CBA outage a wake-up call for HP: analysts

As CBA's outsourcing partner, the bank's IT outage last month was a sharp reminder for HP Enterprise Services to lift its game.

The internal software upgrade stuff-up that caused IT woes for the Commonwealth Bank of Australia (CBA) is a wake-up call for HP Enterprise Services to get its act together, according to analysts.

Late last month, CBA was hit with an IT outage due to a faulty software patch that left some of its branch offices operating at limited capacity .

Sources from within the bank said at the time that the problem also affected multiple PCs within its head office, and had it calling for HP, CBA's third-party service provider, to come in to fix the problem urgently.

The Financial Services Union came out after the incident, saying that a large number of PCs had had gone down due to the problem, and called for the bank to suspend targets, because staff had been unable to access necessary systems for up to five days. It also said that the union had heard that the outsourcer, HP, had been part of the problem.

Shortly after the incident, it was revealed that HP CEO Meg Whitman was visiting Australia, and had spent time with CBA, which CBA CEO Ian Narev confirmed. He tried, however, to play down the significance of the meeting.

"We're one of the most significant customers of HP worldwide. Meg Whitman did what good CEOs do: go and visit your good customers," he said.

It's a crucial time for HP Enterprise Services' relationship with the bank. CBA's long-time outsourcing contract with EDS, which was inherited by HP, is due for renewal very soon.

Narev would not comment on the future of the outsourcing contract between the two companies.

HP acquired EDS in 2008, subsequently merging it with the vendor's services division, and rebranding it HP Enterprise Services. While it performed well in the first two years, HP Enterprise Services has seen margins shrink and a seemingly endless change of leadership.

It's still unclear exactly what role HP had in the outage; however, analysts believe that the saga showed that HP needs to watch its step.

IBRS IT and business-management analyst Alan Hansell doesn't think that the CBA outage incident would be enough for the bank to dump HP as a provider; that is, unless it happens again.

"It's not a serious offence, but it is a failure that exposes a lack of proper governance, which I would presume [HP] would immediately attend to," he told ZDNet Australia.

Both parties have failed to demonstrate an adequate amount of governance, but HP is likely mainly at fault, Hansell said.

Gartner research vice president for IT sourcing James Longwood agreed that any role that HP had in the IT outage is not a dumpable offence, but noted that Enterprise Services' performance has been slipping in recent times.

"Globally, we are seeing some deterioration in service-delivery performance of HP Enterprise Services," he said. "This is a timely reminder for outsourcing companies like HP, IBM, CSC and Fujitsu — just to name a few — to get the balance right between profitability and service outcomes for clients.

"[For Enterprise Services], we are seeing a quality of service drop based on anecdotal information from a wide range of clients."

Longwood attributed the fall in service quality to staff reductions and HP Enterprise Services' move to more automated operations and problem detection.

"I think the balance between automated IT issues and having the right people in the right places, as well as having the right processes, is a key to success," he said.

Both analysts made it clear that moving from one outsourcing provider to another is a long and strenuous process.

"It would probably take 12 to 24 months to make the transition," Hansell said. "There is a whole lot of changes needed moving from one provider to another, and the overall cost of that would be very significant."

In other words, HP would have to mess up very badly to be replaced.

But if CBA does decide to go with a new provider, there are plenty of players waiting in the wings.

While the bank has stuck with one provider for its infrastructure services, Longwood noted that the general trend across all enterprises is to take on multiple best-of-breed vendors.

"In the Australian market, there are a number of providers that can certainly compete for the CBA business," he said. "For the datacentre component, there is IBM and CSC. For managed desktop, there's Fujitsu and even Unisys.

"Generally, HP, IBM and CSC have the sweet spot at the top end of the market."

With major organisations increasingly concerned with ensuring business resilience, including financial institutions, Hansell sees IBM as having an extra edge.

"IBM is actively promoting its business resilience service and I think it has spotted a gap in the market," he said. "I have no evidence of HP offering a comparable service.

"I think that sends a message to the community that IBM has the skills to do it."

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