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Weather the storm

Weather the storm

Telstra CIO John McInerney sees through the clouds to a sunny future for the transforming telco as a provider of utility computing.

Tucked between arctic air currents and hot desert winds, Melburnians know that if they wait long enough, stormy skies turn to golden afternoons. Unlike Brisbane, with its heatwaves that last for weeks, or Sydney and its frequently rainy winters, Melbourne’s weather can switch from balmy to blizzard and back in 24 hours. A Melburnian born and bred, Telstra chief information officer John McInerney knows how to wait for the weather to turn. He began working for the national telco in 2003, two years before the appointment of Sol Trujillo as chief executive precipitated a deluge of North Americans.

Trujillo and his third-person antics were followed by the brash and blustering Phil Burgess, the more demure Greg Winn, marketing head Bill Stewart and finally Tom Lamming, who was initially appointed as a consultant and then brought in full time to head up the company’s flagship transformation project.

Six years later, the United States execs have come and gone but McInerney’s still around, and picking up the pieces of the grand projects begun on Trujillo’s watch.

Announced in November 2005 and promoted as the centrepiece of Trujillo’s reign, Telstra’s transformation program was supposed to consolidate the company’s processes and streamline technical, support, customer service and billing. Although McInerney denies the project is running over budget or behind schedule, he does concede that deadlines and budgets have been repeatedly reviewed and that the project has not yet progressed enough to enable the company to turn off many of its legacy software systems.

“We’ve been working within the same budget since day one of the project, but that budget has always been open to change,” McInerney says, somewhat cryptically.

Having been there from the beginning, he appears impervious to criticism of the project, saying the true value will become clearer as it nears completion.

“Back in November 2005, it was me standing on the stage announcing [the transformation project],” he says. “I’m extremely proud of the fact that four years later it’s still going and, although it has changed along the way, a lot of the projects we were working on have come into production.”

New kind of crash

This isn’t the first time he has weathered large-scale projects, economic downturns or challenging internal environments. In 2000, he watched from the helm of Melbourne-based business intelligence integration firm Datum Group, as the dotcom crash tore a swathe through the information technology landscape. But he says the current crisis is materially different from the IT-led downturn at the beginning of the century.

“We were hardly [affected] because the type of integration work we did was focused on business intelligence, data warehousing and those types of functions,” he says. “Our core business actually grew stronger because that was where people had to keep on spending their money, at the same time as they were cutting back on riskier or more innovative projects.”

In June 2001, Datum was acquired by listed IT services group Senetas Corporation, which was rapidly expanding through acquisition, for $6.4 million. Datum focuses on business intelligence integration and relationships with vendors like IBM, Microsoft, Hyperion and Business Objects, so it was a stable, attractive business at a time when the dotcom crash had grounded those with more adventurous approaches.

“It’s been interesting to see the current downturn through an entirely different lens,” McInerney says. “It was amazing to see how quickly suppliers changed their approach as to how they wanted to deal with Telstra as soon as the economy started getting rough.”

Although he says his dotcom bust experience is relevant in the global financial crisis, McInerney is keen to point out that the downturns are very different, not just in the way they have come about, but also in the response from the corporate sector.

“This is a different style of downturn,” he says. “In 2000, the concept of innovating your way out of the problem simply was not there. The business response was all about battening down the hatches and hoping for survival.

“This time around, hardly anyone has stopped innovating. They’re being more watchful and they aren’t spending what they don’t have to, but they haven’t stopped investing in technology that will help

them through.”

Immediately following the Senetas takeover, McInerney became manager of the Datum business unit operating within the larger company. He was then a consultant for a few months before joining Telstra in 2003 to head up its data management division.

For him personally, the major difference between the GFC and the dotcom bust is that he is now a technology buyer rather than a seller. This shift in perspective has provided him with an interesting insight into how to communicate with customers during a downturn.

“Certainly we’re looking for a different value proposition than we were two or more years ago,” he says.

“Vendors who walk into my office and start talking about innovation and increased efficiency are going to get a lot more of my ear time than someone who is coming to sell me the same old software deal.”

McInerney is one of an increasing number of IT executives whose background encompasses both business and technology. A chartered accountant by training, he completed a business degree at Monash University but says it wasn’t until he took on a graduate role with PricewaterhouseCoopers that he began to think more systematically about his career.

“I’d gone into accountancy because I was always a reasonably structured thinker,” he says.

“I then went straight into PwC and worked for a couple of years in audit, and then in IT audit and corporate taxation.”

It was during this period that the lines between accounting and IT started blurring for McInerney. Like many IT enthusiasts, he found himself literally programming himself out of his job.

“I really enjoyed the development side of IT over the number crunching of accountancy and found myself using technology more and more to innovate in the accounting side of my role,” he says.

“I finally decided I wanted to be an IT person, rather than an accounting person, and that’s when I started looking for a different challenge.”

His next step was a move into the chief executive role with Datum, as the dotcom boom gathered pace.

“The chief executive role gave me a lot of experience with revenue, financial reporting and sales accountability, all of which have been important for me to fulfil my role here at Telstra,” he says. “It gave me a breadth of experience that’s hard to come by within the IT division of a company.”

He firmly believes that this experience at the helm of a company has given him insight into the relationship between IT and the operational aspects of the business. It’s a link, he argues, that many fail to appreciate fully.

“Many people underestimate the role of the CIO,” he says. “It requires a whole combination of different attributes and abilities — including financial, operational and audit requirements — in order to ensure that IT functions at the core of the organisation.”

But since November 2005, his role seems to have shifted back and forth as the transition project has progressed.

The grand plan

Announced amid great fanfare in November 2005, Telstra’s transformation was supposed to be an $11 billion investment in its fixed-line, mobile network and IT systems. Only about $500 million was targeted specifically at those IT systems but their infrastructure permeated the project.

Within three years, the company said, it would be able to turn off 75 per cent of its 1200 software applications, while a further 5 per cent were to be “cut dead” by the project’s completion, Winn had said.

Siebel Systems was the big winner in the plan. It was appointed in 2005 as the principal supplier of the company’s new customer relationship management system, while software provider Comverse picked up the billing end with its Kenan system and Accenture won the integration deal.

Four years later, it’s hard not to notice that project costs have ballooned out to $20 billion, and that the great software switch off is yet to occur, but McInerney insists that the overhaul is on track. Although the timetable for switching off legacy applications has not been met, he says that the project is progressing according to its initial deadlines, and that the overall implementation is already between 70 per cent and 75 per cent complete.

“We’re through a good proportion of the mass market transformation,” he says. “Our core billing systems, customer relationship management, ordering and activation and assurance platforms are all in place.

“We’re in the expand-and-migrate phase. Almost all of our private residential customers have been moved across and we have a few that we’ll bring through at the back end of this year or early next year.”

Legacy applications have been left running in most cases. This is because there are customers who use a complex combination of pay TV, mobile, broadband and fixed-line plans, and the initial forecast underestimated the time it would take to integrate complex product sets into the Siebel system.

“We’re a full, quad-play telco,” he says. “At the same time as we’re migrating across customers, we’re doing a clean-up of our product catalogue as well.

“Business customers are to go on a different journey with us. We have a lot of work to do to replicate their product capabilities in the new system. Rationalising products that are based on intellectual property is not an overly simple job, and there’s a lot of development work going on.”

However, he insists the underlying commitment to the consolidation of all of Telstra’s customers on a single database is the ultimate goal of the project, and says the company is keen to complete it as soon as is physically possible.

“There are two aspects to us wanting to complete the project as quickly as possible,” he says.

“One is the momentum. With a big project like this, it’s easy to lose momentum.

“The other aspect is the people. We’ve developed a strong base of skilled people who’ve been working on this for three or four years now, and we want to finish the project while they’re still strongly engaged and working hard.”

Now that he can begin to see a light at the end of the transformation tunnel, he can also begin to think about plans and programs on the other side. The focus of the transformation project is on consolidation and streamlining and, he says, it has essentially been an exercise in the applications layer of the business, while the next project will focus squarely on the company’s infrastructure.

“Assets such as our data centres will become exceedingly more valuable once their project is complete and we can move forward into the next phase [of the transformation],” he says.

“Up until now, we’ve been heavily dependent on having a great network, but once this is complete we can start looking at what services we’ll be able to deliver over that network. Applications consolidation has been a crucial step.”

Virtualisation, software as a service, cloud computing — McInerney believes that the next step for Telstra is to become a service provider in utility computing. His goal is to return the company to being an IT service provider and move Telstra into the role of innovator in providing low-cost, flexible IT services.

“Right now, CIOs are worried about managing this piece of equipment or that server,” he says.

“But in a few years’ time we’ll enable them to step up to the next layer, allowing them to order those resources from others and focus on how that technology applies to the business.

“Most CIOs want to become consumers of the service they currently manage and I see a role for Telstra in providing that service.”

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Tags cloud computingCIO rolechange managementtransformation

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