Virgin Entertainment Group is no stranger to the latest trends, so it shouldnt come as a surprise that the company is leveraging a consolidated IP network to deliver an enhanced shopping experience to customers as well as voice and data to its employees.
The resulting savings are music to Virgin executives ears: In the first year of the completed deployment, the company is on track to save $700,000 on a network that cost $330,000.
Virgin officials estimate that the IP infrastructure will ultimately increase the companys estimated savings to more than $1 million a year.
“We literally went in and redid the major backbone infrastructure across our entire organization while taking our data and converging it with voice to establish a strong IP-based platform going forward,” said Robert Fort, director of IT for Virgin Entertainment Group, North America.
“We just finished the implementation, and it is absolutely proving to be [going in] the right direction in our [profit and loss] statement.”
Virgin Entertainment Group is the North American subsidiary of billionaire Richard Bransons London-based Virgin Group conglomerate.
Virgin Entertainment, based in Los Angeles, operates 14 Virgin Megastores in the United States.
Larger stores stock as many as 250,000 CDs, 11,000 DVDs and 7,000 games. The company also operates the Virgin Megastore Web site (www.virginmega.com), which is run through a partnership with Amazon.com.
Virgin Entertainment has more than 1,500 employees, with sales of $200 million in 2005.
Two years ago, Virgin Entertainment was operating classic analog PBX systems in its stores and at its headquarters.
Employees companywide were using the systems on the public telephone network, resulting in limited voice mail capabilities and high long-distance charges.
Virgin Entertainment also lacked an internal support infrastructure to service the PBX systems in its stores.
Every time an issue came up—be it the addition of an employee to the directory, a move or a change of a phone number—Virgin would have to call a local service company for support.
“The number of stores we have isnt huge, but their geographic disparity challenged us as an IT organization from a support point of view,” said Fort.
“A lot of equipment was reaching end of life, and the number of support problems was dramatically increasing. At, lets say, $150 a service call, it was getting ridiculous.”
Fort and his team decided to investigate more cost-effective options. At the same time, Fort was contemplating a change in data providers—the one Virgin Entertainment was using had been slow to respond to outages and required an Internet connection at each Virgin Entertainment site.
Fort saw the opportunity to consolidate voice and data traffic onto one IP network. By doing so, he projected, he would be able to save money on management and telephony services. He also figured that he could further leverage the investment by using the companys new WAN to enhance the customer experience in Virgin Megastores by delivering digital content to kiosks and multimedia content to store displays.
“VOIP was coming along, and it was getting past the bleeding edge and moving to the leading edge,” Fort said.
“I looked at that and started to think, We could tie this up in one big knot. I definitely had a business case where we could improve the bottom line by going to a converged network and VOIP and address other issues at the same time.”
Last April, Fort presented his business proposal to the Virgin Entertainment board and received approval.
The key to approval, he said, was his estimation that future savings from the project could be used to pay for the deployment, thereby making the deployment self-funding.
“We had a very strong dollars-and-cents business case,” Fort said. “Were also an innovative company, so we knew where we want to be going forward.”
Fort and his team went into the product evaluation process with specific criteria. For example, he wanted a service provider that would respond more quickly and that had better service levels than the current provider.
He also wanted a solution that would be easy to manage because he had only two network and server administrators supporting the project.
Fort considered three deployment scenarios: a self-contained model for which Virgin Entertainments IT staff would be responsible, a hybrid solution in which Virgin Entertainment would keep its existing PBX hardware and convert calls from analog to digital as they ran across the network, and a hosted model that would give control to a service provider.
Since the point of the project was to replace Virgin Entertainments PBXes, the hybrid solution wouldnt work. And, with the costs for the hosted model high and ongoing, Fort decided to go with a self-contained solution.
As a Cisco Systems customer, Fort decided to replace his switches and routers with new equipment from Cisco.
He also chose to move his data network to SBC Communications and worked with SBC and an SBC partner for the deployment.
The project, which began in September 2005, was on a strict timeline. As a retailer, Virgin Entertainment couldnt risk any network issues during the holiday shopping season.
Therefore, the first phase of the project—the implementation in a new Hollywood store and the new Times Square store in New York, as well as the relocation of the network central system from Atlanta to a co-location facility in Irvine, Calif.—all needed to take place within a five-week time frame.
The Next Phase
The next phase of the project—the deployment at the companys remaining 12 stores—began in January 2006. The project was completed in September.
Virgin Entertainments co-location facility in Irvine serves as the call processing center for all 14 of its stores. The new phone system, which runs on a Cisco MCS-7835 Unified CallManager appliance, uses Ciscos IP Contact Center Express to automatically route calls, monitor and balance system loads, and manage redundancy.
CallManager, a software-based call processor, delivers telephony features and functionality to Cisco IP phones. Virgin Entertainment is using the 7940 and the 7970 handsets with Cisco Unity Unified Messaging enabled, giving employees centralized voice mail.
Keeping their experiences with unreliable phone service in mind, Virgin Entertainments IT managers decided to install two backups to their phone system and use a Cisco 2811 router as the gateway to a public telephone network switch, along with a Cisco 1760 router plugged into the public phone network.
In addition, the remote routers run Ciscos Survivable Remote Site Telephony as an extra backup manager.
Virgin also has deployed 200 Virgin Vault Kiosks, based on IBMs Anyplace Kiosk. The kiosks, which were placed in the highly trafficked Hollywood and Times Square flagship stores, run proprietary kiosk software developed in-house.
The kiosks allow shoppers to sample the arsenal of music, movies and games for sale at Virgin Megastores.
All data for the kiosks is stored at Virgin Entertainments headquarters in Los Angeles.
The data is delivered to stores as needed using Cisco Application and Content Networking software, which caches and performs content delivery, and two Cisco 4507 switches. These caching capabilities are significant, as they reduce network bandwidth requirements and server cycles.
Caching isnt the only method Virgin Entertainment uses to save resources. The company also does least-cost routing using CallManager.
For example, when an employee in California calls a non-Virgin vendor in New York, the phone call originates as IP traffic to the New York store and then uses the public telephone network to complete the call.
Fort said least-cost routing accounts for a significant percentage of the projects total cost savings per year.
“When we quote a project cost savings of $700,000 a year, a lot of that is from least-cost routing because we have eliminated dramatic amounts of long-distance traffic,” he said.
Virgin Entertainment uses Microsofts Exchange Server 2003 and Outlook for e-mail, so the company is also taking advantage of unified messaging. Now, voice mail messages appear as messages in Outlook in-boxes, allowing users to check voice mail when theyre checking their e-mail.
With content streaming and telephone calls all on the same network, prioritizing traffic has become even more important to Virgin Entertainment.
The company uses Cisco tools to monitor QOS (quality of service) and relies on SBC to do the same, as part of an existing SLA (service-level agreement) with that company. Forts predecessors had installed T-1 lines to every store, which also has made it easier for him to ensure QOS.
At the Times Square store, however, Fort underestimated the utilization of the kiosks: He said he had thought the kiosks would be used 30 percent of the time, but usage has been hitting 70 percent levels.
Fort had estimated correctly the packet requirements for each transaction, but his estimate for the number of transactions was way off.
His estimate for the number of phone calls that would originate from the Times Square store also was off, increasing actual bandwidth requirements. As a result, the company had to install a second T-1 line to the Times Square store.
Forts advice to other CIOs is to measure local calls carefully.
“In the analog phone world, you have phone bills and some details that explain the number of long-distance calls that were made, but the local calls arent counted,” he said.
“Our observation is that having a good benchmark and understanding what your analog traffic is before rolling telephony out on your data network is key.”
Fort said he is on track to realize his estimated savings of $700,000 on voice traffic in the first year.
He expects the amount to increase to an estimated savings of $1 million a year in the near future.
Virgin Entertainment is talking to third-party vendors about developing applications for its IP handsets.
For example, Fort said he might use the screens on the Cisco IP handsets in Virgin Megastores to display information on the latest music or movies for sale so that sales associates can easily access that information and pass it on to customers.
“When youre in a retail environment, dealing with a very trendy product, you want the store associate next to the phone to know what the current releases for the week are,” Fort said.
“We could use the phones to display e-mail, but any time we make key retail information available, thats a potential increase in sales.”
Displaying the latest trends isnt the only thing the phones will do. Fort said he may program the phones with a panic button so that employees wont have to look up phone numbers in the event of an emergency.
He is also considering using the handsets as a time clock with which employees can log their hours.
“Our big strategy was to help resolve the constant communication problems,” Fort said.
“Communication comes down to the individuals here, but if they dont have the right tools, its difficult to get a hold of people. We are on our way to addressing those concerns and have positioned ourselves for the future.”
Senior Writer Anne Chen can be reached at [email protected].
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