Message-ID: <24227005.1075858756899.JavaMail.evans@thyme>
Date: Wed, 26 Sep 2001 16:26:20 -0700 (PDT)
From: sally.beck@enron.com
To: greg.piper@enron.com, mark.pickering@enron.com
Subject: RE: Regrouping of ENW Budget Discussions - Per transaction thoughts
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Realistically, only the trading support provided for straight-forward gas a=
nd power trading makes sense to consider in a cost per transaction mode.  I=
 would say that the only part of IT Development costs that could be conside=
red in that would be the system maintenance costs and maybe the licensing f=
ees.  Capital projects don't make sense on a cost per transaction basis - s=
hould be looked at as individual discreet costs that the business unit spon=
sor and ENW agree upon. =20

While we could come up with a methodology for cost per transaction, I still=
 have concerns about this on a lot of levels.  Frankly, the relationship be=
tween the book administrators and traders is just as collaborative as the E=
OL relationship.  If we are boxed into a cost per transaction, then wheneve=
r John Lavorato or the traders ask for a different view of data or an ad ho=
c analysis of P&L, we would need to discuss this as a change order and pric=
e accordingly.  Practically speaking, there is not one of the ad hoc trader=
 requests that isn't needed yesterday, and stopping to negotiate whether th=
e request is in or out of scope and additional pricing would probably get m=
e and my risk team fired!  I also have a big concern over pushing the envel=
ope on an arms length service arrangement.  I will have trouble recruiting =
and retaining the best people.  The guys on my operations team honestly wor=
k every day with the business goals of EA in mind.   They work hard to insu=
re success for EA.  That is what John and Louise should want.  Push us back=
 too far and no one will like the results if we don't have people fully ded=
icated to and feeling a part of the business to which they provide support.=
  It is kind of ironic.  I think that Enron is pleased with how I've manage=
d operations, and one of my goals when I took the role a few years back was=
 to create a true team between commerical and my operations team to make su=
re that this works for Enron.  I have some really good people who are very =
motivated, and a big part of that is my commitment to have operations viewe=
d as an integral part of the team at EA, EGM, EIM, etc.  We had to work har=
d to achieve that, but we've gotten there for the most part.  So how odd it=
 is to me that now some people want to undo what has been a major contribut=
or to the success that we have had.  EES is reeling right now partly becaus=
e they have never recognized the value of creating a good operations team, =
nor did they approach operations as an integral part of managing their busi=
ness in full.  And now I have been asked to help correct that.  Makes you k=
ind of wonder...=20

I am fully supportive of running operations (and ENW) like a business, with=
 a critical eye toward delivering value effectively.  When I first took thi=
s role I told my team that at that time we were the service provider of cir=
cumstance and that the goal was to move to a feeling that we were the servi=
ce provider of choice.  A component of this is definitely striving for lowe=
r costs and higher value delivered.  We can continue to improve on this, bu=
t going too far may produce the wrong answer for Enron.  --Sally=20

 -----Original Message-----
From: =09Piper, Greg =20
Sent:=09Wednesday, September  26, 2001 2:36 PM
To:=09Beck, Sally; Pickering, Mark
Subject:=09RE: Regrouping of ENW Budget Discussions - Per transaction thoug=
hts=20

I have been thinking alot about this per transaction thing. =20

ENW provides three very different types of services to Enron.  The first, E=
nronOnline, is very collaborative and is very much an application building =
and operating situation.  No one at Enron is looking to outsource EOL funct=
ionality.  Creativity in that application is driven by the desks and ENW in=
 a marriage every hour of every day.   If it goes down for a minute, trader=
s are panicked and the news wires start pumping out that it is down.  I am =
not in favor of any relationship on EOL that would drive any kind of arms l=
ength wedge between us and any other group.  If my revenue is not large eno=
ugh on EOL, do I let service slip?  What is a new function and feature requ=
est that fits in the contract?  Do I do change orders?  What is an EOL chan=
ge order?  I think EOL is an allocation relationship.

IT infrastructure is something that could be outsourced.  It was once and i=
t didn't work very well and we pulled it back in.  If we outsourced it, how=
 would EDS or IBM or someone like that price that service to us?  By a per =
transaction charge?  Not likely.  On this one, we can charge exactly like i=
t was outsourced to them by charging per desk top, putting depreciation in =
a $/month charge, having them select their level of service on controllable=
, etc.  That would be up to Mark and Jenny.

So let's get down to what really is a service related to transactions and t=
hat is fulfillment and the operations and IT associated with that.  Let's s=
ay we went per transaction on that in some fixed and variable form.  Once a=
gain, the pain will come around negotiating levels of service and eliminati=
ng the flexibility for them to change quickly.   We will also have issues s=
ince we have shared systems and EIM and EGM may not want to pay per transac=
tion.

I am against per transaction for EOL, I am OK pricing something like any ot=
her service company would price on IT infrastructure, but I think we should=
 only consider per transaction on the fulfillment portion.

Your thoughts?

GP

 -----Original Message-----
From: =09Beck, Sally =20
Sent:=09Wednesday, September 26, 2001 10:19 AM
To:=09Kitchen, Louise
Cc:=09Piper, Greg; Pickering, Mark; Colwell, Wes
Subject:=09RE: Regrouping of ENW Budget Discussions=20

Wes and team had preset the meeting schedule and topics to be covered in ea=
ch.  The outline that I sent you with the changes for the remainder of this=
 week is simply our best attempt at fitting coordinating topics around peop=
le availability and the meeting schedule that had already been set.  The sc=
hedule that we have been working with that Wes provided did not allocate tw=
o hours for the Friday meeting.  If you had set aside two hours, that had n=
ot been communicated to us.  There were only two one-hour meeting slots on =
that schedule.  One for ENW from 1-2 and one for Research from 3-4.  I have=
 a major conflict on Friday - I committed months ago to attend a meeting th=
at Ken Lay asked to be involved in that is in the Woodlands that runs throu=
gh the evening hours..  Only because Beth Perlman is out on Thursday for a =
religious holiday, I decided to "skip out" from this meeting to be here on =
Friday afternoon to discuss the Operations and IT Development budgets toget=
her.  In order to minimize my time away from the Woodlands meeting, I orche=
strated the time swap with Vince Kaminiski so that we could have our ENW me=
eting at 3:00.  I will talk with you later today and fill you in on the com=
mitment for Ken Lay.  Maybe we can work together for a scheduling solution =
that works for both of us.  I would appreciate your help on that, Louise.=
=20

Scheduling issues aside, Wes suggested that we also review with you the EES=
 budget that ENW has prepared.  Our approach so far has been to determine t=
he appropriate and necessary spend for 2002 for expense and capital for all=
 of the services that ENW provides to support the EES business.  We have do=
ne this without regard to who will cover which expenses - EES or EA.  That =
is a separate issue from understanding the services that need to be provide=
d and our best estimate at costs.  We are prepared, however, with a suggest=
ed split on the costs for discussion purposes.  I have assumed that the dec=
ision on cost sharing or allocation would be made between the offices of th=
e chair for EES and ENW.  If you would like to cover all of ENW's budgets t=
ogether, both for EES and EA, then it would make more sense to set a longer=
 block of time (maybe 3 hours?).  I will bring my schedule to our meeting a=
t 11:00 today to cover the Canadian budget and we can work out a schedule t=
hat works for both of us. =20

We will be prepared to discuss pricing per transaction, but will hold that =
until the end of our meetings when we have been able to review with you the=
 components of costs and the detail of capital projects.  Our review of cos=
ts and projects in effect will serve as our "scope of engagement" discussio=
n.  A service provider would never quote a firm price until agreement had b=
een reached on the scope of the engagement.  We will have a straw man for d=
iscussion on that.    --Sally=20

 -----Original Message-----
From: =09Kitchen, Louise =20
Sent:=09Wednesday, September  26, 2001 8:23 AM
To:=09Beck, Sally
Cc:=09Piper, Greg; Pickering, Mark; Colwell, Wes; Killen, Faith; Roper, Ker=
ry; Schoppe, Tammie; Valdez, Christina
Subject:=09RE: Regrouping of ENW Budget Discussions=20

I am expecting an all in cost for this service - what do we achieve in sepa=
ration.  I had allocated two hours on Friday to do this from 1pm until 3pm.=
   Are you not intending an all in cost (per transaction) of IT and Operati=
ons?  If you believe that the outline below works then go ahead, do we just=
 have the total number debate on Fridy - if so let's start at 2pm.

Thanks

Louise

 -----Original Message-----
From: =09Beck, Sally =20
Sent:=09Tuesday, September 25, 2001 7:36 PM
To:=09Kitchen, Louise
Cc:=09Piper, Greg; Pickering, Mark; Colwell, Wes; Killen, Faith; Roper, Ker=
ry; Schoppe, Tammie; Valdez, Christina
Subject:=09Regrouping of ENW Budget Discussions=20

Louise,

To make our ENW budget discussions most meaningful, we felt that coupling d=
iscussions of the Operations and IT Development budgets will make the most =
sense.  To insure that we have the appropriate attendees in our  ENW 2002 p=
lan meetings and to schedule these meetings around Thursday as a religious =
holiday, I have worked with Wes Colwell and made a trade with Vince Kaminsk=
i to make all of this happen.  There is no change to your calendar in terms=
 of date, time or location of meetings.  We have simply realigned topics an=
d attendees as follows:=20

Date=09=09=09Time=09=09Location=09Revised Group=09=09=09Revised Attendees=
=20

Wed, 9/26=09=0911 - Noon=09EB3314=09=09Canada Support (unchanged)=09Wes Col=
well, Faith Killen, Louise
=09=09=09=09=09=09=09=09=09=09=09Kitchen, Sally Beck, Rob Milnthrop,
=09=09=09=09=09=09=09=09=09=09=09Bob Hall (added-responsible for EA
=09=09=09=09=09=09=09=09=09=09=09Operations, including Calgary)
=09
Thurs, 9/27=09=091:30 -2:30=09EB3316=09=09ENW: EOL & Infrastructure=09Wes C=
olwell.Faith Killen,Louise
=09=09=09=09=09=09=09=09=09=09=09Kitchen, Sally Beck,Mark Pickering,
=09=09=09=09=09=09=09=09=09=09=09Jenny Rub, Greg Piper, Kerry Roper,=09=09=
=09=09=09=09=09=09=09=09=09Brad Richter (added-EOL), Jay =09=09=09=09=09=09=
=09=09=09=09=09=09Webb (added-EOL)

Fri, 9/28=09=091 - 2pm=09=09EB3316=09=09Research=09=09=09Wes Colwell, Faith=
 Killen, Louise
=09=09=09=09=09=09=09=09=09=09=09Kitchen,Vince Kaminiski (no =09=09=09=09=
=09=09=09=09=09=09=09=09changes)

=09=09=093 - 4pm=09=09EB3314=09=09ENW: Operations & IT Dev.=09Wes Colwell,F=
aith Killen, Louise=20
=09=09=09=09=09=09=09=09=09=09=09Kitchen,Sally Beck, Beth Perlman,
=09=09=09=09=09=09=09=09=09=09=09Mark Pickering, Greg Piper, Kerry
=09=09=09=09=09=09=09=09=09=09=09Roper, Bob Hall (added-EA =09=09=09=09=09=
=09=09=09=09=09=09=09Operations)=20

I look forward to reviewing details with you in each of these meetings.  --=
Sally