Banking IT ignores credit crisis

Banking IT ignores credit crisis

Summary: Australia's major banks will continue to pursue huge technology projects that will fuel local IT spending for the next few years despite the global financial crisis, according to a leading local analyst.


Australia's major banks will continue to pursue huge technology projects that will fuel local IT spending for the next few years despite the global financial crisis, according to a leading local analyst.

The economic disaster has resulted in chaos in the international financial services community, with several US giants hitting the wall, a partial nationalisation of eight banks in the UK and the Commonwealth Bank of Australia (CBA) buying local group BankWest. Tier two Australian bank and insurance firm Suncorp is also currently up for grabs.

The issues have created a sizable debate within Australia's IT industry about whether local IT spending will hit the wall, especially in sectors like government and financial services.

But Gartner's managing vice president of its North Sydney office, Ian Bertram told that the banking sector, at least, would still be putting its hand in its pocket for projects. He said all indications were that no Australian bank was at this stage backing down from their key technology investments, especially the ongoing upgrade of core banking systems.

Ian Bertram
(Credit: Gartner)

"Keep in mind that with CBA buying BankWest, with Suncorp potentially on the table, with Westpac looking to acquire St George, where do you think they'll be spending their money?" he said.

Over the past few months both CBA and the National Australia Bank have outlined core banking system replacement strategies that are likely to cost hundreds of millions of dollars each. Australia and New Zealand Banking Group is believed to be considering its options, with similar IT investments in the Asia-Pacific region.

Westpac has also hired former CBA CIO Bob McKinnon ahead of what is expected to be an extensive IT integration project flowing from its pending acquisition of Australia's fifth-largest bank, St George.

"I can't see IT spending among the banks going south," Bertram said. "If anything it will go north."

Topics: CXO, Banking, Government AU, IT Priorities

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  • money to burn

    Well, a feature of a recession is that money stops moving around the community and settles in big business bank accounts.

    Pursuing IT development in such times is a way of unlocking this money and the community.
  • IT spend

    Sadly the core replacement programs will be not be spending locally but with big brand foreigners. The project teams will be sourced from India and elsewhere with very few new roles locally.
    There is a real problem in this country with using local talent. The perception is that you need to use a big foreign brand to boost your own brand and keep perceived risk at a minimum. This is blatant ignorance. Local vendors and integrators provide much better value - consistently cheaper, quicker, smarter. In my experience, you engage one of the big US brands and you WILL pay at least 10 times more for inferior services than you would get locally (or in-house)

    Its time our industry educated market analysts and corporate executives about the true value of local brands. The market watchers need to understand more about the intrinsic value of IT and be able to recognise the difference between "best practice" and bullshit.
  • Indeed...

    You are right, sending IT money overseas is false economy. I have seen it time and time again. The US corporate culture so prevalent in not only US, but also Indian companies is a culture of arse covering and blame. Contrast that with the good old Australian attitude of "just get it done".

    Prime example: While working for a first-tier global investment bank, we were deploying a new data centre backup solution. Several teams in New York, London and Singapore took turns over a 14 month period at attempting and failing to find a working solution. Out of desperate need, I decided to just quietly build a prototype solution based on a number of ideas that I submitted and that were repeatedly dismissed. As it turned out, the system worked well enough to deploy it in Australia. A few weeks later, the Tokyo office decided that they wanted to replicate the solution, followed by Hong-Kong, then Singapore, then London. Eventually it became the global standard. It probably saved the company several million dollars just in consulting costs and even more in licensing costs, since a good chunk of the integration glue was code that I wrote.