National Australia Bank is heading into a major core banking rejuvenation, and its new IT leadership team is ready to take up the challenge. Yet such projects carry risk, as the bank knows from the past, making them a double-edged sword for management.
The question is, will the bank's recently appointed chief information officer Adam Bennett be able to push the project through without eventually being shunted aside as several of his predecessors have been?
Former NAB CIO Michelle Tredenick
Over the last five years, National Australia Bank's IT division has been led by Bennett's predecessor Michelle Tredenick. Tredenick was called in from the bank's MLC subsidiary in 2004 as regional CIO, while Ian MacDonald took on the group CIO role for a brief time before retiring.
The pair had replaced former CIO Ian Crouch, who had become the victim of a management revamp, as was to be the case with Tredenick five years later.
Tredenick's experience was soundly based in the financial sector. She had not only the MLC CIO role under her belt, along with a number of other less technical roles within the wealth management firm, but she had also held a senior role within tier two banking and insurance specialist Suncorp.
Tredenick's view, expressed in an interview (PDF) with executive recruitment firm Heidrick & Struggles was that a good CIO knew about the business and how technology could bring it forward.
According to one person who knew her, the CIO had a penchant for implementing sweeping programs at the bank. Indeed, early in her tenure at NAB she tackled a 10-month overhaul of the bank's IT division to integrate five technology groups into one operating under a decentralised model. Tredenick then threw herself into a strategic plan for information technology to underpin a $1.8 billion investment the bank was making to revitalise its operations.
The idea was to transform the underlying platforms, architecture and asset base for the bank's technology operations. Part of it was the long-postponed consolidation of the bank's desktops to Microsoft XP, which the bank achieved in 2007. Later, Tredenick turned her focus to attempt to reduce costs via offshoring of jobs to India from the bank's Australian IT department. The partners who benefited from the contracts were Satyam and Infosys.
In July 2008, the company had 500 positions in India, and was looking at transferring almost 200 more, although this was stymied later by the financial implosion of Satyam in early 2009.
What appears to be Tredenick's most ambitious legacy, however, is her commitment to a core banking revamp — a project that most of Australia's other major banks are also attempting in different ways. In the Heidrick & Struggles interview, Tredenick said that insights into what the competition was doing were important. She believed it was essential to be abreast of trends.
The CIO showed her ability to do that when questioned by ZDNet.com.au at the time of the Australian release of Apple's iPhone. Asked whether employees would be able to use the device for work, she said that the bank had already started a trial with a small user group and expected no problems with "BYO" iPhones. Other CIOs expressed their scepticism that it would move beyond a perk or toy for business.
With some companies taking the device seriously, such as Lion Nathan, which ditched the BlackBerry to use Apple's phone as its corporate device, the CIO's approach appeared to show foresight. New CIO Bennett might hope that Tredenick was displaying as much perspicacity when committing to a new core banking platform, which the bank has dubbed the Next Generation Platform.
Big projects mean big risks, and when they go wrong, they become a drag on the hip pocket — something NAB knows all too well.
In 2004, the bank suffered a $200 million write down on an ERP system for its Integrated Systems Implementation (ISI) project. The highly publicised ISI project, which was to provide a single IT platform for NAB's global operations, was completely laid to rest, with the enterprise resource planning strategy "ceased" and implementation of further modules of the software "indefinitely deferred".
Years later, Tredenick's outsourcing vision also ran aground as Indian outsourcing partner Satyam enmeshed itself in a corporate scandal. It turned out that Satyam's founder and chairman B. Ramalinga Raju had been doctoring his company's books to the point that around $1 billion in claimed revenues didn't exist.
NAB already had a number of jobs offshore and was about to send more. After the scandal hit, the bank said it was considering the issue then finally decided not to send further business Satyam's way.
Considering these concerns, the bank couldn't be blamed if it felt a little skittish as it planned its core revamp. After all, many analysts have likened it to open heart surgery, while others have said that it will make the bank's previous attempted ERP revamp look like a walk in a park.
Oracle's core banking solution is one of the systems vying for the top spot in Asia-Pacific, according to Ovum analyst Jens Butler, with others including SAP or TEMENOS.
National Australia Bank rival Commonwealth Bank of Australia has chosen to go ahead with a SAP revamp, while Westpac is rumoured to be mulling over replacing its core with CSC's Hogan, already in place at new subsidiary St George. Australia and New Zealand Banking Group has been rolling out Infosys's Finacle to its Asian banks, but has not yet clarified its intentions for its main business in Australia.
Oracle's core banking system serves 319 customers in 115 countries, according to the software behemoth. One such customer is Ta Chong Bank in Taipei. Ta Chong Bank was founded in 1992 and has $3.2 billion in revenues. National Australia Bank has $8.5 billion in annual revenues.
Ta Chong's core banking system was 15 years old and the bank was chafing at its limitations. The bank decided it had to do something about it and considered systems from 25 vendors. Oracle won out because of its track record, its functions, its simple system architecture and the experience of the Oracle team, according to the bank. Ta Chong's implementation was finished within 25 months and reduced its mainframe maintenance costs by more than US$1 million a year.
Despite Ta Chong's quick roll-out experience, since National Australia Bank's announcement that a revamp would be going ahead, the bank has remained unwilling to go into much detail about its progress (declining a request for an interview with Bennett for this article). NAB announced the core banking project last year, naming Oracle as its supplier in August. The bank was not, however, going to rush full tilt into the core systems makeover, committing at first only $30 million from the expected $1 billion total spend.
That $30 million was earmarked for working on the bank's new online venture Star Direct, of which the first brand is Ubank, a branchless term deposit service operated entirely online and over the telephone. Tredenick hadn't expected the Oracle core systems to be ready for the bank's launch to the market. Instead, the bank would be set up on the old platform, while work was carried out on the new platform.
NAB CEO Cameron Clyne said in April that this $30 million phase would be completed by June this year. After that hurdle, the bank will need to launch its next stage. How much money and what deadlines are set for this phase of the projects will rest on the shoulders of the new team.
The new bank
The idea of reworking the systems which make the bank tick is a daunting one, and one which new group CEO Cameron Clyne might not necessarily have chosen. Clyne was announced as former NAB group CEO John Stewart's replacement in July last year.
Clyne moved over from being CEO of the bank's New Zealand operations, although he had previously worked within the Australian operations as executive general manager of group development. Before that he had worked at PricewaterhouseCoopers and at IBM's consulting arm.
Changing of the guard
This extensive overview of the National Australia Bank'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.
It didn't take long for Clyne to adjust the management to his liking, replacing Tredenick with former colleague Adam Bennett as CIO. Speculation abounded that it was Satyam's fall, injuring NAB's offshoring construct, which had doomed Tredenick to be left by the wayside.
Not so, according to sources close to the bank. Tredenick and Clyne had simply never gotten along back when he was executive general manager of group development, they said. Meanwhile, new CIO Adam Bennett had been with Clyne since his days at PricewaterhouseCoopers.
The pair's biographies run along parallel lines. Bennett had been general manager of banking delivery services at the Bank of New Zealand under Clyne, before which he was general manager group development in Australia.
Before joining the group in 2005, Bennett worked at Capgemini and Ernst & Young and spent over 12 years in consulting with PricewaterhouseCoopers and IBM. Given this, it's unsurprising that one former bank employee called him "Cameron's man". He also expressed concern about Bennett's lack of IT background.
Yet others in the industry see Bennett's appointment as positive, with one source describing him as "fundamentally different to Michelle", claiming Tredenick was unapproachable even for direct reports, not listening to their concerns, let alone others in the organisation. Bennett, on the other hand, is said to listen to employees, even those who aren't his direct reports, digging down into the organisation to get views.
There are those in the industry who question whether Tredenick's core banking revamp plans sit well with Clyne, as the bank commissioned a review of the strategy. Speculation has focused on the idea that although Ernst & Young found the core banking renewal necessary, the consultancy said the planned execution left something to be desired.
However, the bank has said that recommendations of the report are being finalised and an update will be provided to the board next month. As such any such speculation is unfounded. "Any comments presupposing the outcomes are purely speculation and not based on fact," a spokesperson for the bank says.
The review was an "interim checkpoint" of the program, according to the spokesperson, and there would be more of them at key points in the project life cycle. As to whispers that the planning process was behind schedule, the spokesperson said the project was tracking to plan and since it was a multi-year program, there was no start and end time frame for planning.
The core banking renewal will always depend on support from the upper echelons, and given his history with Clyne, Bennett should have it. Yet there are other projects on the bank's mind.
Former group CEO John Stewart had a regional focus, as shown by comments in an interview with CIO magazine. "When I came here, IT was centralised; it had great strategies but it didn't work. So what I did was devolve IT into the businesses and it has been very successful. It is really important to get this one right," Stewart said to the publication.
There are those in the industry who question whether Tredenick's core banking revamp plans sit well with Clyne, as the bank commissioned a review of the strategy.
Clyne, on the other hand, is said to prefer a group focus, a legacy of his years being executive general manager group development. Thus it seems logical that one of his first steps was to combine the group and Australian CEO roles, with the result that NAB's Australian CEO Ahmed Fahour was moved to another role and later left the bank.
Therefore it could also suit the executive that one of the items on his agenda is the development of ServCo, an internal services company that aims to consolidate to one way of doing things across the globe in terms of terminology, tools and processes. One example would be negotiating with one supplier across all regions within procurement.
ServCo is headed up by Glenn King, the same executive who is currently heading the core banking revamp, according to NAB. King moved over from a key operations role at NAB's UK operation, Yorkshire Bank. The bank would not comment on speculation that it would soon be looking for a separate head for the core banking project.
Given that the same executive is currently heading up both efforts and that it seems likely that IT would have a role in helping with a plan to consolidate processes across the group, this could indicate that the bank's Next Generation Platform could be complicated by alternate goals. Bennett will need to be able to untangle the requirements of both to be able to produce the outcomes the banks want.
Yet he will have to step cautiously, as shown by the failure of NAB's achingly similar Integrated Systems Implementation project, which looked to form a single platform for the group. Bennett will need to use any connection he has with Clyne to make sure the bank's IT stays on the rails because the last thing the bank needs in the middle of the global financial crisis is another expensive write-down.