[LINK] Telstra looks to Big Blue

[Bernard Robertson-Dunn]

<brd>
Technology companies have yet to learn that if you just spend less you 
will get less. However, if you do things smarter, you can get more for less.

I see no evidence that IBM or Telstra have learned how to do things smarter.

</brd>

Telstra looks to Big Blue
Michael Sainsbury
SEPTEMBER 13, 2006
The Australian
http://australianit.news.com.au/articles/0,7204,20401455%5E15306%5E%5Enbv%5E,00.html

TELSTRA has ramped up its cost-cutting activities, handing a huge 
contract to IBM - which the telco hopes will save it $500 million over 
seven years.

The contract with the US-based information technology giant is to manage 
billions of dollars of Telstra spending.

The telco's costs grew twice as quickly as its revenues in the 2006-07 
financial year, a trend that is expected to continue this year.

But last November, Telstra chief executive Sol Trujillo promised to 
return earnings margins to between 50 and 52 per cent by 2010 from their 
present level of 44 per cent.

Under the deal, IBM will provide Telstra with contract management and 
reporting systems, as well as operating an integrated supply chain for a 
range of indirect procurement services such as travel, office products, 
energy and utilities and industrial supplies.

IBM claims to have saved $US6 billion ($8 billion) in costs and provided 
a 25 per cent improvement in productivity using these processes. The 
move is part of the emerging trend known as business process outsourcing 
(BPO).

"In keeping with Telstra's one-factory model, we will move to a single, 
company-wide view of vendor spend and performance data," Telstra 
procurement chief Ian Wheatley told staff via email yesterday.

The deal will see 75 jobs cut at Telstra, about 60 of which will be 
redeployed to IBM.

While IBM has major BPO centres in India, Telstra spokesman Warwick 
Ponder said the jobs would stay in Australia.

It is the second major contract won by IBM at Telstra this year after it 
grabbed a $1 billion, five-year contract to run Telstra's data centres 
and provide other internal information technology services. Since taking 
charge at Telstra, Mr Trujillo has handed out a raft of fresh contracts 
to third parties and this has seen a stream of jobs cut at Telstra.

Last year, Telstra handed a contract for its mobile phone purchasing to 
Miami-based Brightstar. This was later extended to a full supply chain 
management contract.

Telstra has contracted Swedish network maker Ericsson to build its 
entire $1.1 billion mobile network, although the telco was recently 
forced to take some work on the project in-house.

IT services company Accenture has been given a contract for a new 
billing system worth $300 million.


-- 

Regards
brd

Bernard Robertson-Dunn
Sydney Australia
brd at iimetro.com.au