Changing of the guard: Commonwealth Bank

Summary:Get an insider's look at Commonwealth Bank of Australia's technology operation with chief information officer Michael Harte in the first of our Changing of the guards series examining generational change in the nation's big four banks.

Outsourcing and cloud computing

The recently inked $1 billion, 10-year managed network services contract CBA signed with Telstra was perhaps the cornerstone piece it had to set in place for the coming decade — a period in which Harte believes cloud computing will become "enterprise ready".

Changing of the guard

This extensive overview of Commonwealth Bank of Australia's technology operation is part of ZDNet.com.au's Changing of the guard series, which looks in detail at the use of technology in Australia's four largest banks, following a series of executive appointments that have resulted in an almost complete turnover of banking technology tsars. The remaining profiles will be published over the next few weeks.


Some [suppliers] would sit back and say, 'Well, we met the 99.98 per cent SLA'. But we could lose 6000 calls in a morning and they would say, 'Tough luck'. What part of that would make our customers happy?

CBA CIO Michael Harte

At the announcement of the deal three weeks ago, Telstra and CBA released a joint statement saying it would provide outcomes for customers. But what exactly did this mean? According to Harte, the terms were remarkably different to previous contracts in that they ditched Service Level Agreements (SLA) — a move which reflects how critical uninterrupted uptime is for CBA's strategy.

Harte described a typical scenario under which SLAs were relied upon: "Some [suppliers] would sit back and say, 'Well, we met the 99.98 per cent SLA'. But we could lose 6000 calls in a morning and they would say, 'Tough luck'. What part of that would make our customers happy?"

With the bank's online platforms shored up for a future in which the internet dominates its business, the telco deal leaves zero room for a supplier-caused outage. "To the extent that they can go beyond what most companies regard as an SLA, they get paid. If they blow it, they don't," Harte explains of the terms Telstra faces.

The deal with Telstra, however, is just one key component of the bank's IT outsourcing strategy for the coming decade.

Prior to the reign of Harte and Norris, CBA bought stakes in its suppliers. These include former telco provider Telecom New Zealand (Gen-i's parent) and a stake in the local operation of its major outsourcing partner, EDS.

But in 2007, the expiration of contracts inked by the old guard in the mid-1990s gave the bank the chance to change tack. Rather than single source with EDS as it had in the past, CBA embarked on a multi-sourcing strategy, which emphasises "competitive tension" rather than cost-cutting by increasing the scale of outsourcing deals.

The new structure broke infrastructure deals into four stacks: desktop computing, application services, network services, and centralised computing. Under the new regime, EDS was retained for "enterprise processing services" and "end-user computing" until 2012, deals worth $114 million and $74 million per year respectively; however, it was dropped for application services, worth up to $200 million a year. This work was put to a panel of providers that consists of IBM, HCL and Tata.

But while large scale conventional infrastructure outsourcing still constitutes the bulk of the bank's technology budget today, Harte has for some time trumpeted the rise of cloud computing. His views, however, are mixed in terms of their potential for CBA. In 2007 he appeared to be envious of the computing models delivered by global banks such as HSBC, perhaps longing for the scale of operation of his former employer, Citibank, which could leverage the concept of grid computing.

Today, that focus has shifted to cloud service providers, such as Salesforce.com, and the influence that buyers such as CBA can have on the future of cloud services.

"That's the next advance from grid or utility computing into that dimension people call the cloud. The cloud is not that far off," says Harte. "If you think about layers of services — infrastructure, processes or applications — the most mature form of services across networks are available as infrastructure services. For example, you can go buy storage, or test and development server environments, provisioned on a pay as you go basis," he says.

The other shift that has occurred over the past few years is the rise of web services or services-oriented architecture. The ability to drag services from the cloud has triggered a renewed focus on the ability for IT to automate business processes, which has manifested at an organisational level, according to Harte, as the merging between operations and technology, and dissolving the line between IT and "the business".

"We are an enabler at the end of the day. But as platforms are valuable strategic assets, and as those platforms are increasingly mission-critical, the division between IT and the business is blurred," he says.

The SAP core systems overhaul dovetails with the merging of IT, the business and the concept of technology as a service.

Despite Harte's conviction that cloud computing is inevitable, he maintains it's not mature enough today — and that includes services from the world's largest software-as-a-service providers: Salesforce.com and Google. CBA famously rejected Google Apps Premier Edition package as "not enterprise ready" and continues its reliance on Microsoft Office 2007. Meanwhile, according to Harte, Salesforce.com remains a point solution.

"There is still some distance to get those platforms mature. But we are able to buy those services across the network. Right now we're not at that wholesale basis, but we're doing that point by point. But," he concedes, "it's foreseeable in the future that we could apply it as an enterprise service." Interestingly, Harte reckons this issue will not be overcome by vendors, but buyers from large corporations.

"It will be up to the buy-side community to force the market to go down that path. The supply-side will be less inclined to offer it in a format other than one-off solutions. You know, we can see probably hundreds of new start-ups that offer niche services on-demand in this manner, but it's not until they become enterprise-ready that we will see a tipping point occur. Maybe it's three years away."

In the meantime, Harte's getting on with the job. Next time, we take a look at how his predecessor Bob McKinnon is finding life on the other side of the fence at Westpac as the bank wrestles one of the largest technology integration projects in Australia: the digestion of St George.

Topics: CXO, Banking, Enterprise Software, SAP

About

Liam Tung is an Australian business technology journalist living a few too many Swedish miles north of Stockholm for his liking. He gained a bachelors degree in economics and arts (cultural studies) at Sydney's Macquarie University, but hacked (without Norse or malicious code for that matter) his way into a career as an enterprise tech, s... Full Bio

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