Telefónica de Argentina: Application Outsourcing

Outsourcing rings up cost savings and productivity gains for Telefónica de Argentina.

Since August 2000, Telefónica de Argentina has outsourced the application management of eight of 12 custom application groups to Accenture.

Telefónica is one of the country's leading private telecommunications operators and a leader in public telephony throughout Latin America, offering basic telephony as well as sophisticated voice, data and image transmission services. By providing services to carriers within the region, the company is also an important backbone for telecommunications to and from the United States and Europe. It is a wholly owned subsidiary of Telefónica, S.A., headquartered in Spain.

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Accenture's ongoing research into the characteristics of high-performance businesses reveals that top companies compete on competency. That is, they focus on developing internal capabilities in areas of strategic importance. They achieve extended mastery in non-core areas by teaming with trusted outsourcing providers.

Against these criteria, Telefónica de Argentina was clearly on the path to high performance. The company had made the strategic decision years earlier to outsource the application maintenance of its information systems. However, over time, a number of challenges emerged.

A full 80 percent of the maintenance functions were outsourced to 40 small companies, presenting Telefónica with a large operating risk if the companies went out of business. Service delivery did not meet user expectations, and complaints were rapidly increasing. The IT department was organized by applications, making communication among the groups difficult. Maintenance, development and demand management functions overlapped. The full-time Telefónica employees were stretched between performing strategic and operations functions at the same time. Finally, there was a lack of service measures, and since cost controls were difficult to implement, subcontractors' costs grew every year.

In 1999, when Telefónica de Argentina faced an increasingly deregulated and competitive market, the decision was made to streamline the organization and processes of its Information Systems division to better meet the company's business challenges. Specifically, Telefónica set out to consolidate all IT services within the Information Systems division.

This action—like the company's decision to outsource years earlier—was supported by Accenture's research, which shows that high-performance companies rationalize, simplify and standardize their IT environments to manage costs and boost productivity. Yet, a major challenge remained.

The company knew it needed to not just streamline its existing application environment, but also redefine its entire application maintenance and development service model. Having provided maintenance services for Telefónica since 1991, Accenture was well positioned to help.

Based on Accenture's track record, its deep outsourcing capabilities, and its understanding of Telefónica's goals and challenges, the company asked Accenture to submit a bid for outsourcing systems maintenance and development for the entire Telefónica application portfolio, which was categorized into 12 separate application packages. Ultimately, Telefónica selected Accenture as the provider best suited to manage eight out of the 12 packages.

Accenture worked with Telefónica de Argentina and its previous outsourcing providers to transition application maintenance functions for the eight application packages covering a variety of areas, including customer care, billing, collections, marketing, finance and human resources. Each of the application packages contained an average of 76 applications with more than 200 modules.

These applications were used by more than 5,000 Telefónica employees. In its role as outsourcing provider, Accenture managed all corrective maintenance, user inquires, information requests and Tier 2 help desk requests. In addition, Accenture worked with the client to continually identify new functionality requirements and enhance the applications as needed.

Based on the success of the outsourcing arrangement, Telefónica de Argentina asked Accenture to take the lead in defining and implementing a complete Service Management Organization. In Phase I of this effort, Accenture implemented the methodology, processes, procedures and tools required to enable application development and maintenance for all IT staff and outsourcing providers.

In Phase II, Accenture defined and implemented the organization, roles and responsibilities for Telefónica's IT staff engaged in demand management and product management activities. Accenture's outsourcing arrangement was extended with the client several times over the years. Today, approximately 340 Accenture employees continue to maintain a number of application packages, including sales management, logistics and financials, call consumption, customer relationship management, service billing, interconnection consumption and HR systems. Each package contains approximately 154 applications with more than 430 modules.

With Accenture's help, Telefónica de Argentina has achieved higher levels of performance across its IT organization. The new organization model, implemented by Accenture, has:

• Cut costs by 20 to 30 percent for all eight application packages Accenture manages.
  
  
• Increased productivity by 20 percent.
  
  
• Improved satisfaction for users and 80 percent of the employees.
  
  
• Cut the production backlog from six months to three months.
  
  
• Allowed greater staff flexibility by slashing maintenance time from 50 percent to 30 percent.
  
  
• Switched Telefónica's focus from corrective maintenance to application enhancements that drive greater productivity and efficiencies.

"Thanks to Accenture's expertise in systems integration and outsourcing, the Information Systems direction has a new role now," says Fernando Miguel, Telefónica de Argentina chief information officer. "We have taken control of the process and increased our productivity, and we are now able to advise users before projects are chosen, which is the best use of our own expertise."

 

By successfully transitioning Telefónica´s IT organization to a new service model, Accenture has played an instrumental role in aligning the company's systems and IT strategy to better meet its business challenges. Accenture continues teaming with Telefónica, positioning the company to not only drive greater value throughout the company's business, but also forge a path to high performance.