At first glance, Hrvatski Telekom, the Croatian telecommunications company, hardly differs from other European carriers. The company was formerly owned by the state and was created in 1999 from the break up of Hrvatska Pošta i Telekomunikacije. It must operate in a market increasingly controlled by global players. The transition from a governmental agency to a private company was hardly over before the liberalization and deregulation of the national telecommunications market placed new challenges in front of the young company. Unlike most other suppliers of telecommunications services, the Croatian firm has a distinctively decentralized corporate structure that has grown over time. Some 21 locations attend to critical corporate tasks, which are coordinated by the headquarters in Zagreb.
The corporate structure meant that transparent accounting processes were barely present. In addition, all locations handled accounting with their own instances of three different applications that were developed in house and based upon Oracle. Hrvatski Telekom ran a total of 63 linked systems, each with its own data, for commercial operations. A batch process then transferred the data from all 63 systems to the central office, where it was consolidated.
Standard Processes from Deutsche Telekom Provide Direction
To build a strong framework for the future, the company decided at the end of 2000 to implement SAP R/3 as its standard accounting software. The carrier did not find it difficult to decide on SAP R/3. Because Deutsche Telekom then owned 35% of Hrvatski Telekom, introducing Deutsche Telekom’s proven, standard processes based upon SAP R/3 made sense. The introduction of these processes thus meant that the overall project was part of a large reorganization of the company. For example, the accounting processes had to be remodeled. At the same time, the company had to set up flows for the new controlling system and map them in SAP R/3.
The carrier first engaged a Croatian consulting firm to handle the implementation. But from the start of the project it was clear that the entire corporate structure would change completely because Deutsche Telekom already had plans to assume majority interest in its Croatian telecom partner. Only liberalization laws were needed to create the legal framework for the takeover. The uncertainty of the situation meant that hardly any employee of Hrvatski Telekom wanted to make and implement far-reaching decisions, so it was no surprise that the project soon fell behind schedule. To prevent failure, the carrier’s management took Plaut Consulting on board in March 2001. Work on the implementation of SAP R/3 resumed in May.
An international project management team, consisting of one employee each from Hrvatski Telekom, Plaut Consulting, and the Austrian firm wwi.con IT Consulting, first worked on a new process design. The design, which accounted for the changed framework, was completed in August 2001. For example, instead of the original step-by-step conversion of legacy systems, the new design called for a big-bang rollout to avoid complicating the already intricate flows in the company with additional double postings in the new system and the legacy systems.
Strong Arguments Convince Wary Employees
The smallest problem in the overall project was the standard software itself. Because SAP R/3 would first be used in accounting (general ledger; subledger; vendor, customer, and asset accounting; and overhead cost controlling), the standard functions of SAP R/3 already covered the company’s needs completely. The definition of new accounting processes could look back to proven approaches. Because Deutsche Telekom acquired 51% of the company in October 2001, the new flows were to be based upon the proven standards of the German partner, which were already mapped in SAP R/3.
As is the case in many IT projects, the primary difficulty lay in involving and motivating employees. The introduction of new flows in a company ultimately demands a great deal of flexibility from each employee. Flexibility cannot be realized with pressure or smooth talk, but by working to convince others with cogent arguments. While upper management supported the project with all the means at its disposal, the change in consulting partners created some hesitancy and insecurity among middle management. But because of tremendous time pressure, it was impossible to obtain support with the usual methods, such as kick-off events. After a ramp-up period, however, widely based trust in the international project management team was created for the implementation of SAP R/3.
Productive Operation in One Fell Swoop
Only three months after completion of the process design (in November 2001), project management reported the close of the realization phase and began training employees. In November and December, all postings were doubled (once in the legacy system and once in SAP R/3) to practice the new processes and operation of the software. In parallel, the individual project teams painstakingly prepared the rollout. The big-bang approach meant that the year-end close for 2001 had to occur very early and quickly. Posting were to be performed exclusively in SAP R/3 in February.
This situation placed the project team before two completely different challenges. First, it was clear that time constraints meant that the close in January would have to occur with partially interpolated numbers. Accordingly, auditors had to be involved in the project early on to find a certifiable solution. Here, the project team was able to create the closing for the last year with the help of the legacy system in only three weeks.
Second, the data from the legacy systems had to be migrated to SAP R/3 in a very short time to make it available on time. Although the decentralized legacy systems were essentially identical, the master data of each individual application was clearly different, for example, general ledger accounts were different. For the migration, Hrvatski Telekom made all the data available in one file, according to a Plaut template. The data was transferred to SAP R/3 in only three days with the help of an SAP tool called Legacy System Migration Workbench and a program developed in house.
On Time and Under Budget
Since February 2002, 400 users in the accounting department of Hrvatski Telekom have worked exclusively with SAP R/3. Despite all the difficulties at the start, the project ended on schedule, and the project team fell well below its generous budget. The newly implemented processes and the new software even enabled the company to shorten the record close of January by a week. With the move to standard software, the Croatian carrier also laid a foundation stone upon which it can modernize all its business processes and thus maintain its competitiveness in deregulated and global markets.
Now that SAP R/3 and a powerful and flexible structure have been implemented, follow-up projects are building upon this foundation. Hrvatski Telekom realized solutions for purchasing and project management at the end of 2002 with SAP Project System and SAP Materials Management. SAP support for the calculation of telecommunications services and modern sales controlling will follow in 2003 for the newly structured controlling area.