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Telefonica cuts HR running costs by 40% as it replaces hundreds of ageing IT systems

Multinational telecoms group Telefonica is on the verge of completing a project to replace 175 incompatible HR IT systems with a cloud service covering more than 40 countries

Telefónica, the multinational telecoms group which owns the O2 mobile network in the UK, has cut the costs of providing human resource (HR) services to more than 125,000 employees by 40% after rolling out a cloud-based HR system.

The company is replacing up to 175 ageing and incompatible HR IT systems with a company-wide HR service, in a project that gives managers a view of the global workforce for the first time.

“The benefit for HR is in being able to look at all our processes in a common way – how we measure headcount, for example,” said Louise Parsons, Telefónica’s head of global HR transformation.

The project has allowed the company, which also operates the mobile phone brands Vivo in Brazil and Movistar in Spain and Latin America, to create shared service organisations to provide HR support across 15 countries in Latin America.

Telefónica outsourced its HR services to IBM in a 10-year contract two years ago. The IT supplier developed HR hubs in Peru and Argentina to provide services to Spanish speaking companies in the telecoms group.

Starting point

Telefónica began its programme to replace on-premise HR systems with cloud services around three-and-a-half years ago.

The goal was to replace nearly 200 outdated HR IT systems, including 80 payroll systems from multiple suppliers, across 41 countries.

The company evaluated a range of software and service providers before choosing SAP’s SuccessFactors technology.

“We went out to market and selected SAP SuccessFactors for a number of reasons. It was the right technology for us at the time,” said Parsons, in an interview with Computer Weekly.

Workday, for example, an alternative cloud service, did not offer recruitment services at the time – a key requirement for Telefónica.

The company already used technology from SAP to run its finance and logistics systems, and that was an influencing factor – though not decisive – in its choice of SuccessFactors.

Telefónica deployed HR modules, including performance and recruitment, while rolling out SuccessFactors’ core HR technology as a parallel project. Performance management was the first to go live after 100 days.

The company rolled out the core HR technology, Employee Central, country by country.

It worked with three integration partners, IBM, Accenture and Indra, a Spanish systems integrator (SI), together with smaller SIs in each country.

It took time to develop templates that could be used across each country, and to customise them to meet local laws.

“Employee Central is very complex compared to talent management systems. We had to spend time developing that,” said Parsons.

Minimising data

The HR team decided to transfer only the minimum amount of data legally required from its on-premise IT systems into Employee Central.

Each operating business took responsibility for its own data, deciding what it wanted to keep and for how long.

This made sense, as different countries have laws requiring companies to retain different types of data for different lengths of time. In some countries, for example, it is necessary to keep records relating to health and safety for seven years.

Delegating decisions on retaining data made deployment quicker and will also simplify the company’s compliance with the General Data Protection Regulation (GDPR), which will come into force on 25 May 2018.

“We only transferred legally required data. That was a good decision, with the changes we have with GDPR,” said Parsons.

Being prepared for all of the interdependencies with the technology was another challenge. Telefónica had to ensure that SuccessFactors could work with its other IT systems, including, payroll, expenses and door access systems.

At one point, the company had to put its software deployment on hold, after realising – at the last minute – that it would deactivate the company’s expenses software.

“No one had identified early enough that expenses were a major dependency,” said Catherine Leaver, director of HR for Telefónica O2. “We realised if we switched it on, on the go-live date, no one would be able to file expenses.”

HR data in a single database

Telefónica is gradually removing its legacy IT systems, but the main business driver was not reducing costs, but being able to store the company’s HR data in a single system, said Leaver, speaking at the Unleash Conference & Expo on the future of work and technology in London.

“We now have all our people in one system – one learning management system, one way of measuring headcount,” she said.

In the past, new learning content had to be deployed country by country, but now it can be rolled out to all 127,000 employees in one go.

Talking numbers

  • Telefónica has 303 million customers, 127,000 employees, US$52 billing revenues and three main brands – O2, Movistar and Vivo.
  • Telefónica’s SuccessFactors roll-out to date: 11 HR modules; servicing 130,000 employees; covers 41 countries and 170 different legal entities; HR shared services for 14 countries; final roll-out of Employee Central in Brazil, UK and Spain due by the first quarter of 2019.

Staff are able to use Employee Central on their mobile phones to book annual leave, while managers are able to check who else is away, and to approve or decline leave using their phones.

They can see organisational charts of the whole business on their mobile phones. Or they can award “recognition badges” to their colleagues for good work.

The organisational charts and recognition awards were an unexpected hit, and have had a big impact on way people interact with HR.

“We did not acquire SuccessFactors for those things. They were not the core things. But in terms of changing culture, they are accessed every day,” said Leaver.

Telefónica is running mandatory training courses on SuccessFactors, covering principles and ethics. That is encouraging employees to use other training courses, including learning material created by their colleagues, through a social network for learning and collaboration, known as SAP Jam, said Parsons.

Almost all businesses in the group are now using the SuccessFactors performance management software – one of the first modules to go live.

Future plans

Telefónica plans to introduce additional HR services once it has completed the roll-out of SuccessFactors in the remaining countries.

To date, the company has bought 11 modules for SuccessFactors. They include onboarding tools to manage how new employees are brought into the company.

The HR technology team plans to deploy technology that will encourage people to use the HR technology, such as Applearn and Walkme.

Future iterations of SuccessFactors will use machine learning to anticipate what users are looking for.

Other projects are underway that allow the company to store documents electronically – a key part of complying with GDPR.

“HR and IT are very aligned. We have a common aligned roadmap. HR and IT together are on same path. We don’t always agree, but can agree that we disagree,” said Parsons.

Telefónica plans to complete the implementation of Employee Central in Brazil, its largest operating area, in May 2018, the UK in October, and Spain in the first quarter of 2019.

Telefónica also has plans to introduce SAP Hana, an in-memory database that can analyse large quantities of data.

Unexpected issues

The HR team had to learn how to become flexible in redeploying people working on the project as it progressed.

The company has a small global HR IT team, but worked with HR teams in each country to roll out the project.

“We worked in quite an agile way as HR during this time. At different points in a project, you need different skillsets. We had people working on change management, then people working on adoption,” said Parsons.

Telefónica was not fully prepared for the need to manage both the deployment of SuccessFactors and to manage updates to the software as it was rolled out.

“People who can deal with change and ambiguity are essential. The willingness and capability to understand digital tools is essential”
Catherine Leaver, Telefónica O2

In the first 12 months after deploying SuccessFactors in the first country, the HR team found itself having to deal with four updates of the software.

“We did not anticipate how quickly we needed to move to in-life support. We deployed performance management in 100 days. As soon as it’s live you need to start supporting it,” said Parsons.

It is important to have teams who can work flexibly. That means having a mixture of generalists and specialists, said Leaver.

“People who can deal with change and ambiguity are essential. The willingness and capability to understand digital tools is essential,” she said. “We need people who can get stuck in and find solutions.”

Adapting US software for Europe

Telefónica found that SuccessFactors was designed for US-style global companies, with highly centralised HR.

The telecoms group, which is made up of autonomous companies operating in each country, each with their own CEO and HR department, does not fit neatly into that model.

“Cloud systems are not built with this in mind. They are often created with a highly centralised US structure built in,” she said.

The problem was not unique to Telefónica, said Leaver. “We spoke to Heineken and Nestlé, and they had the same problems.”

Telefónica introduced a system of permissions to ensure local HR staff could not make changes that would affect staff in other countries.

The issue is now being addressed by SAP, in a move that will make it easier for companies with multinational bases.

“SAP has told us it is focused on looking at suite-wide integration, which will make a big difference to global corporates. That will create an opportunity to manage and control permissions in a different way,” said Parsons.

HR can be the biggest obstacle to change

One of the key lessons from the project was to ensure that the HR team buys in to the project, said Leaver.

“At some points they will be the biggest barrier to adoption. There will be people who are absolutely wedded to a part solution or legacy solution,” she said.

In Telefónica’s case, one country operation did not want to go live because people objected to the idea of recognition badges, which allow staff to recognise work colleagues for doing good work.

“The HR director said, ‘Come on guys, we are not going to die in a ditch over recognition badges, after making all this effort’,” said Leaver.

It’s important for the IT and HR departments to agree on a common plan for what technology to deploy and when, she said.

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