underestimated. This personalized
attention accomplishes the following goals:
- Provides another opportunity for the employee to ask questions or
voice concerns.
- Provides Perot Systems with the opportunity to formally extend job
offers, collect necessary paperwork, and begin the new-hire process.
- Reinforces to the employees their importance in the overall success of
the new business agreement.
We have found these sessions to be most productive if they are conducted within
two weeks of the group meeting or kick-off. In order to ensure timely processing
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Perot Systems Confidential August 31, 1999 Page 29
California Power Exchange Our Solution
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of the CalPX employees, Perot Systems will expand the transition team during
this period.
ADMINISTRATIVE SESSION
The final component of the Employee Transition Phase is an administrative
session. This session provides one last opportunity for Perot Systems' Human
Resources personnel to ensure that all of the employees' forms me COrrect and
complete. Additionally, this brief session gives the employee another opening to
meet with a Perot Systems Associate and ask questions.
The group meetings, individual sessions, arid administrative sessions are the
primary activities that take place during the Employee Transition Phase.
However, these sessions are not all-inclusive. Additional meetings and
communications tools may be used to ensure a constant flow of information during
this critical time.
PROGRAM MANAGEMENT APPROACH
In this section we highlight our program management approach. We present our
Program Management Methodology (PMM). We highlight three critical project
control areas: problem management, change management, and configuration
management. We also introduce the concepts of a Change Review I Board and an IT
Steering Committee.
OVERVIEW OF OUR PROGRAM MANAGEMENT METHODOLOGY
Perot Systems has developed a structured approach to managing projects and
programs that we call our Program Management Methodology (PMM). It provides a
standard approach to program and project management based on our best practices.
"Users" maintain the flexibility to adapt to client needs and practices.
The PMM's five phases provide a time-phased approach to managing programs and
projects (see figure 4). Users can begin by identifying the current STATUS of
their projects in relation to the PMM phases. A program is iterative in nature,
with multiple projects in varying stages of progress. Therefore we apply PMM
iteratively.
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California Power Exchange Our Solution
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INITIATION EXECUTION
1 2 3 4 5
FEASIBILITY PLANNING SHUTDOWN
FIGURE 4. THE FIVE PHASES IN THE PROGRAM LIFECYCLE
Perot Systems follows the Total Quality Management approach to assure that tie
products and services we produce meet our clients' needs and expectations. Perot
Systems USES a three-tiered approach to quality: defect detection and removal,
defect prevention, and continuous process improvement. In addition, all Perot
Systems methodologies contain checkpoints designed to assure that the engagement
is on track at various points in the lifecycle.
An extremely important element of program management at CalPX will be the
presence of highly skilled and seasoned business consultants. These business
consultants will not only play a key role in developing and refining CalPX's
business protools but also ensure a smooth interface between the business
community and IT community at CalPX.
PROGRAM MANAGEMENT OFFICE
The Program Management Office (PMO) is the nucleus for managing projects in an
enterprise-wide environment to ensure that projects are aligned with your
strategic business goals. We facilitate the integration of common efforts across
business units and govern projects to meet your increased customer expectations.
We have established a history in the program of the arena and have captured our
success using a methodology that produces customized results based on your
business requirements.
However, a methodology alone is not enough to ensure success. Our team approach
combines understanding of CalPX business, methodology with our commitment to
working closely with each client in creative relationships. Together as a team,
we interact to solve business problems-initiatives are driven by our client's
enterprise strategy. We look at where you are now, where you
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Perot Systems Confidential August 31, 1999 Page 31
California Power Exchange Our Solution
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want to go, and what is the best way to get there--and then help you make it
happen.
The Program Management Office is a single point of contact for projects and
represents complete service delivery and offers a scalable project execution
methodology. designed to encompass only the components needed to succeed.
Working together as a team, we facilitate the integration of common project
efforts throughout an enterprise to ensure projects are within budget and on
schedule, while also remaining aligned with the enterprise's business vision,
Perot Systems' PMO delivers an enterprise-wide solution that will:
- Interface effectively and continuously with business units to
understand their needs.
- Prioritize projects with strategic business goals.
- Facilitate integration of common efforts across business units.
- Improve the: project success track record.
- Minimize risks and control costs.
- Consolidate reporting to monitor progress of critical initiatives.
CHANGE REVIEW BOARD
We propose to implement a Change Review Board consisting of CalPX Senior
Executive and members from the Program Office. This board will meet monthly to
review submitted requests for changes and either approve or reject these
requests. This board will also prioritize the change orders and existing project
work if necessary to meet the demands of the business. All changes will be
brought to the Change Review Board by a sponsoring business unit and the IT
department. Monthly project status reports will be provided to the Change Review
Board members so they can be kept updated to the most current project status.
IT STEERING COMMITTEE
We propose the formation of an IT Steering Committee headed by the CIO. The
members will also include the Program Manager, the Applications Director and the
Operations Director. Also, on this team will be representatives from each of the
major business units. This team will meet weekly to discuss upcoming events
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such as; major new software releases, hardware implementations and planned
change schedules. This team will also explore technology areas that can bring
business value to the enterprise that are not being currently exploited. These
strategies will be driven by the directions and needs of the business units in
response to operational or market challenges, If this team generates any change
request they will follow the process as defined for changes. These change
requests will be sponsored to the Change Review Board by one of the IT Steering
Committee members.
BUSINESS CONSULTANTS
We will engage with client at the root of a business problem resolution or
business expansion activity to determine the best possible solution, whether IT
related or not. Our business consultants are completely fluent with the
problems, concerns and aspirations of CalPX and the energy markets in California
ad beyond.
PROBLEM MANAGEMENT
Perot Systems' problem management services include problem triage, logging,
escalation, tracking, and reporting for each problem call, from initiation to
resolution for many of our clients, the Help Desk has become a focal point for
service level agreements, vendor management, network support, applications
support, and desktop services. Perot Systems owns and is responsible for all
requests and resolutions, from the time of the initial call through completion
and technical follow-up. Whenever possible, requests are addressed directly
during the initial call by the organizations responsible for client support. If
a request cannot be handled directly, it is dispatched to the appropriate
support team.
THE REMEDY ACTION REQUEST SYSTEM
The Remedy action request system is the premier problem-tracking and management
system in the industry. The Remedy system's greatest strengths are its knowledge
database and ease of customization. We will tailor the Remedy system to track
and manage CalPX's specific business processes such as change, asset, and
facilities management, as well as defects and work orders. All trouble calls,
system modifications, system and application outages, and change requests are
entered and tracked through the Remedy system. We will use the action
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request system to generate useful system performance, Help Desk metrics, and
service level reports.
CHANGE MANAGEMENT
We will track changes, regardless of their origin, through a formal change
management process. The business unit representative, Operations, and the IT
organization will be able to make change requests. Each change request will be
submitted to the Program Office to coordinate initial cost and schedule
estimates. The Program Office staff will complete estimates within 15 business
days and return each estimate to the original requestor. Estimates are then
revised as necessary to achieve concurrence between requestor, sponsor, and the
PMO.
Then, once a month, changes are presented to the Change Review Board for
approval. If approved, the change is assigned a change control number, worked
into the Integrated Master Schedule maintained by the PMO, and added into the
PMO monthly customer reports. The board also may shift priorities and schedules,
including ongoing projects, based upon the business needs of any the projects
under consideration. Should the board reject the change, it will be returned to
the PMO and requestor to determine if a course of re-submittal is warranted. The
PMO shall have sole responsibility for the execution of any and all changes
approved by the Change Review Board. A process flow diagram of this is
illustrated in Figure 5.
Submit Request
Generate to PMO Coordinates PMO & Requestor
Change Program Cost and Schedule Agree on
Request Management Estimate Schedule & Cost
(Business) Office
NO
PMO Assigns Requestor
PMO Initiates Change Controls Board Presents Change
Change & Adds & Integrates into YES Approves to Change Review
to Customer Integrated Master Change Board
Reporting Schedule
FIGURE 5. ILLUSTRATION OF CHANGE MANAGEMENT PROCESS FLOW
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CONFIGURATION MANAGEMENT
We have the environments, procedures, source control software, and automation in
place to support multiple development environments using the same software base.
The concurrent efforts that exist today include production support and a single
enhancement stream, although we have intentions and me prepared to accommodate a
second enhancement stream.
Each enhancement stream today is a logical branch off of the current production
source (soon to be 8 physical branch). Production support changes must then be
merged back into each enhancement stream. Once the enhancement stream goes into
production, it then becomes the production support environment and will be
branched to support a new release cycle (we are currently on a quarterly release
cycle).
Regardless of the environment, system components follow the same lifecycle.
System changes or issues start with the customer opening a change or problem
ticket. This ticket is assigned a number, which is then used as a reference
number for any system components modified as a result of that request, An
analysis is done on the request to determine the system components impacted. If
this is a change request, its cost is estimated and presented for customer
approval. If approved, it proceeds to the development teams, along with any
problem tickets, so the appropriate work can be completed.
During the development process, there are reviews and approvals both by peers
and leads. Once the changes pass through unit and integration test, they are
passed to the test team for systems testing. If approved by the test team, the
changes will continue to customer testing. Once again, if the customer approves,
the change will be released. Enhancements and "non-critical bugs" will be placed
into production during a regularly scheduled release. "Critical bugs" will be
implemented as soon as is practical. Any request received as an emergency
request (off-cycle processing) involves a form and must be justified and
approved by the customer, application team lead, and one designee of the Change
Review Board.
The complete development and acceptance process involves separately distinct
source labels in our source control tool. Each of these environments has its own
build schedule. If modules are placed into specific areas without the required
reference number (as described above), the change management team removes the
modules and notifies the teams.
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ORGANIZATION
In this section, we present the organizational structure that will support
CalPX's IT requirements. Figures 6 and 7 show the transitional and final
organizations. All roles and responsibilities related to these organizational
structures are covered in this Section,
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CIO COO Officers
[GRAPHIC]
FIGURE 6. THE PROPOSED CALPX/PEROT SYSTEMS IT ORGANIZATION - TRANSITION PERIOD
CIO COO & Officers
[GRAPHIC]
FIGURE 7. THE PROPOSED CALPX/PEROT SYSTEMS IT ORGANIZATION--FINAL
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APPLICATIONS MANAGEMENT
Perot Systems proposes to leverage our deep knowledge of the business processes,
credibility and smooth working relationship with the business units, proven
project and applications management experience, as well as OUT methodologies and
processes, to develop business applications in an effective, predictable, and
cost-effective manner. The IT function will be based on the leadership from the
Change Review Board, discussed earlier, that will direct the use of committed
resources, measure the effectiveness of IT services, and obtain additional
funding, if required.
APPLICATIONS DEVELOPMENT
Application development will use Perot Systems' proven Application Development
Methodology. The development resource will be baselined, and projects will be
initiated, committed, and managed under guidance and leadership of the IT
Steering Committee and the Change Review Board.
The Perot Systems Program Management Methodology (PMM) is used in the execution
of all projects, including those involving software development. Software
development projects we broken into a series of components that include
requirements gathering, analysis, design, development, testing, release and
operations activities, These are clearly identified in the Perot Systems
Application Development Methodology.
The table below gives a rough mapping of these software development components
to the PMM Lifecycle Phases, along with how they might map to the CalPX business
processes.
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Life Cycle
Phase Key Results of Phase Completion IT Application Development Activity
Feasibility Initial Scope and Objective developed None
by Business Units, Program Manager
and IT Steering Committee
Initiation Requirements, high-level estimate and High-level requirements, analysis, and
proposal returned to CalPX IT Steering overall estimate
Committee, who authorizes detailed
design and planning A key tool for developing these
requirements is the Project Definition
Workshop (PDW)
Planning Approval by the CalPX Change Detailed functional requirements,
Review Board proceed software development plans (including
defining change management, risk
management, test plan, acceptance
plan, operations planning, etc.),
technical requirements, and
analysis/design
Execution Successful completion of project and Detailed analysis/design, development,
customer satisfaction testing, release, operations
Shutdown Knowledge and reusable components Shutdown
harvested
FIGURE 8. PMM LIFECYCLE APPLIED TO CALPX
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[GRAPH]
Program Management, Project Tracking, Processes Improvement
APPLICATION DEVELOPMENT APPROACH
FIGURE 9. APPLICATION DEVELOPMENT APPROACH
APPLICATIONS MAINTENANCE
Application maintenance will be performed from the maintenance resource in the
baseline plan. Using an appropriate time recording system, we will record the
maintenance, including:
- Application/component
- Type of activity (analysis, coding, debugging, testing, etc.)
- Hours
The IT Steering Committee will track maintenance levels using reporting and
metrics generated from the time recording process and other sources. The
committee can modify the maintenance baseline by adjusting allocations
between development and maintenance, as required.
Maintenance activity will be initiated by two sources:
- Production problems, referred to the maintenance group via Remedy
tickets, classified in terms of severity.
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- Enhancements requested by the business areas. These requests will be
managed through the change management process.
ROLES AND RESPONSIBILITIES
The table below illustrates the proposed organizational structure and the roles
and responsibilities for each organization.
Develop Initial High Level Detail Detail Design, Maintenance
ment Scope & Requirements, Functional Develop, Test,
Project Objectives Analysis, Reqmts, SW Release, Install
Proposal Overall Effort Dev Plans,
Estimate Technical
Reqmts, Effort
Business Initiate Provide Review & Concur Review & Review, Validate, Report
Area or IT Concur Concur Problems
Steering
Committee Initiate
Enhancement
Requests
Program Plan Plan Plan Negotiate Plan Negotiate Plan Negotiate Plan Negotiate
Managers Negotiate Negotiate Track Track Track Track
Track Track
IT Application Evaluate Evaluate Perform Perform Perform Evaluate
Development Impact
Fix Bugs
Implement
Change
Request
Change Approve Approve Monitor Monitor Monitor, Adjust
Review resources
Board Allocate Adjust Evaluate Results
Resources Resources (On
Maintenance as
a whole)
FIGURE 10. ROLES AND RESPONSIBILITIES
ENTERPRISE SYSTEMS ARCHITECT
An Enterprise Systems Architect would provide the technology direction for
CalPX projects. This Associate would:
- Establish the current and the future system architecture.
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- Define IT standards to avoid multiple platforms, database types, and
development languages.
- Evaluate and select tools and products.
- Review, assist, and approve the technical architecture for all new
applications.
- Suggest consolidation Or migration of applications to establish
integrated system architecture,
SYSTEMS PROCESS IMPROVEMENT
Our systems process improvement activities would enable continuous systems
process improvement within CalPX's IT division. It would establish processes
and ensure that they are implemented within all projects. The three key process
areas on which we would focus are:
- Requirements management
- Project planning
- Project tracking and oversight
Software process improvement responsibilities would include:
- Customize and ensure implementation of the Project Management
Methodology to enable the key process areas.
- Communicate standards under which all projects are to be managed.
- Establish a common language and terminology with common methods
across all projects.
- Determine the process to measure productivity and establish metrics.
QUALITY ASSURANCE
Quality assurance personnel will perform integration & regression testing on
applications before they are placed into production. This activity would include
new development and maintenance or enhancements to existing systems.
Currently, TestMasters contractors are used to perform a part of this activity,
and they report into Computer Operations organization. We propose to integrate
Quality Assurance as part of Applications Development & Support organization.
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Initially, we would use contractors from TestMasters under Perot Systems'
direction, as part of tie existing contractual arrangement with CalPX, This
relationship and the direction of quality assurance in the future represent an
opportunity for additional cost savings.
APPLICATION CHALLENGES ADDRESSED
In the current environment discussion, several application challenges were
identified. The table below summarizes those challenges and how our proposal
addresses them.
CHALLENGE HOW ADDRESSED
Communications between IT and the Change Review Board, IT Steering Committee,
business areas Program Management, business Consultants,
Systems Process improvement
Lack of complete IT project plan Program Management
No time recording, project accounting Implement Project Accounting
Project funding Change Review Board
Roles and responsibilities Program Management, Systems Process Improvement
IT activity in Business Units Partially addressed; additional future opportunity
Applications standards Enterprise Systems Architect, Systems Process
Improvement
Configuration management Enterprise Systems Architect, Systems Process
Improvement
FIGURE 11. APPLICATION CHALLENGES
COMPUTER OPERATIONS
The Computer Operations team provides CalPX with 24-hour coverage and support
365 days a year to ensure that the established business service levels are met.
Operation teams report daily on service levels key to management. Frequent
meetings are also held in the areas of problem, configuration, and change
management to communicate changes to the appropriate business unit
representatives.
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Perot systems will remotely operate the CalPX systems located in Alhambra,
California. The Level I Help Desk will remain in Alhambra, The operating system
administration, Sybase and SQL Sewer database support, performance and tuning,
aid capacity planning will all be supported from our nationwide support center
in Dallas, Texas. This technical support team has over 650 technicians that are
available to support CalPX's needs.
Perot Systems will be responsible for maintaining and enhancing automated
operations processes and procedures for all computing environments, including
system software, online applications, and batch, tape, and print operations.
Perot Systems' Operations team operates in a fully automated operations
environment using adopting an Enterprise System Management approach. This
approach allows for single point-of-control monitors, alerts, and proactive
reactions for the entire enterprise, regardless of the devices and platforms it
contains. From one powerful, centralized workstation, we provide you with a
consolidated, integrated view of all the elements and management systems in the
enterprise (including the Help Desk, data center, and technical support). This
standard view allows for the most efficient use of human resources across all
support groups,
Business and technology rules dictate how system management activities can be
managed in the computing center. Through centralized alert and event management,
we can proactively address activities. Client/server technology and software
allow for the integration of system management activities necessary to
efficiently manage complex centralized and distributed systems.
REMOTE OPERATIONS
Perot Systems engages several enterprise operations management initiatives by
way of a remote operations model. This model allows us to maintain a
centralized, well-trained support organization in Dallas managing customer
systems located across the geography.
A wide-area network connection between the CalPX computing center in Alhambra
and Perot Systems' Richardson Information Management Facility (RIMF) outside of
Dallas would facilitate a remote operations scenario.
A Level 1 CalPX operations support staff located in Alhambra would perform local
operations functions associated WITH systems management of the onsite
processors, such as tape mounts and system reboots. After-hours and off-shift
support--including system monitoring, troubleshooting, problem management
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and escalation, and performance and capacity management functions--would be
performed by a remote Level 2 support team in Dallas.
DESKTOP SUPPORT AND HELP DESK SERVICES
Perot Systems designs, deploys, and operates a wide range of Help Desk and
desktop support environments for some of our largest clients, including an
international Car Rental, one of our largest construction companies in the
world, ad one of the largest healthcare organization in the U.S. The Help Desks
we operate receive more than 200,000 inbound calls and track over 100,000
trouble a tickets each month. These environments are located at Perot Systems
and client facilities around the world.
As Figure 12 illustrates, Perot Systems believes that the Help Desk is
positioned in the middle of service delivery--that problem ownership should
begin and end there--and that the Help Desk must be closely coupled with the
desktop service provision.
Desktop Support
Systems Support Application Support
Help
Desk
Network Support Telecom Support
FIGURE 12. CENTRALIZED LEVEL 1 HELP DESK SUPPORT
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Further, we have aided many of our clients in reducing their total cost of
ownership for desktops by employing desktop standardization projects, or
thin-client solutions. We provide application and technical assistance services
to our Help Desk clients' users 24 hours per day, 365 days a year, or as
required.
HELP DESK TRAINING
Perot Systems provides ongoing training in various disciplines. Perot Systems
maintains that tie more knowledgeable the Help Desk Associates are, the more
capable they will be in providing immediate resolutions. The knowledge base is
very broad, but a combination of specialization and cross training continually
increases the capabilities of the staff.
HELP DESK AUTOMATION
We meet and exceed customer expectations by combining technology and automation
tools. By using these tools, the Help Desk personnel are empowered to assist the
customer with greater productivity and an increased quality of service. The
tools that Perot Systems has implemented include:
- Enterprise System Management - Tivoli products
- Problem and change management system
- Customer service system (CSS)
- Automatic call distribution (ACD)system
- Voice response capability system
- Automated terminal reset system
- Alpha paging system
- Performance and utilization monitoring system
- Call traffic monitoring system
- Customer notification system
VENDOR MANAGEMENT
CalPX IT is currently working with a number of vendors such as MCI for network
services and IBM for desktop procurement and support. Perot Systems will act as
the primary interface with all CalPX IT vendors, as identified by CalPX, to
ensure contract compliance. The services provided by these vendors
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will be managed, maintained and coordinated for the term of the existing
contract and evaluated for renewal at that time, CalPX will remain responsible
for financial obligations of these contracts,
CUSTOMER DATA, ADMINISTRATION (POWERBASE APPLICATION)
Perot System will assume the day-to-day responsibility of maintaining the Market
Participant master file through "Master/Master" database and as part of
Powerbase application maintenance.
TECHNICAL SERVICES
The technology services that we provide to support CalPX's systems include Unix
system administration, database administration, NT administration and support,
monitoring system performance, projecting future business needs, and developing
capacity plans.
UNIX/VMS/NT SYSTEM ADMINISTRATION
UNIX, VMS, and NT system administration consists of primarily the same tasks,
regardless of the platform. These tasks include system installation and
configuration; user creation; disk/storage management; patch management; problem
management and resolution; operation system, software, and hardware upgrades;
backup administration; system monitoring; system security; performance
monitoring and tuning; and capacity planning. Some of these tasks are
self-explanatory. A brief description of some of the others follows.
System monitoring is accomplished in several ways. Manual or visual checks of
the systems on a periodic basis can identify events such as a disk in a RAID
array that has failed. Scripts or shell programs can check for a variety of
error or warning conditions that are not necessarily visible. Some of these
conditions may include one fiber channel to a disk RAID going down when there
are multiple paths to that array, or a tape drive that may have downed itself in
a tape library. These scripts can be scheduled to run through, for example, cron
on a UNIX system to give timely notification of a particular event.
A third method to accomplish system monitoring is through the use of third-party
software. Tivoli software products are the Perot Systems' standard for
Enterprise
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Systems Management (ESM). Tivoli has "out of the box" monitors that allow system
administrators to define certain thresholds for event notification, The scripts
mentioned above can interface with Tivoli as well. Tivoli can also interface
with Remedy software to automatically create problem tickets in the event that a
defined error or warning condition has occurred.
System security deals with eliminating unauthorized access to the systems. This
can be accomplished both manually and with security applications. Performing
system security manually includes instituting having standards and procedures
for user account creation and administration, monitoring system logs for
intrusions, performing intrusion recovery in the case of an event, and
verifying the integrity of system configuration files. Security applications can
perform many of the menial security tasks more efficiently, as well as
controlling user access more effectively, and can take specified actions when an
intrusion is detected.
DATABASE ADMINISTRATION
Database administration consists of three main activities: database maintenance,
enhancements, and design. The purpose of database maintenance is to maintain
the day-to-day operation of production databases within the scope of available
system resources and to provide a rudimentary analysis of impending problems and
corresponding recommendations. Some of the database maintenance activities
include upgrades to the database to fix known bugs, management space, backup and
recovery, database security administration, and database performance monitoring.
Some examples of database enhancements could include the additional effort
arising from inadequate database design by other vendors, Additionally, we would
recommend performance and scalability improvements, defragment poorly designed
databases or incomplete purge/archive strategy, upgrade certain tools to their
latest release to enhance their use, and migrate databases from one platform or
location to another.
Database design falls into two main categories: database and application design.
Database design involves the physical structure and size of the database.
Following the optimal file architecture structure the physical design is based
on the hardware configuration of the server hosting the database. This involves
laying out the required files (data, index, control, and online redo files) to
maximize performance. By balancing the I/O across the controllers & disks, the
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I/O bottleneck be reduced. This also involves sizing the files based on the
application requirement.
Application design involves understanding the business requirement and setting
up the schema (tables, indexes, and referential integrity) so that all the
business requirement data arc stored and are consistent throughout the database,
It also involves security data management of certain critical business data.
SYSTEM AND PERFORMANCE MONITORING
Performance monitoring consists of collecting, charting and graphing performance
data gathered through a data collection application, such as SAR or MeasureWare.
Based on specific requirements, specific data can be graphed on a daily or
weekly basis to give a view into how the system and/or database is performing.
Based on this performance data, the system administrator can tune the operating
system, I/O, and network parameters to improve overall system performance and
response.
CAPACITY PLANNING
Capacity planning takes the performance data collected above and tracks it over
time, typically monthly. Reports and graphs are produced to explain what is
happening on the system and why certain trends or blips may have occurred. An
example of these reports and graphs might show memory utilization relative to
the number of users logged on to the system. By combining several months' worth
of capacity data, long-term wends can be seen that can affect business needs and
decisions.
SERVICE LEVEL AGREEMENTS
Perot Systems uses service level agreements on all operational services-related
accounts, as well as most project-related accounts. These service level
agreements align the IT needs of our clients' business with the IT service being
provided. Perot Systems follows a basic process for defining these service
levels with the clients business drivers continually guiding the process. The
process can be summarized as follows:
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- Understand and document IT services utilized directly by the customer
and the associated business impacts or criticality of those services.
- Define service requirements in client terms for the top-priority IT
services.
- Translate these service requirements to internal IT specifications.
- Assess the impact of service requirements on cost.
- Agree and document service level agreements.
- Establish reporting and review process,
This relatively simple process helps Perot Systems and our clients to develop
service levels that are meaningful to the performance of the business and not
just meaningful to the performance of individual IT components.
In terms of specific service leve1 measurements in each of the areas described,
it is difficult to establish the most meaningful measurements without completing
the process described above. In the absence of specific proposed measures, the
following sections provide possible measures as well as some example service
level measures we have used within other client environment, In regard to the
question of why a given service level would be used, the answer is inherently
built into OUT process of service level development. Only those Service levels
that translate to a meaningful impact on the client's business are recommended.
See Appendix C for a sample service level agreement.
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PLAN AND SCHEDULE
We propose to provide IT program management, applications development and
computer operatioris sendces to CalPX for is period of 36 months starting with
the execution of the Services Contract, which is expected to be around October
18, 1999. Our proposal calls for a phased transfer of CalPX IT services to Perot
Systems according to the timetable depicted in Figure 13, which provides our
critical milestones and timeline.
According to our schedule:
1. CalPX and Perot Systems will start the Services Contract negotiations
immediately after the acceptance of this proposal by CalPX.
2. We foresee contract negotiations to last for about one month during
which time Perot Systems will conduct a due diligence study under the
existing Task Order 5 between CalPX and Perot Systems. All fUnds
collected for the due diligence study till be credited to CalPX should
CalPX agree with the Services Contract with Perot Systems. Once signed,
the Services Contract will supercede Task Order 5.
3. We would start the transition of all program management and
applications development services to Perot Systems immediately after
the Services Contract is signed. This transition, described later in
this proposal, is expected to last one month.
4. At the end of the transition time period IT program management and IT
application development services for CalPX will be provided by Perot
Systems.
5. We would conduct a careful study of the computer operations starting
with month three and completing by month six. At the same time period
we will conduct a series of studies as indicated in Appendix B of this
proposal. At the end of this time period either party may decide not to
agree with the transfer of computer operations to Perot Systems. Lack
of acceptance, if my, will have no bearing on the transfer of program
management and applications development services to Perot Systems.
6. Should both parties agree to transfer computer operations services to
Perot Systems, we would transition computer operations to Perot Systems
over one month time period during month six.
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CALPX IT SERVICE PROVISION IMPLEMENTATION TIMELINE
1 2 3 4 5 6 7 8 9 to 36
- CalPX accepts the proposal
[ ] Contract negotiation and due diliengece review
- Contract is signed
[ ] Transition period for Program Management and Applications Development
Program Management and Appliations Development by PSC
Study Computer Operations Transfer
[ ] Transition Period for Computers Ops
FIGURE 13. CALPX IT SERVICE PROVISION IMPLEMENTATION TIMELINE
Figure 14 represents the breakdown of roles and responsibilities between CalPX
and Perot Systems
FUNCTION CAPLX PEROT SYSTEMS
Business Needs Communicate Propose
Business Growth Forecast Implications
Service Levels Establish Achieve
Information Security Define Enforce
Applications Needs Specify Integrate
Information Issues Identify Resolve
People Transition Select Develop
Industry Knowledge Vertically Horizontally
Competency Consumer Technology
Contingency Plans Specify Execute
Technology Base Defines Supports
New Business Create Enable
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This table (Figure 14) is meant to emphasize CalPX's role in this partnership.
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FINANCIAL SUMMARY
PRICING
Our pricing is meant to help CalPX with predictability of its IT expenditure
while greatly improving business systems' reliability and enhanced service. In
short, our pricing is as follows:
1. Starting with the transition period for transfer of program management
and applications development to services Perot Systems, CalPX will bay
Perot Systems one million dollars ($lM) per month for the services of
up to 50 Perot systems' associates and contractors. This payment till
also cover aH travel costs to the Los Angles area for these 50
associates and contractors - but will not cover travel costs outside
the Los Angeles area on CalPX business. Services of additional Perot
Systems associates will be charged on time and material basis using
Perot System's published rates for such resources at a 25% discount.
This will include additional services rendered for studies enumerated
in Appendix B.
2. Starting with the transition period for transfer of computer operations
to Perot Systems, CalPX will pay Perot Systems one million three
hundred and fifty thousand dollars ($1.35M) per month adjusted annually
based on IT Salary Index for the services of up to 70 Perot Systems
associates and contractors. This payment will cover all travel costs to
the Los Angeles area for these 70 associates and contractors - but will
not cover travel costs outside the Los Angeles area on CalPX business.
Services of additional Perot Systems associates and contractors will be
charged on time and material basis using Perot System's published rates
for such resources less a 25% discount.
3. If computer operations services are not tzansferred to Perot Systems,
CalPX will continue to pay Perot Systems one million dollars ($lM) per
month adjusted annually based on IT Salary Index for the services of up
to 50 Perot Systems associates and contractors. The remaining pricing
features will remain the same as clause 1 above.
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BENEFITS
As we indicated earlier our proposed solution will enable CalPX to have
predictable IT performance and cost and to have the flexibility to address CalpX
bhms requirements in Cdifomia and beyond. In addition, we believe aat our
sdution will bring substantial savings to CalPX in its current IT expenditure.
The following table compares the cost of our solution with what we have
estimated to be the baseline CalPX IT expenditure under status quo - we have
conservatively assumed that CalPX baseline IT expenditure will remain constant
over the next three years. The table shows a saving of more than six million
dollars ($6&I) over tie next 3 years for CalPX.
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YEAR 1 YEAR 2 YEAR 3 TOTAL
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CalPX Current Baseline IT
Expenditure $18,742,000 $18,742,100 $18,742,100 $56,226,200
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Payments to Perot System $14,530,000 $16,200,000 $16,200.000 $46,930,000
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CalPX Retained costs $ 2,986,000 $ 117,400 $ 117,400 $ 3,220,800
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Total Perot Solution Cost $17,516,000 $16,317,400 $16,317,400 $50,150,800
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SAVINGS FOR CALPX $ 1,226,000 $ 2,424,700 $ 2,424,700 $ 6,075,400
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FIGURE 15. PRICING BREAKDOWN
We believe that there are other substantial savings that can be realized through
our solution. These are:
- Saving in the cost of major financial liability for CalPX due
to what we believe to be an inevitable major system crash at
CalPX in the foreseeable future;
- Savings due to potential restructuring of MCI and IBM
contracts;
- Saving due to the potential for housing the entire CalPX staff
in Pasadena that could result from streamlining of IT
personnel and equipment; and
- Saving due to potential elimination of backup disaster
recovery site at Folsom; and
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- Savings due to total consolidation of all IT services and
elimination of all "phantom IT organisms" throughout the
company.
CALPX BASELINE IT EXPENDITURE
The CalPX baseline IT costs consist of salaries, for employees and contractors
from the following groups;
o Business systems planning
o Data administration
o Computer operations
o Application development (includes Perot Systems' team)
o 75% of the capital budget (IT Labor)
o Specifically identified IT resources at Trading (3 people) and
Settlements (3 people) groups
This baseline expenditure excludes, among other expenses, those related to the
hardware/software purchases and vendor contracts such as MCI and IBM and
Test-Masters. Should CalPX desire, Perot Systems can act as an its agent for
purchase of hardware and software products and licenses and pass through its
corporate savings, less 5% administrative fee on purchase value, to CalPX.
The Calpx retained costs are costs not being transferred to Perot Systems as a
result of transition.
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APPENDIX A: PEROT SYSTEM'S QUALIFICATIONS
In the following we describe a few of our business relationships in order to
illustrate out strength, breadth of experience and capabilities. We can expand
the list of our relationships to cover numerous other examples should CalPX
requite that.
NORTH AMERICAN INDEPENDENT SYSTEM OPERATOR (ISO)
In March of 1997, Perot Systems formed a partnership with a major EMS vendor,
taking on the challenge of implementing the Bidding, Scheduling, Settlement,
Billing, and Administration systems for the first ISO in North America. Perot
Systems was responsible for the overall program management and delivery effort,
including system integration, testing, documentation, and training of the mar&
participants. This effort resulted in a record-time delivery of the ISO systems
in less than one year.
The ISO successfully started its operation on schedule, and has been
successfully managing the use of the transmission grid for more than a year
thanks to the business and techology solutions that we developed for it. The
systems developed by Perot Systems Corporation and its partners has enabled the
ISO to smoothly conduct its business scheduling energy transactions, conducting
ancillary services and real-time energy auctions, and settling electricity
trades.
NORTH AMERICAN RELIABILITY COORDINATOR
Perot Systems, along with a partner, took on the responsibility to develop an
Interchange Distribution Calculator (IDC) for a North American Reliability
council, This project included a rigorous acceptance-testing requirement. The
IDC testing included the following steps in accordance with a test plan:
- Functional Test
- Performance Test
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- Fail-Over Test
- Y2K Test
- Customer Test
- Operational Dry Run Test
Given the short time frame available until the target Service Date, the scope
of these tests were contained to fit the available time. All the testing was
conducted using available data provided by the customer.
INTERNATIONAL CAR RENTAL COMPANY
With a long-term strategy for growth, an international car rental company,
serving clients worldwide with a 250,000-vehicle fleet, realized a need to
upgrade its network infrastructure. This company came to Perot Systems because
they wanted a partner who understands how much a reliable network means to
their business goals.
Companies require networks that work transparently--networks that let their
CIOs sleep at night.
INFRASTRUCTURE TO SUPPORT A CLIENT/SERVER-BASED CAR RENTAL SYSTEM
Part of the client's long-term growth strategy was to implement a new
client/server-based car rental system, based on technology developed by Perot
Systems, to accommodate the increased business. They needed to get online as
soon as possible--or risk losing some of the opportunities presented by their
growth strategy.
Getting online required a transition from a network based on dumb terminals and
IBM 3270 mainframe controllers to a frame-relay-based client/server environment.
The client needed to install over 6,000 Windows NT workstations. In order to
support these workstations, Perot Systems built a network infrastructure from
the
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ground up to replace the IBM 3270-based network. We worked with them to set up a
backbone for the network to serve their widespread locations through our
Dallas-based data center, with alternate routes to backup data at Florida
location--because having reliable, continuous access to their data was
mission-critical for the client. A frame-relay network was established, and
Cisco routers were installed in most locations.
FLEXIBILITY, RELIABILITY, AFFORDABILITY, AND TIMELINESS
We built flexibility into the client's network design, knowing that each of
their locations had unique business needs that might not always fit into a
static architecture design. For example, at some remote car rental stations, it
was impractical to sustain a full-fledged frame-relay connection to the network.
So instead of forcing these stations to operate inefficient network connections,
we installed ISDN lines, which provide less bandwidth but cost less than half of
what a frame-relay connection would cost.
In other locations, especially in remote areas, gaining access to the data route
that would connect to the data center was a concern. We leveraged our
relationships with data carriers to set up network-to-network interfaces across
multiple carriers to gain access at the lowest possible cost. Plus, for some of
the client's mission-critical locations, Perot Systems installed redundant
network service in the event of a carrier outage--providing reliable routes to
data if one of their network providers faced an outage.
By moving to this new frame-relay network, the client increased their bandwidth
by over 400%--and saw their network costs drop by over 25 percent.
Installing a network backbone like this is not an unusua1 task. But this client
asked Perot Systems to complete this transition as quickly as possible. With
more than 600 locations throughout the United States, a team would typically
take over a year to finish the work. To help the client meet their business
goals and start using its network, the project was completed in three months.
The client was rapidly able to take advantage of the benefits of a reliable,
consistent network backbone.
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OBJECTIVES
- Roll out new network architecture to accommodate a new car
rental system--quickly.
- Lower technology costs.
- Create flexible, expandable network architecture to
accommodate rapid growth projections and multiprotocol
requirements.
CHALLENGES
- With locations scattered throughout the United States, meeting
the client's timeframe would require dealing with network
issues much more quickly than usual.
- It was impractical to install a traditional frame-relay
network common at some remote locations, yet alternate
connection methods are not always stable.
- Interfaces with global distribution systems (Sabre, WorldSpan,
Galileo, Amadeus) through a client/server-based system are not
always stable.
- Network response times for curbside check-in devices, which ax
used throughout the network, might decrease with a different
network architecture.
IMPACT
- Timely United States roll-out of over 6,000 Windows NT
workstations, 160 Windows NT servers, 1,400 printers, 700
Cisco routers, and a time-relay network across 600 sites in 50
states, all connected to a Texas data center, 10 regional hub
sites, and a second data center in Florida-plus additional
equipment at 70 locations in Canada. Completed in three
months, compared to a typical roll-out time of over a year.
- Bandwidth increased by over four times at 75% of the cost of
previous network access fees.
- Remote locations connected affordably and with reliability
above average.
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- Interconnections to global distribution systems and hand-held
devices performed with reliability above average.
- Redundant backup systems and network connections keep the
client's critical sites up and running no matter what.
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APPENDIX B: ADDITIONAL PROJECTS
The following section describes services that Perot Systems could provide beyond
the scope of this baseline proposal. Perot Systems views this service offering
as a business partnership. Our commitment to go beyond simply meeting client
requirements to exceeding them is evident throughout the document and our
Current engagement at CalPX. Perot Systems is committed to not only exceed the
stated requirements, but also to assist its business partners in developing new
opportunities. In this vein, we present the following areas of opportunity that
add value beyond the stated baseline offering.
ESTABLISH A NETWORK SECURITY BASELINE AND PROCEDURES
CalPX's most valuable asset--its corporate data--may be at risk. Perot Systems
recommends a Security Posture Assessment be performed to determine
vulnerabilities in the network infrastructure from the inside and outside.
Perot Systems will perform a comprehensive Security Posture Assessment from
inside (intranet, server platforms, and desktops) and outside (Internet, remote
access, and extranet) the CalPX network. We will use industry-proven network
probes and analysis tools (ISS Scanner and Cicso Netsonar) to non-intrusively
collect data about the network, We will then deliver detailed reports
identifying security weakness and recommendations for improved security
procedures for applications and the infrastructure.
Additionally, Perot Systems' industry-certified security engineers can consult
on or help with the development and installation of products recommended from
THE results of the assessment.
By performing this assessment and following the resultant recommendations, CalPX
will:
- Understand the current "holes" in the existing corporate
security systems.
- Develop a policy-driven security process tailored to CalPX's
needs.
- Eliminate the opportunity for unwarranted access into the
enterprise network.
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- Automate the monitoring and control process used for internal
security access.
- Implement best-of-breed industry tools around a standard
network architecture.
ESTABLISH SYSTEM AND DATABASE SECURITY BASELINES AND PROCEDURES
As CalPX becomes more and more Web-enabled, it becomes essential to address all
levels of security: the communication level, the network level and the
application level. Applying only network security and communication security
safeguards is not enough to filly protect an E-business site. Application level
security must be addressed as well.
After assessing CalPX business, we propose to establish the minimal level of
application security baseline. An application security policy would be devised
that will define the security baseline. we will then, define procedures to
implement the selected level of security. All applications would need to adhere
to the security baseline by following these procedures.
To enable the necessary security level within the existing applications, these
applications would be assessed to identify gaps and validate their conformance
to the security baseline. The effort, cost and timeline to make non-compliant
applications conform to security baseline will be determined and plan presented
to Change Review Board for implementation approval.
CONSOLIDATE APPLICATION TESTING
By implementing Perot Systems' standardized policies and procedures, including
the implementation of a formal change review process, CalPX will gain additional
opportunities to perform applications testing. Scheduled releases of existing
and new applications will follow standardized test scripts operating in an
independent controlled test environment Further efficiencies may be gained by
leveraging automated testing.
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Currently, TestMasters contractors are used to perform a part of this activity,
and they report into Computer Operations organization. We propose to integrate
Quality Assurance as part of Applications Development & Support organization.
Initially, we would use contractors from TestMasters under Perot Systems'
direction, as part of the existing contractual arrangement with CalPX. This
relationship and the direction of quality assurance in the future represent an
opportunity for additional cost savings.
DEVELOP APPLICATION SECURITY BASELINES AND PROCEDURES
We propose to conduct a security assessment which will identify gaps in the
existing security controls used at CalPX. Once these gaps are identified we
will create appropriate plans for corrective action.
CONDUCT A DISASTER RECOVERY ASSESSMENT INCLUDING A REVIEW OF FOLSOM BACK-UP SITE
Disaster Planning has now expanded from the traditional mainframe arena to
include distributed processing, end-user computing, and local and wide area
networks. This means that much of the critical information--and the means to
maintain and process this information--are under the direct control of the
separate business units of the organization. Protecting centralized computer
operations (disaster recovery) remains important but is not sufficient to meet
current needs. Business continuity management and planning requires
corporate-wide emphasis and must address all of the critical business functions
throughout the corporation. Perot Systems will review CalPX's current disaster
recovery architecture plan, including the role of the Folsom backup site, and
suggest additions to improve the current plan, as well as adding new features
for a client/server environment, and implement backup systems and processes as
deemed necessary. It is plausible that a much improved backup feature, in lieu
of facilities at Folsom could be identified as a result of this review.
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CONSOLIDATE OPERATING SYSTEM PLATFORMS AND DATABASES
Perot Systems will study the physical systems and the utilization of those
systems and databases to assess the need for either consolidation or upgrades of
Systems. Additionally, we will use this assessment to determine how to better
utilize the database structures and design.
DEVELOP AND IMPLEMENT AN IT SERVICES CHARGE-BACK PROCESS
The cost of IT services is typically supported by the business units that
require those services. Today, IT is competitive to CalPX. One way to fund these
costs develop a charge back or allocation system that tracks and charges each.
business unit based on their usage/demand of IT services.
REVIEW OF MCI AND IBM CONTRACT
Perot Systems will review the existing MCI and IBM contracts to identify all
areas where savings in such contracts could be achieved. We will, to the extent
possible, attempt to leverage cur extensive relationship with such vendors to
realize all possible savings in these existing contracts. We could also expand
this review to cover other CalPX vendors.
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APPENDIX C: SAMPLE SERVICE LEVEL AGREEMENT
The following document provides a sample service level agreement (SLA). A final
SLA would be customized for CalPX
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