The telco is now in the second phase of its supply chain agreement with IBM, which was first signed in September 2006 and went live in July 2007. In its first two years, the deal delivered $355 million in cost savings.

Telstra's plan is ambitious: it has overhauled its procurement processes and also hopes to drive efficiencies in logistics and inventory management and achieve a total supply chain cost reduction of $700 million over the seven-year period of the agreement.

"Before we made this decision I would spend a lot of time speaking with a lot of our key partners. Not only our strategic partners, but our other key providers about what they were doing with their own supply chains and transformation," Telstra procurement executive director Ian Wheatley said.

"And I had also taken the opportunity of spending time with some international companies because best practice around the supply chain doesn't reside in Australia. There is aspects of it that you see in other major corporates," he said.

"We didn't want to be bleeding edge but certainly leading edge."