Telstra signed a $300 million contract today to outsource one of its three core lines of IT work with a Deloitte Consulting and EDS services alliance, thereby handing its ERP, billing and administration systems management to the consortium for the next five years.
Telstra's managing director of business process and information, Dwight King, said the deal was a product of the carrier's new "federated IT model"- a corporate approach to performing Telstra'a main IT work, which hands individual business units centralised control over IT operations.
The arrangement is aimed at reducing the cost of managing IT systems for human resources, finance and administration; developing solutions faster to market and improving quality of service, King said.
Telstra will focus on two cost area in the arrangement; firstly concentrating on "new levels of work" this year and secondly, on reducing IT work by 10 to 20 per cent by spreading it across different IT initiatives.
Deloitte's work will principally be in the area of SAP application management, thus eliminating "a lot of older applications that don't integrate with SAP," said King.
King declined to elaborate on the cost savings Telstra expected over term of the contract, maintaining this would be commercially incompetent.
Commenting on the impact the deal will have on Telstra staff, he conceded that 70 staffers would be "affected" and 60 consultants transferred to Deloitte from March 22. "We're comfortable with the number of people moving over [to Deloitte] - those people will have significant opportunities in SAP application implementation. And our goal for our staff is always for them to find positions" said King.
And while the 70 Telstra employees had been offered placements elsewhere, King refused to specify how many had declined the offer.
The deal is Deloitte Consulting's largest oursourcing contract to date, the firm's regional managing director of outsourcing for the Asia Pacific Russell Hay said.
Telstra will continue to contract IBM GSA and its services subsidiary Advantra for desktop management.
King said the organisation was finalising discussions with IBM GAS for another core group of IT activities in a fortnight, the value of which he declined to disclose. This stream of work will cover CRM, wholesale and international operations, fixed mobile network systems and marketing IT support systems, King told Computerworld in February.
According to King, Telstra is using three outsourcing partners to ensure it secures more competitive rates. "The impact on Telstra is that [this approach] will reduce overall IT spend. This helps us get the same amount of work done at lower cost." He added that the disadvantage in using several firms was the burden of managing three sets of interactions.