Telstra has gone live with the first phase of its IT update, known as release one, as part of its five-year overhaul plan.

The switch to release one happened last weekend, according to Telstra boss Sol Trujillo, and two months ahead of schedule.

"There are other milestones to be hit and as we continue the IT portion of the transformation, let me stand here before you and say this is the biggest one we had to hit," he said today at the company's investor day in Sydney.

According to the telco, release one will increase automation, enable single billing and reduce repeat activities for front line staff. Telstra is also moving to greater purchasing of "out of the box" platforms and minimising customisation which, the company says, will mean "less complexity".

The telco expects to decommission 150 systems this financial year in the course of the IT transformation, which will save it AU$100 million annually.

"With IT, it's still very much on the hump of putting in new systems and taking out the old," Greg Winn, Telstra's COO, said.

To support the change, Telstra has opened a new Sydney datacentre and consolidated and upgraded its existing infrastructure.

The second phase of the project, the innovatively-named release two, is planned to go live at the end of 2008 and will work on completing the OSS migration and updating inventory control.

As the company's five-year transformation continues, Telstra is beginning the second stage of a contract with IBM to target its supply chain. The telco said it expects to save in the region of AU$500 million during the seven-year life of the contract.