Michael Sainsbury | August 19, 2008
ON time and on budget was the one hoary old phrase missing from Telstra's typically upbeat full-year profit briefing last week.
Telstra's relentless catchcry from chief Sol Trujillo and lieutenant Greg Winn was missing from the telco's upbeat profit briefing
It has been the relentless catchcry of Telstra chief executive Sol Trujillo and his chief lieutenant, Greg Winn, since they convinced the company's board to throw an extra $12 billion at the telco's networks, information technology systems and marketing.
Winn, in particular, didn't take too kindly to suggestions by The Australian at the telco's half-year results announcement in February that his project, undertaken at breakneck speed, of installing new networks and IT systems may be running into trouble.
Last week came news that the IT section of Trujillo's "transformation" project was running over budget and behind time, its scope reduced.
On Wednesday, as he handed down a $3.7 billion profit announcement, Trujillo was forced to admit what many had suspected - that the project's costs had blown out.
Trujillo said Telstra would spend $580 million more than planned and had increased the future ratio of capital expenditure to sales: that is, the amount of new assets built to attain its sales targets.
"This unexpected guidance downgrade might have somewhat eroded investor faith in the capex reduction story," JPMorgan analyst Laurent Horrut mused.
Still, Telstra's woes, such as they are, are less than those of its rivals and are generally self-inflicted, as management hubris tends to overshadow solid achievements.
This is particularly true in Trujillo's best strategic move: the fast-tracking of its Next G third-generation mobile network, blind-siding its main competitor, Optus.
The billing project is moving along, albeit more slowly than expected, although the bells and whistles continue to be stripped away as they get in the way of the company's aggressive schedules.
Whacking up new mobile phone towers is a relatively easy task - just ask Vodafone in India, which puts up thousands of new towers every month - but telecommunications billing and customer service platforms are another thing all together.
Originally scoped as a wonderful new billing and customer relationship management platform for the entire company and its customers, it is now something less.
Telstra has been quietly chipping away at the edges of the project to the point that once the TR1 and TR2 phases are completed, another will be needed to finish the job. You are unlikely, however, to hear Telstra say that directly.
The ripping out of legacy systems has slowed considerably, as managers keep finding more of them. The first estimate was more than 1200 and the count has since grown to about 1500.
Telstra's IT transformation is a monster IT project - one of the biggest and baddest ever attempted in Australia.
Projects of such size rarely end up on schedule or on budget.
Trujillo has, according to him, the very best executive team available to humankind and even they couldn't do it.
What hope, then, for mere mortals at places such as NAB and the Commonwealth Bank, which are embarking on their own version of what Telstra is undertaking as they rip out their core banking systems?
Finally, farewell to Phil Burgess, Telstra's so-called public policy chief, who has achieved not one single regulatory win since joining Trujillo as one of the original US-sourced "three amigos" in 2005.
Unsurprisingly, he remains with one paw in the Telstra till as a consultant.
Burgess's war on everyone was entertaining at first, but soon palled.
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5 Comment(s)
The transformation project was ill-concieved and naive from the start. For me, this simply indicates that the disastrous senior management team should go. Telstra should stop the spin and just do the work.
''Trujillo has, according to him, the very best executive team available to humankind and even they couldn't do it'' ... that's cause it is not the big-mouthed, overpaid corporate executives that do it. It is the nameless drones at the coalface who actually do the work. Senior management are simply a non-productive overhead.
Biggest and baddest - as in huge and huge ask ... from the very start ... Monster size is right ... It was never going to be on time or budget, the job was too big and time too short. No need to tell porkies, it is what the market expected (and got). Time - cost - quality, if you're lucky you get to pick two.
"Telstra's IT transformation is a monster IT project - one of the biggest and baddest ever attempted in Australia."
What exactly makes the Telstra transformation the "baddest ever"? There's absolutely no qualification of that. If it is because it ran over-time and over-budget, there are IT projects in Australia that have run over by far larger figures than the Telstra.
Typical Sainsbury rubbish. Nitpicking Negativity.
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