Daruwala believes Westpac is looking for quick integration wins and using existing systems would buy it time to show growth, which would allow it to later invest in systems for its long-term strategy — including the planned core upgrade. "They're taking the best possible denomination and enhancing it to serve their purpose, 'for now'," he says.
The analyst likens it to buying a brand new house. "It's wiped our accounts dry," he says. "There is every intention to decorate, beautify it, put some bells and whistles, but not now. We're not saying 'no we won't do it'. But let's fix our kitchen sink first, can we? But can we fix our oven first? Let's slap on paint first. Then we'll look at the beautiful leather couch and some Monet paintings."
So while Westpac/St George is tinkering with the kitchen sink, who is going to get the contracts for the painting and who is going to sell it the Monet?
Girn says he is currently examining the suppliers needed to enable the bank's strategy. "This includes a review of our current application supplier relationships, especially around application development and maintenance, so that we deepen our relationship with a smaller number of suppliers who are skilled to supplement our own internal capabilities as required, or can meet backfill opportunities as our staff work on the business transformation investments," he says. Westpac is negotiating with IBM, which does its core processing, to work out what will happen when its contract runs out in December next year.
It will be interesting to see how much business IBM receives. "One of the merged entity's major challenges — which is presumably covered in the model — will be integrating the IT managed services provided by IBM Global Services for Australia New Zealand and affiliates with processing done internally by St George," IBRS' Hansell says.
Daruwala thinks the banks should do more outsourcing, not less. He says St George had been "developing large solutions that need armies of people going down to the kernel and changing code for every business functional need", which he thought was "completely out of whack".
The banks shouldn't be doing all that work, he says: "There is no need for you to be a champion in developing and monitoring. That is someone else's forté."
If IBM is successful in the negotiations, its partners will also likely benefit. "IBM is also leveraging its large global partners to ensure we have the very best skills and capabilities on our account," Girn says. In core banking terms, IBM partners with Temenos, Fidelity, Oracle and CSC.
St George is already on CSC's Hogan platform, which would make it an easy choice, especially if Westpac is feeling "gun shy", as Hansell put it, and many people in the industry say that Westpac is serious about doing so, adding that it would be a low risk option which would allow the bank to upgrade sections as needed. Yet the bank refuses to specify which system it intends to use as yet. Girn says there have been no decisions made as yet as to which vendors it would partner with in the execution of its strategy.
Daruwala isn't surprised the bank hasn't chosen a vendor to go with for its core upgrade yet. He believes it is very difficult for vendors to offer the same functionality that banks possess, as the financial institutions were highly customised. "No one player can claim they service the breadth," he says. "That's why the Accenture and SAP core banking deal: we'll wait and judge it when it's going live to see how really effective and how on time, on budget it really was." Oracle isn't a consideration either, he believes. He says he would pick a consortium headed by IBM and an international player such as Fiserv or Infosys.
Whichever platform the bank chooses, it has a long road of integration before it to even reach the stage where it could tinker with its deepest systems. McKinnon and Sarv certainly possess good IT experience from Commonwealth Bank days — but in the end it may be McKinnon's team building skills that save the day.
"It is naïve to think success in large and complex application systems replacement projects, as planned at Westpac, is due solely to the performance of senior IT managers such as CIOs and CTOs," Hansell says. "Whilst the role of senior managers is important, they are only as good as the IT professionals acting as the application systems architects and, to a lesser extent, the project managers they appoint to lead the initiatives."
Indeed, Westpac and St George might find that the IT integration hinges very much on the IT people working on it, all the way down to the bottom. This makes Kelly's announcement to freeze offshoring into a masterstroke if it was planned to get the team on side. Yet more importantly it will likely be the way both St George and Westpac march to the tune of their new executives.
Having been headhunted from other organisations, McKinnon and Girn won't know the team as well as others who have been there longer. They'll have had to learn quickly to build camaraderie. Yet the combination of the St George and Westpac IT teams, which saw some St George employees take good positions, such as former St George CIO Paul Newham becoming Westpac's chief operating officer, has been "embraced", according to Girn. And if what's said about Girn and McKinnon is true — the former's IT genius and the latter's team feel — getting everyone to work together on the IT strategy shouldn't be a problem, especially since Mr Transformation, Brad Cooper, is said to have oodles of charisma to cheer on the mob.
Kelly had better hope so. Because if they don't succeed in motivating the masses, the integration could go awry. In the poker game of bank IT, the standard flush thrown down by Commonwealth Bank last April when it announced its core refresh would become a royal flush, beating Westpac's full house of St George.