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RIPE NCC Expenditure Planning 1995

Daniel Karrenberg

This  memorandum proposes amendments to the RIPE NCC expenditure budget for 1995.  The companion document "RIPE  NCC  Revenue  in  1995"  provides information about the revenue situation.

The growth rate of the European Internet seems to be increasing.   This  can  be  seen in a number of key figures like the RIPE DNS hostcount:

|                                                   |
1.3e+06++                                              A    |
|                                             *     |
1.2e+06++                                            *      |
|                                           *       |
1.1e+06++                                          *        |
|                                         *         |
1e+06++                                       *A          |
|                                     **            |
900000++                                   **              |
|                                 *A                |
|                              ***                  |
800000++                           *A*                     |
|                         **                        |
700000++                       **                          |
|                     *A                            |
600000++                  ***                              |
|               *A*                                 |
500000++            ***                                    |
|       ***A*                                       |
Q2/93 Q3/93 Q4/93 Q1/94 Q2/94 Q3/94 Q4/94 Q1/95

The current workload of the RIPE NCC is also greater than  expected  as  the  number  of local registries grows somewhat faster than predicted:

|                                                   |
180++                                              A    |
|                                             *     |
|                                            *      |
160++                                           *       |
|                                          *        |
|                                         *         |
140++                                       *A          |
|                                    ***            |
|                                 *A*               |
120++                              ***                  |
|                           *A*                     |
|                         **                        |
|                       **                          |
100++                     *A                            |
|                  ***                              |
|               *A*                                 |
80++            ***                                    |
|         *A*                                       |
|      ***                                          |
Q2/93 Q3/93 Q4/93 Q1/94 Q2/94 Q3/94 Q4/94 Q1/95

Normally the sharp increase caused by the data pointfor Q1/95, would not be cause  for  revised  projections  by  itself.   However the currently available data indicate that the growth rate has  persistently increased and other indicators such as the hostcount mentioned above follow the same trend.

Indicators for NCC workload such as  the  number  of incoming  e-mail  messages and faxes to the registry functions of the NCC look quite similar too:

|                                                   |
|                                              A    |
3000++                                             *     |
|                                           **      |
|                                          *        |
2500++                                         *         |
|                                       *A          |
|                                    ***            |
2000++                                 *A*               |
|                              ***                  |
|                           *A*                     |
1500++                        ***                        |
|                     *A*                           |
|                   **                              |
1000++                 **                                |
|             ***A                                  |
|         *A**                                      |
500++      ***                                          |
|    A*                                             |
|                                                   |
Q2/93 Q3/93 Q4/93 Q1/94 Q2/94 Q3/94 Q4/94 Q1/95

Due  to  the sound funding model, the growth in reg istries also leads to a growth in  available  finan cial  resources; see the accompanying revenue report for details.

However, the NCC has just barely passed the staffing level  that  was  necessary  already  in 1994 and is still  lagging  behind  this   development  in  staff resources.

Proposed 1995 Budget Amendments
To  cope  with the increased workload and the necessity to put resources  onto  support  for  new  registries  we propose to amend the 1995 expenditure as follows:
|  Budget by Cost      |     1995            1995         delta |
|                              | budgeted     %   revised     %         |

|          Personnel       |      296    73       347    66      51 |
|     Office Running     |       53    13        66    12      13   |
|Contracted Services  |        0     0        40     8      40    |
|             Travel           |       35     9        35     7       0    |
|          Computing       |       23     6        41     8      18   |

|       TOTAL (kECU) |      407   100       529   100     122 |

These  figures  are presented in terms of the budget lines traditionally used in  NCC  budgeting.   These lines  represent  cost  classes  and do not show therelation of  the  expenditure  to  activities.   The original  lines "Rent&Office", "TERENA Services" and "Recruitment" have been combined into  "Office  Running".  The line "Unforeseen" has been absorbed into the other lines.

The new line "Contracted  Services"  represents  NCC activities  and  services which are not performed by NCC staff but contracted out.  This concerns support for  new  registries  in  the  form of tutorials and other  documentation.   Besides  this   the   budget increase  represents  three additional staff for the second part of 1995: two junior  hostmasters  and  a deputy manager.  This will bring the total number of junior hostmasters joining the team this  summer  to three  which  will provide a serious relief from the current overload situation in registration services.

The  deputy  manager  is  needed in order to provide room for proactive thinking in management and to restart the regular reporting which has been suffering severely from the overload.

The absolute increase in  1995  of  the  "Personnel" budget  line  is rather modest as it is based on the junior people working for 6 months  and  the  deputy manager for 3 months of the year.  Assuming one year contracts  for  all  new staff this brings the total staff commitment for 1996  to  380kECU.   To  employ this  staff for the whole of 1996 will cost slightly more than 500kECU.

In view of the urgency of this relief we are already in  the  process of recruiting and hiring the junior hostmasters.  It is  expected  that  the  additional staff can be hired quickly and the contract work for the support of new registries can also start reasonably quickly.  The NCC will be able to cope with theincreased load and slowly start proactive activities again before the end of 1995.

1995 Budget by Activities
In  order  to  offer  a clearer view on relationship between expenditure and activities we also present a different  way  of  budgeting.   There are four main budget lines closely related to the  Activity  Plan: "Administration  &  Reporting",  "Registration  Services", "New Activities" and "Other Activities".

| Budget by Activity         |   1995            1995         delta |
|                                   | actual     %        revised     %      |
|    Admin & Reporting |     62     15          78    15      16 |
|Registration Services |    303     74        358    68     55 |
|       New Activities      |      9        2          22     4       13 |
|     Other Activities      |     33       8          71     13     38 |

|         TOTAL (kECU) |    407   100       529   100     122 |

The "Administration & Reporting" budget line  represents  activities  6.1-6.4 of the activity plan, the formal procedures concerned  with  billing  and  the administration  of  the NCC computing systems.  This currently represents 15% of  the  global  costs  and shall be proportionally kept at 15%.

The  "Registration  Services" budget line represents the basic NCC activities related to the NCC being  a Regional  Internet  Registry,  such  as  handling of incoming requests, assignment and allocation of network   numbers   and  the  coordination  with  other organisations.   In  addition  are  included in this chapter the activities related to  the  support  and the  training  required to secure a proper start out of new registries, which will eventually lead  to  a reduction  of the load on the RIPE-NCC.  In relation to the Activity Plan these are 3.1,  3.2(66%),  3.4, 3.8,  and  4.1(50%).  Although in absolute value the main change proposed is  within  this  chapter,  the total  fraction  will  reduce  from 76% to 68%, thus confirming a better and more  balanced  distribution of activities.

The  "New Activities" line represents the participation in special projects approved by the RIPE community,  as  defined  in  the  RIPE-NCC  activity plan (4.4). Almost non existent today, shall represent 4% of our activities in the future.  The planned activities in 1995 are exclusively related to IPv6 tracking and testing.

The  "Other  Activities"  line  encompasses  all the remaining activities In particular  the  maintenance of  the  Routing  Registry  as  well  as other tools developed at the RIPE-NCC, such as PRIDE, the update of  the  Database  management tools, and the maintenance of RIPE related documents and meetings organisation.  This  activities  represent about 8% of the total and shall be proportionally increased to  13%.

It  is important to note that the "1995 Actual" column represents roughly how resources are being  used currently  out  of necessity, not how they should be used according to the Activity Plan.   The  lack  of personnel  has forced us to concentrate resources on the Registration Services, thus neglecting the other activities  defined  in the Activity Plan.  This has serious effects on both the progress of those activities  and staff morale.  The current staff were not hired and are ill suited to spend  the  majority  of their  time  doing  registration  services.  The new junior staff will explicitly be hired and suited  to spend  the majority of their time doing registration services, freeing some time of the current staff for the remaining activities.

As   this   budgeting   model  clearly  shows  where resources are going w.r.t. the activities,  we  pro pose  to adopt it as the main tool for NCC budgeting in the future.

Support for New Registries
The  total  expenditure  on  activities for new registries in the revised budget  is  ECU  117k.   This represents  approximately  two  thirds  of the funds that are earmarked for these activities.  It is  not possible  to use more resources in a useful way this year.

Building Reserves
Reserves accumulated so far (ECU 51k) will  probably have  to be used to cover for the 1994 revenue problems, which shall leave us almost with  no  reserves at all.

It is therefore necessary to build prudent reserves,equal to at least half the yearly operating cost  of the  NCC,  as  TERENA  members require that no costs  associated with an unexpected discontinuation of the
NCC be borne by TERENA.

Thanks  to  a  growth, even faster than expected, of the  NCC  customers  there  was  a  healthy  surplus expected  in  1995,  which amounts to 344Kecu. It is proposed  that  this  amount   be    transferred   to reserves,  which  will provide about half of what is
deemed necessary.

The  European  Internet  is  growing   faster   than expected.

The  1995  expenditure  needs  to  be  increased  by 112kECU in order to catch up to present needs and to cope  with  the  increasing growth rate of the workload.

We cannot spend all the unexpected signup  fee  revenue  of  ECU  174k  on  new registry support effectively, but max. 66% of that amount.

A substantial part of 1995 revenue should be used to build reserves.