How Not To Transform

[Steve Bennett]

I read with great interest a recent article on the departure of Telstra's Senior vice-president of transformation - Tom Lamming. This Accenture partner had been taken into the company by CEO Sol Trujillo as a part of the US Executive influx at the start of his time at Telstra. He has now resigned from Telstra and returning (I imagine) to Denver and Accenture.

Lamming started out at Telstra as a consultant where he was paid up to $15,000 a day. Presumably less after he joined Telstra as an employee. What do you get for that sort of money?

But first, what was he paid to do? According to reports, his stated objectives were: a $12 billion, five-year transformation program that sought to develop common business processes for Telstra's operating support, customer care and billing systems. The aim was to save the telco hundreds of millions of dollars as 1,500 legacy systems were consolidated down to 'between 250 and 300 by 2010'.

This was all part of Trujillo's business transformation of Telstra. He talked about the network transformation at Accenture's Global Convergence Forum 2007. It gives you an idea of the scale of transformation being attempted:

Accenture Global Convergence Forum 2007, 11-13 April, 2007 in Rome, Italy. 'Driving Transformation Through Innovation' by Sol Trujillo.

So perhaps this was a good investment for Telstra - it certainly should be if the transformation delivers.

What I am particularly interested in is the interim report card for the transformation project 4 years into the 5 year project. Here it is as far as I understand it:

On the plus side:

• Seven million Telstra private customers have migrated to the new platform (an application that crashes a lot is still an application)


• 400 of the 1,500 legacy applications have been retired (with one year to go).

And on the negative:

• Only 250,000 business customers had been moved across


• Reportedly, the budget is blown by more than $1 billion


• Of the 1500, by 2010 Telstra hopes to reduce that figure by 80 per cent. But with a year left, only 400 have been switched off.


• More than 3,300 change requests have been issued


• Related to the last point, the 'fixed price' contract with Accenture has reportedly blown out from $350 - $400 million to almost $600 million. Plus there must be a significant cost to keeping all of the remaining 1,100 legacy applications running


• Presumably no net savings have been made so far (given all of the figures reported).

On the face of it, this is a pretty poor result. Don't be fooled: it is a poor result. No wonder CEO's, CFO's and CIO's are so worried about starting major transformation projects like this. 

Telstra are not alone in achieving this level of poor performance, but it makes me weep when avoiding these problems is so easy.

Can anyone spell 'fiscal discipline' anymore?

So where was the effective governance in this program? Why was such a transformation project agreed to in the first place if governance wasn't the number one priority? Apparently performance tracking of the project was missing - or at least ineffective.

Transformation is always difficult. You succeed by breaking the problem down into small, measurable chunks that are delivered on an agreed schedule throughout the life of the project. Big bangs are bad. Period.

When you've done this you then put into place people with the backbone to govern the project and demand that the project deliver as promised - and if they don't then to understand why and judge whether-or-not investment continues.

Why is this so difficult?

This may be why I am a turn-around specialist rather than a permanent line manager. That and the fact that I spend a lot of time on governance and proving benefits as they are delivered. You'll have to take that as true for now - but please check with people I have worked with and for. I hope that they back me up on this.

The point about all of the above is that hopefully Telstra will learn something from this experience and bring the transformation project to a successful conclusion. I for one will cheer for a Project Manager that delivers this outcome. Even at a starting rate of $15,000 a day - that would still deliver bottom-line profits to Telstra.

I'll be brushing-up on my American accent for my next interview!

I'll leave you with Mr Lamming's own opinion as reported in the papers:

Quote:

"Telstra's transformation is the largest, most comprehensive and successful I have ever seen, and we have implemented it at speed," Mr Lamming said.

May he be as successful in a future engagement - but hopefully not in Australia!

Check back here in a year's time to see the end result of the 5 year program and the final report card.

More...

[admin]

Liam Tung, ZDNet.com.au
13 August 2009 05:15 PM

Telstra chief executive David Thodey today defended the progress of his company's five-year IT billing and customer relation management system modernisation, which has run $200 million over budget.


David Thodey talking to Telstra CFO John Stanhope today
(Credit: Liam Tung/ZDNet.com.au)
"I've been involved in too many IT transformations. There's nothing easy in here," Thodey told media and analysts at Telstra's annual results session. "It's easy to talk about, but harder to do. I do not know a better IT transformation ... We're within $200 million of the IT transformation."

Chief financial officer John Stanhope said the $200 million was around 2 per cent more than initially budgeted, and later noted that despite rumours that Telstra faced cost overruns, the increased bill was in part due to changing the scope of the project.

"There's lots of rumours about cost overrun," Stanhope responded to an analyst. "In October [Telstra's annual investor briefing] I will take you through the details. There are things about this program that weren't in there, such as BigPond. Now it is. That puts in more money."

Stanhope did, however, concede there was "a bit more complexity". "We did spend some more money as we came through to the realisation," he said.

Thodey said Telstra had moved 9.2 million of its customers to its new Siebel CRM system, but multi-product customers have yet to be migrated, while Telstra still faces the task of switching off legacy systems.

"As of last weekend, we had 9.2 million customers across the new platform. 17.8 million of our services are moved from the old platform to the new," said Thodey at his first annual earnings announcement as Telstra's chief executive.

A major milestone for Telstra remains switching off its legacy systems, which Thodey pointed out was where its sunk capital still lay. "We've done a tremendous amount in the IT arena, and we still have some legacy products to exist to move forward," he said.

In September last year Telstra announced it had completed the integration of BigPond as part of its transformation, which enabled it to shed 800 staff from the division as BigPond's access business was integrated with the rest of Telstra.

Telstra in 2005 had set a target of reducing its headcount by 10,000 to 12,000 as a result of its systems upgrade. Thodey would not update guidance on headcount it expected to shed, but he set expectations by relaying his experience when Telstra installed Siebel CRM in its Enterprise and Government division.

"In 2002 we put in Seibel [in Telstra Enterprise & Government]. I remember what happened. We put it in and the first release was an absolute failure. It took 15 months of working every application, trying to get the processes right. On some we got instantaneous benefits. Some took longer. Siebel is a wonderful product, but it takes some time to drive value from," he said.

"I don't think there is any necessity for any recourse to anyone because we're going to drive the value from the product. When people say you just drop a new CRM in get instantaneous value, well, it's just not true," he said.

Telstra's chief information officer, John McInerney, who took the role in 2008, clarified that several systems had been installed: Siebel/Oracle for Telstra's CRM, Kenan for its billing systems and Amdox for its order provisioning.

"So there are a lot of systems in this, and many are different stages of migration. All these systems are in production. So what we're doing is the migration of the customers across our release four platforms," said McInerney.