AT Consulting completed replication of the main functionality of a uniform ERP system of Oracle E-Business Suite in Rostelecom

The most large-scale project of Russia on implementation of the ERP system based on the software of Oracle E-Business Suite. The project started in 2003 and was expected 2-3 years. As of January, 2009 the ERP system was put into commercial operation in all MRK, except for a number of branches of Dalsvyaz, Uralsvyazinform and Sibirtelecom and also North-West Telecom in which start of a system in commercial operation was planned to the middle of 2009. Project cost was $426 million.

In September, 2012 in Rostelecom based on which Svyazinvest was reformed, said that implementation continues. Installation of the new version of a product is going to be completed by 2014 (for more details see below).

Solution and Contractor Selection

For the first time started talking about intentions of Svyazinvest to implement a single system of enterprise management in the spring of 2003 when the holding made the decision to buy the software of Oracle E-Business Suite worth about $153 million. Then on Open Technologies (OT) company - the official partner of Oracle in the Russian market, obligations of general system integrator of this project were assigned. Open Technologies should provide development and implementation of the project plan, coordination of works of different contractors, a uniform implementation methodology, observance of uniform technical policy, quality control of the carried-out works. The contract provides purchase of nearly 76,000 licenses that will allow to automate work of a quarter of staff of the companies of holding.

The choice of the ERP system happened in two stages. At the first stage using consulting companies Accenture and BDO "Unikon" the most suitable ERP system, and on the second was selected — the system integrator which will undertake its implementation was selected. It is interesting that with offers on an occasion of this project Svyazinvest did not address to SAP.

The Deputy CEO Evgeny Yurchenko supervised system implementation. It was supposed that installation of these software products will promote gain of centralized operation by regional network, will increase company performance. Is later than the letter to heads of MRK with information on necessary budgets on implementation of Oracle e-Business Suite and a possibility of involvement of these or those contractors also were signed by Evgeny Yurchenko.

"For the choice of an enterprise management system for Svyazinvest holding, the general system integrator of the project and the general consultant of the project during the period from January to March, 2003 independent tactical assessment of the ERP systems presented at the Russian market was performed, - the deputy CEO of JSC Svyazinvest told Evgeny Yurchenko. - The assessment was carried out by specialized department of JSC Svyazinvest together with the companies BDO "Unikon" and Accenture. On the basis of the carried-out analysis the Department of information technologies of JSC Svyazinvest drew a conclusion that from group of the considered 15 products only 2 information systems completely met the main requirements of Svyazinvest holding. These products were also selected for more detailed studying. At the second stage, first of all, the solutions adapted to the communications industry, experience of system implementation in telecommunication companies were estimated also the cost of licenses counting on one workplace was taken into account. As a result we received detailed characteristics of each of the selected couple of products. On the basis of the analysis of results of the second stage as a single system of enterprise management development Oracle E-Business Suite of the company Oracle" was selected.

The indicative quote from the press release of Standard and Poor's: "recent solutions of Boards of Directors … about approval of the transaction on acquisition Enterprise management systems E-Business Suite of the company Oracle for lack of carrying out the tender will not cause changes of ratings of corporate management of these companies. The risk of non-compliance with tender procedures in policy of purchases of subsidiary interregional companies "Svyazinvest" is already considered as a negative factor in the current ratings of the companies".

In June, 2003 deputies of the State Duma sent to the Accounts Chamber (AC) the appeal with a request to carry out an inspection of telecommunication holding "Svyazinvest". The transactions which drew attention of deputies were listed in the text of a request. Among them the expediency of the conclusion of the recent contract with Oracle on purchase of the software for the amount of $153 million was called in question.

Project Progress

Implementation of the ERP system took place in all seven interregional companies (MRK) of Svyazinvest holding:

• JSC Central Telecommunication Company;
• JSC North-West Telecom;
• JSC VolgaTelecom;
• JSC Southern Telecommunication Company;
• JSC Uralsvyazinform;
• JSC Sibirtelecom;
• JSC Far East Company of Telecommunication.

Works on implementation of Oracle E-Business Suite were conducted in several directions:

• development of releases of a master system;
• implementation of releases of a master system;
• creation of technical architecture in MRK for implementation of ERP;
• creation and activity Global and Local Competence Centers;
• creation of a system of distance learning of users.

All set of the implemented functionality of Oracle had to be separated between three releases. Each release integrates independent group of business processes and functions. They are developed and implemented consistently, one by one.

2005

In May, 2005 Open Technologies announced project completion of development of the first release of a master system (MS 1) and start of implementation projects in all MRK. According to plans until the end of 2005 MS 1 already had to earn in two MRK — in Siberia and from the Urals. And by III quarter 2006 the functionality of the first release was going to be unrolled in all seven MRK.

By December, 2005 in all seven interregional companies entering into the Svyazinvest group the main phases of implementation of a master system of the first release directed to adaptation of a master system to requirements of the customer ended: project planning, analysis, design, development and application testing. Now MRK started the final stage — connection to the system of end users in regional branches and structural divisions.

2006

Implementation of the ERP system by March, 2006 in Sibirtelecom branches of JSC of second "wave" – Tomsk, Kemerovo, Krasnoyarsk and Irkutsk had to become the next stage. The group of "the third wave" had to include the Chita, Gorno-Altaysk, Buryat and Khakass Sibirtelecom branches of JSC. As for others MRK, it was expected that the regional branches of JSC "Southern Telecommunication Company" which are a part of first "wave", JSC Uralsvyazinform and JSC VolgaTelecom, will begin operation of a system in the nearest future. In general implementation of the first release in all interregional companies had to end in the middle of 2006. In total more than 17,500 people would become its users.

However, in August, 2006 at the project the general contractor was replaced: Svyazinvest replaced OT with Svyazyintek. "This company is created for implementation of all large programs in the field of information technology implementation in Svyazinvest — the deputy director of department of information support of Svyazinvest Yulian Sokolenko explains. For this reason, according to her, the holding decided to transfer Svyazyinteka functions of the general contractor on an implementation project of ERP.

The vice president for external communications of OT of Eteri Heteev emphasizes that her company remains in the project. "The contractual scheme exchanged, now we work as the contractor of Svyazyintek and we will be engaged in implementation of ERP in several MRK" — she explains. Svyazyintek is interested in the maximum preserving of the existing command of the program of implementation of ERP and prepared draft agreements with the main subcontractors of OT" — the employee of department of public relations of Svyazyintek Olga Kirillova confirms. The agreement between OT and Svyazyinteky is signed backdating — since January 1, 2006. "The works which are carried out by us as the general contractor from January 1 to August 1 are included in the September agreement with Svyazyintek, now there is their acceptance transfer, and settlement will be performed until the end of November of this year" — calculates Heteev.

FROM remained the largest contractor on implementation in MRK of a system Oracle, but ceased to receive money from clients, the vice president for external communications of this Eteri company Heteeva in November, 2006 said. According to a source, familiar with a situation, since the beginning of year of Svyazyintek ran into debt OT of $30 million. Not only OT suffered. FBK attracted with it as subcontractor since December 1 displays from the project of all the specialists, without having waited for payment for the rendered services, tells a source, close to FBK. The representative of FBK refused official comments. OT are surprised with actions of FBK. As soon as Svyazyintek pays off OT for works, that will be calculated with all subcontractors, Heteeva promised. Svyazyinteka assured that will return money. "The approved procedure of drawing up acts for the performed works is carried out, after its completion of work will be paid' — the head of department of public relations of Svyazyintek Olga Kirillova said.

OT recalls specialists from participation in the program of Svyazinvest too. According to Heteeva, 50% are already brought out of 170 employees. However, completely is not going to leave the OT project. Nevertheless, as told journalists several relatives to Svyazinvest and MRK of sources, Svyazyintek already found replacement for OT — the GMCS company entering into the Compulink group had to take its place. Representatives of several other contractors of the project confirmed that Svyazyintek was going to sign the agreement with GMCS in the nearest future.

The Borlas company became one more contractor involved Svyazyinteky in 2006. Integrator the Master of the ERP system Release 1 and Release 2 regarding questions of personnel management of the enterprises providing communication services developed methodological ensuring maintenance and development. Contract amount was $2.39 million.

2007

In the annual report Svyazyintek for 2007 it is said that in 2007 349 business processes considering 9026 requirements were developed 462 expansions are developed. Business processes cover the following functional directions: Management of finance; Personnel management; Logistics management. Materials on training and support of a system are developed.

Process of formation in MRK of project teams for implementation Integrated the Master Sistemy came to the end. Managing committees on start of an implementation project Integrated the Master Sistemy are carried out to all MRK. Readiness of technical architecture of MRK for the beginning of setup of an iprovedeniye of system testing in MRK is confirmed.

The structure and regulations of work of the Global Competence Center (GCC) is created. Works on support of commercial operation the Master of the Release 1 System, number of the implemented requests for the period – are conducted more than 2600. Are begun and are conducted the work on maintenance implemented Integrated the Master Sistemy, according to the results of results of development Integrated the Master Sistemy is received in GTsK implementation Tools.

Defects of acceptance testing of ROMS (377 defects) are eliminated. Project teams of VOMS in MRK are connected to information system GTsK for receiving the support in process of implementation Integrated the Master Sistemy. Methodical materials on accounting of RAS in a system and to behavior of tax accounting in a system (methodical recommendations, 55 tax registers) are prepared and directed to JSC Svyazinvest and MRK on approval. The works on preparation of Functional designs of converting (data patterns, the description of methods of loading) are completed.

In 2007 Svyazyintek terminated the agreement with Open Technologies, having paid the companies of $15 million, and signed the agreement with GMCS for the amount of 556 million rubles. According to the last agreement, GMCS undertakes to render services in the centralized works within the program of implementation of ERP in Svyazinvest group, including: Execute development of an Integrated Master system, render maintenance services and support of the Release 1 System implemented the Master based on Oracle E-Business Suite.

2008-2009

For the end of 2008 all interregional companies (MRK) of Svyazinvest started operation of the implemented system modules of ERP. An exception make a number of branches of Dalsvyaz, Uralsvyazinform and Sibirtelecom (there the project is implemented for 80%) where final transition to work in a system is planned for the 1st quarter 2009 (January-February) and also North-West Telecom in which start of a system in commercial operation is planned in the first half of the year 2009.

Ella Tomilina, the deputy CEO for the corporate relations North-West Telecom, says that "in full accordance with the plan, now Oracle E-Business Suite is started in two branches of MRK, and there is its replication in all other branches".

It was going to complete the program of implementation of a uniform ERP system at the end of 2008, Olga Kirillova, the representative of Svyazyintek company says. However, "the changed economic situation for that period introduced some amendments and with respect thereto in some interregional companies the end of implementation is postponed for the first quarter 2009".

It was supposed that at the end of 2008 the companies of Svyazinvest (except North-West Telecom and Dalsvyaz) will write off 0.94 billion rubles of cost of the software of the ERP system Oracle. As a result in 2008 "subsidiaries" of Svyazinvest wrote off the cost of programs Oracle E-Business Suite and Amdocs for 2.77 billion rubles (taking into account adjustments of the former reporting). It follows from reports of interregional companies (MRK) of holding on IFRS. The amount of write-offs appeared above the forecast of Svyazinvest (2.02 billion rubles for 2008). In two years of MRK wrote off more than 3 billion rubles of cost of software of Amdocs and Oracle.

Only the MRK, not written off anything, became North-West Telecom. Implementation of Oracle will end in 2009, the representative Ella Tomilina explains it.

Cost depletion of the Oracle MRK systems is explained with "redundancy of the user places" — for this reason 1.38 billion rubles are written off (16% of book value of software for the beginning of 2008). Licenses for 25% of employees were initially bought. And the cost of billing of Amdocs of MRK is written off as, implementing it is software, they capitalized a part of expenses on its technical support that is forbidden by international standards, the representative of Svyazinvest Igor Pshenichnikov explains. In addition business processes in MRK and the legislation changed and the performed works partially lost relevance, he says.

Difficulties of the project

Open Technologies: The greatest complexity of implementation projects of a master system in MRK presented the solution of a problem of transition to commercial operation. It was caused by the high number of staff of interregional companies. For this reason application deployment was performed in several stages, carrying the name "waves". In different deployment was performed by MRK in two or three waves.

Svyazyintek: "Together with department of information technologies of JSC Svyazinvest we booked audit of the IC and came to a conclusion that in the companies of Group systems which are not expected service of business needs of the organizations of the corresponding scale are operated, - the CEO Svyazyinteka Sergey Kovalenko said. - The used methods of creation of a corporate data network, structure of operating systems, security protections and office applications are not unified. In the companies of Group there is no regulatory base regulating work of IT departments, there are no developed management tools quality of work and monitoring of operability of the IC".

"It is going to complete the project by the end of 2010, - the CEO of Svyazyintek Alexey Obidin hopes. - But obviously adjustment of plans as some MRK (VolgaTelecom, SZT, Uralsvyazinform) refrained from participation in the project in 2009 in connection with an unstable situation in financial markets will be required".

The planned implementation time

Automation will cover functions of financial planning and consolidation of data, conducting separate accounting, formation of the tax and management reporting, management of receivables and payables and fixed assets, control systems of the movement of cash flows, managements of an investment portfolio and different financial instruments, full-function personnel management (accounting, salary, training) and purchase managements, Evgeny Yurchenko told in May, 2003.

First-priority blocks of automation: personnel management and salary and also fixed asset accounting.

Implementation of the software package Oracle E-Business Suite 2003 Professional will be made in JSC Svyazinvest, all seven MRK - JSC CenterTelecom, JSC North-West Telecom, JSC VolgaTelecom, JSC YuTK, JSC Uralsvyazinform, JSC Sibirtelecom, JSC Dalsvyaz and their branches.

Process of implementation of the ERP system in Svyazinvest is expected 2-3 years. The detailed plan of system implementation until the end of the current year will be developed by the working group of JSC Svyazinvest in June. In JSC Svyazinvest and in everyone the MRK will create the working groups of the project as a part of responsibles of MRK, representatives of the companies of the general system integrator and the general consultant.

According to the developed strategy of implementation the staging of implementation of the main modules ERP systems is defined. Now it is planned that until the end of 2003 subsystems of accounting of personnel and fixed assets should be implemented. In 2004 it is going to complete full-scale implementation of financial and accounting modules, and in 2005 - logistics modules.

In October, 2006, according to Yuliana Sokolenko, the program for implementation of ERP was executed for 60%.

Project cost after change of the general contractor

According to Yuliana Sokolenko, change of the general contractor from OT on Svyazyintek will not affect its cost. "The contractual amounts for MRK do not increase" — she notes. As told journalists several independent members of Boards of Directors of MRK, will receive $8-10 million from each of these Svyazyintek companies. The independent member of Boards of Directors of Sibirtelecom, Dalsvyaz and Uralsvyazinform Vladimir Statyin considers it market price. And here the independent director of Dalsvyaz Alexander Shevchuk notices that Svyazinvest did not provide distinct arguments why Svyazyinteka should be paid so much. On the ERP project most of independent directors apprehended the fact of change of the general contractor neutrally. "But us does not arrange that in general the settlement scheme between MRK and the general contractor is opaque" — the board member of YuTK Denis Kulikov says.

According to the Accenture company advising Svyazinvest, the total costs of MRK of system implementation of Oracle will make $405.5 million. From them $150 million are already spent for purchase of licenses, $150 million more will leave on payment of consultations on installation and adjustment of a system, $75 million — the equipment, and $30.5 million — on support of programs and the equipment. Annual additional costs of MRK on support of a system will make $38 million.

In January, 2009 representatives of Svyazyintek reported that the total costs of implementation of the ERP project made $426 million.

Effect from Implementation

Implementation of the first release allowed to achieve the following results:

• increase quality of asset management due to reduction of labor input of transactions and aggregation of information on existence of assets;
• reduce labor input and increase efficiency in the field of personnel management (one data source – a great number of consumers).

2011

On May 31, 2011 it became known that Rostelecom does not intend to refuse a management system of Oracle for which purchase and implementation the former management of Svyazinvest spent legendary $153 million. It will replace outdated software with the new version^[1].

The joint Rostelecom created in April, 2011 by merge of seven interregional companies (MRK) of Svyazinvest to Rostelecom and Dagsvyazyinform software of this company agreed with Oracle about converting of licenses for an enterprise management system (ERP) Oracle E-Business Suite which was not used, in the license on new. The manager of Rostelecom told about it, it is known of it also to the representative of one of system integrators.

In 2003 Svyazinvest signed with Oracle the contract for $153 million which provided purchase and implementation in MRK of the licenses Oracle E-Business Suite for 70,000 jobs (25% of employees). Market participants called the contract unprecedented by the size — and were right: the system of Oracle did not earn from the majority of jobs and in the years ahead "daughters" wrote off purchase costs of excessive licenses. It is senseless to complete implementation of old licenses: a system became outdated long ago, the manager of Rostelecom says. Instead, according to him, the operator agreed to install a new enterprise management system of Oracle which should help the joint operator to integrate and consolidate business.

Rostelecom will get new licenses free of charge, the manager of Rostelecom claims. And the AT-Consulting system integrator will be engaged in implementation of the ERP system, know sources in one of system integrators and in developer company of business systems. AT-Consulting was already engaged in completion and technical support of the ERP system of Oracle for VimpelCom, it is told on the website of the company. How many will cost implementation in Rostelecom, interlocutors of Vedomosti do not speak. Similar projects are measured by tens of millions of dollars.

2012: Rostelecom revived the scandalous ERP project of Svyazinvest

In September, 2012 Rostelecom stated that it zakanchivt pilot implementation of the ERP system of Oracle E-Business Suite in the central branch. The vice president of the company for the innovative development Alexey Nashchekin reported about it to a korrespondt of TAdviser.

According to him, the 12th version of a product is implemented.

"So it developed that on the central branch we most often roll all projects therefore the choice fell on it", - he told. "We in the nearest future will finish the pilot and we will begin replication on other branches. So that to the middle of the next year almost all divisions were in a system".

Alexey Nashchekin reported that in general the project will take about two years. "Considering it new negotiations with vendor, project development, implementation of the pilot and replication. Actually we lift the project from scratch, only we do not buy the license because they in lostatochny quantity were bought in due time by Svyazinvest", - it continued.

The vice president of Rostelecom did not announce the exact number of the implemented licenses, having noticed that the company completes that left Svyazinvest in due time.

2014: AT Consulting completed replication of the main functionality of a uniform ERP system of Oracle E-Business Suite in Rostelecom

In the spring of 2014 the AT Consulting company completed in JSC Rostelecom replication of the main functionality of a single system of enterprise management based on Oracle E-Business Suite R12. A system works in all macroregional branches of operator and covers 46 thousand users. The project is the most large-scale implementation of Oracle E-Business Suite R12 in Russia and the CIS.

Within the project the following processes were automated: financial planning and consolidation of data, formation of the tax and management reporting, purchase management, receivables and payables, fixed assets, control of the movement of cash flows, management of investment projects, different financial instruments, personnel (accounting, salary, sheet).

The project started in 2011 along with reorganization of Rostelecom company and was separated into several stages. Pilot implementation in three operational units (the corporate center, Stolichny branch, the industrial practice center) took place in January, 2012. System deployment in macroregional branches "Centre", "Dalny Vostok", "Volga", "Sibir", "Ural", "Severo-Zapad", "Yug" came to the end in July, 2013. Every quarter a system was started in one-two new regions. In January, 2014 closing of 2013 financial year and preparation of the reporting of Rostelecom company in a single system successfully took place.

"Through the whole country in more than 80 branches in a system 46 thousand users, apart from the self-service application which each employee of Rostelecom can use work. In a system the salary for 160 thousand employees is calculated, more than 200 thousand invoices of partners monthly are introduced. ERP allows us to build the uniform transparent control circuit and to unify business processes in all branches of the company", – the Vice president - the CIO of Rostelecom company Sadkov Dmitry comments.

2018

Development of ERP

Development of ERP based on Oracle e-Business Suite the Philosophy company. IT.

Development of a system of Separate Accounting

Development of a system of Separate Accounting by Filosofiya.It company based on the solution of Oracle.

Read Also

Contractors, suppliers and consultants of the project

• Oracle
• Open Technologies
• Svyazyintek
• GMCS
• Borlas
• BDO "Unikon"
• Accenture
• FBK

Sources

• JSC Svyazinvest: about system implementation of enterprise management (ERP), the press release
• Svyazinvest selected a single system of business management of Oracle E-Business Suite - an interview of the deputy CEO of JSC Svyazinvest Evgeny Yurchenko
• All contracts — in Svyazyintek
• Transparent history
• The Svyazinvest does not pay for implementation of ORACLE
• Svyazinvest needs to be checked
• $426 million: Svyazinvest completed the largest ERP project in Russia

Notes