Commonwealth Bank of Australia's $1 billion telecommunications deal with Telstra is the toughest the bank has negotiated with a supplier, according to CBA CIO Michael Harte, and all without the use of traditional service level agreements (SLAs).
Commonwealth Bank of Australia's $1 billion telecommunications deal with Telstra is the toughest the bank has negotiated with a supplier, according to CBA CIO Michael Harte, and all without the use of traditional service level agreements (SLAs).
Michael Harte (Credit: ZDNet.com.au)
"They stepped into the relationship," Harte told
ZDNet.com.au earlier this week. "We said we wanted to be the
number one in customer satisfaction. OK, what does that mean?
Well, we said, here are the measures that our customers want to
know about: availability at the ATM, NetBank and CommSec."
Telstra overcame fellow bidders BT, Optus/Singtel, and incumbent
supplier, Telecom New Zealand subsidiary, Gen-i, which dropped out
of the race in July last year. The deal will see Telstra deliver
CommBank's so-called "converged internet protocol (IP) network"
that Harte hopes will also allow it to handle the peaks and troughs
of network demand under a varied pricing model.
"It's really utility voice and data services and we wanted a
big, reliable and trustworthy provider so that we can go about the
business of creating and distributing rich financial services,"
Harte said.
He described the old pricing model under the Gen-i contract as
an "all you can eat" deal, while the new contract with Telstra is an attempt to "de-average" pricing applied for telco services.
But while the race has been won by Telstra, ensuring payment
won't be easy for it. According to Harte, Telstra will continually
have to jump through the bank's hoops without a hitch in order to
secure payments.
"We've boosted the incentive [for Telstra] to meet our
customers' expectations and increased the penalty when they don't,"
said Harte.
The contract, which Harte described as "completely new" in
structure, has been penned without conventional service level
agreements (SLA) — a management tool that is meant to ensure
a supplier performs to a minimum standard.
We said, 'If you can guarantee 100 per cent availability, then we'll pay for that'.
CBA CIO Michael Harte
Despite the guarantee that is meant to flow from SLAs, they have
been widely criticised for failing to translate into outcomes "at
the front counter" as then-Customs and Border Protection Services
chief information officer, Murray Harrison, pointed out in 2007.
"SLAs
don't work. SLAs are open to management discussion and don't
affect people providing services at the front counter," said
Harrison.
Customs' new outsourcing structure was based on shared risk and
reward, with payment determined by a complex grid of performance
metrics that could not fall below 80 per cent twice in succession.
If the suppliers did not meet that expectation, penalties
followed.
CommBank's deal with Telstra is different, but attempts to
overcome similar issues via tough financial penalties when outcomes
are not met. "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," said Harte.
Harte described a typical scenario with suppliers where SLAs
were relied upon and outages had occurred. "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?" said
Harte.
There are, however, sweeteners for Telstra, such as a marginal
pricing schedule whereby CommBank pays higher prices for telco
services during peak demand periods and nothing when demand is
zero.
"We'd like to pay extra for when that occurs, but pay less when
the services are scaled down and not being used. So there's a real
autonomic aspect to being able to provision on-demand to that
scale," Harte added. "We said, 'If you can guarantee 100 per cent
availability, then we'll pay for that'."