Changing of the guard: Commonwealth Bank

Get an insider's look at Commonwealth Bank of Australia's technology operation with chief information officer Michael Harte in the first of our Changing of the guards series examining generational change in the nation's big four banks.

Commonwealth Bank of Australia is the only one of Australia's four top-tier banks not to have experienced dramatic change in its technology leadership team in the last year. And the bank's chief information officer Michael Harte is taking advantage of the chance to get ahead.

Commonwealth Bank CIO Michael Harte
(Credit: Commonwealth Bank of Australia)

Harte currently has two major projects on the boil — the bank's soon-to-be-released Web 2.0 online banking platform, Finest Online, and a core banking systems overhaul that promises to cut financial product development time from months to hours.

It's been three years since the executive grabbed the reigns of arguably the largest technology operation in the country. Roughly a quarter of Australia's population depends on the systems that Harte was hired in 2006 to remedy. His leadership has shown in the new direction CBA has taken after bedding down its $1.5 billion "Which New Bank?" technology revamp.

The CIO has manned the helm during an era in which the bank aligned new IT technologies to the business via platforms such as CommBiz, First Choice, CommSec and NetBank.

"These are all now the very best in the industry," Harte says of the platforms during a recent interview with "Think of NetBank being in the top 1 per cent of financial services websites in the world. Think of CommSec being the first brokerage on the iPhone. Think of FirstChoice as the largest asset management platform in the country."

These are the legacies that Harte has brought to the bank over the past years, leaving it in what would appear to be a strong state when it comes to technology. And if Harte ever left? "There are many heirs in line," the CIOs says, although he declines to name them.

"The organisation has a really strong bench and some of them are in IT and some are across the business. There are plenty of people that would step into the breach if I was hit by the bus, or if I decided that surfing was the thing that I finally wanted to do," says Harte.

But while he stakes claim to these platforms, the CIO credits his predecessors for developing the CommSee application — the single lasting legacy of the "Which New Bank?" strategy — which he says was critical to two major IT investments underway that address the front and back end of its business.

Core banking means days, not months

The much-publicised $580 million SAP core systems overhaul, headed up by former Accenture executive Dave Curran, is one example. CBA leapt into the project with all guns blazing at a time when Westpac was tied up in its $340 million integration with St George, and National Australia Bank (NAB) and Australia and New Zealand (ANZ) Banking Group were both amidst major leadership transitions.

But the "first mover advantage" that Norris claims it to be, is one that the bank has been willing to sit on for a number of years. Harte says former CBA leaders — chief David Murray and CIO Bob McKinnon — knew the core systems required an overhaul. But instead they chose to invest in CommSee.

Why they chose to attack those systems first, Harte doesn't explain, but he says: "They did us a big favour. That allowed us the time to attack those back-end monoliths. While it's not complete insurance, having a single front end means that we can stay in business as we replace the back end."

But the question remains: what does the SAP core systems replacement mean for the bank?

"It takes product development off the critical path. And that's a big statement," explains Harte. "Today it can take six to 12 months for some products, depending on how big and complex they are." New products currently mean writing new applications or altering processes that are hard-coded in the mainframe, followed by months of testing.

The new architecture behind the SAP platform will give product owners the power to treat IT as a utility. "You have a very open, highly configured, set of code where you're basically switching on and off options," says Harte. "That gives the market-focused people the ability to offer, in real time every single day, new features so they can go and experiment with new offers rather than wait for product developers and IT people to get their act together."

Changing of the guard

This extensive overview of the Commonwealth Bank of Australia's technology operation is part of'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.

Still, the project has only reached the six-month milestone. While CBA's term deposit products have been launched, with more releases to come in May, there remains three pressurised years of complexity on the table.

"There's a very strong will to get this done within three and a half years. It's an extremely challenging and exciting program of work, and it's not without its complexities," says Harte. "There's some very large scale launch and migration work to do, so we have to keep this thing in fast forward to reach that target, because we're talking about the main franchise value of the group."

But another project also has its roots in CommSee — the soon-to-be-released Finest Online campaign, which will deliver a new front end to NetBank that is set to fire up the race for online banking supremacy in Australia. "We've invested significantly over the past two years in what we've termed Finest Online," says Harte. "This is about taking the service components that were for the teller and service centre employees to manage their interactions and transactions with the client."

Put simply, Finest Online is the CBA's Web 2.0 romp intended to boost the attractiveness of self-service by exposing information it already holds, but has only just now integrated, via a single web interface.

We've always watched the Web 2.0 patterns and innovations to understand customers' preferences and behaviours.

CBA CIO Michael Harte

In doing so, CBA and Harte have staked claim to several firsts in the Australian banking sector by incorporating JavaScript pop-up help screens, click-to-chat messaging, loan application progress reporting, and its so-named "universal inbox" that contains communications between the bank and customer such as loan approvals or new statements.

The project also tackled simple obstacles, for example, single password access to every banking product. "Customers can do that very conveniently with one password, one log-in and one place to access all the products and services of the group," says Harte. "Where they want to personalise it, and put their own look and feel on it, they can do that too."

The initiative is the first major attempt in Australian banking to draw together disparate systems under a single interface; and in the context of CBA's recent deployment of banking platforms across all mobile operating systems, it arguably positions it as the leader in the technology stakes.

"We've always watched the Web 2.0 patterns and innovations to understand customers' preferences and behaviours. At the most basic level, people want to be mobile and have the convenience to do anything at any time without programming in two hours of the week to go to the supermarket, and one hour to go to the bank. It's much easier if they have the ease to do it when they remember it," says Harte.

But the investments also signify a new dawn for banking — one that will be marked by accelerated change as online banking services supplant the branch in terms of convenience and functionality. Harte nods to that future when he says: "We want that ease of use and high level of convenience as we drive more and more customers online."

Outsourcing and cloud computing

The recently inked $1 billion, 10-year managed network services contract CBA signed with Telstra was perhaps the cornerstone piece it had to set in place for the coming decade — a period in which Harte believes cloud computing will become "enterprise ready".

Changing of the guard

This extensive overview of Commonwealth Bank of Australia's technology operation is part of'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.

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?

CBA CIO Michael Harte

At the announcement of the deal three weeks ago, Telstra and CBA released a joint statement saying it would provide outcomes for customers. But what exactly did this mean? According to Harte, the terms were remarkably different to previous contracts in that they ditched Service Level Agreements (SLA) — a move which reflects how critical uninterrupted uptime is for CBA's strategy.

Harte described a typical scenario under which SLAs were relied upon: "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?"

With the bank's online platforms shored up for a future in which the internet dominates its business, the telco deal leaves zero room for a supplier-caused outage. "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," Harte explains of the terms Telstra faces.

The deal with Telstra, however, is just one key component of the bank's IT outsourcing strategy for the coming decade.

Prior to the reign of Harte and Norris, CBA bought stakes in its suppliers. These include former telco provider Telecom New Zealand (Gen-i's parent) and a stake in the local operation of its major outsourcing partner, EDS.

But in 2007, the expiration of contracts inked by the old guard in the mid-1990s gave the bank the chance to change tack. Rather than single source with EDS as it had in the past, CBA embarked on a multi-sourcing strategy, which emphasises "competitive tension" rather than cost-cutting by increasing the scale of outsourcing deals.

The new structure broke infrastructure deals into four stacks: desktop computing, application services, network services, and centralised computing. Under the new regime, EDS was retained for "enterprise processing services" and "end-user computing" until 2012, deals worth $114 million and $74 million per year respectively; however, it was dropped for application services, worth up to $200 million a year. This work was put to a panel of providers that consists of IBM, HCL and Tata.

But while large scale conventional infrastructure outsourcing still constitutes the bulk of the bank's technology budget today, Harte has for some time trumpeted the rise of cloud computing. His views, however, are mixed in terms of their potential for CBA. In 2007 he appeared to be envious of the computing models delivered by global banks such as HSBC, perhaps longing for the scale of operation of his former employer, Citibank, which could leverage the concept of grid computing.

Today, that focus has shifted to cloud service providers, such as, and the influence that buyers such as CBA can have on the future of cloud services.

"That's the next advance from grid or utility computing into that dimension people call the cloud. The cloud is not that far off," says Harte. "If you think about layers of services — infrastructure, processes or applications — the most mature form of services across networks are available as infrastructure services. For example, you can go buy storage, or test and development server environments, provisioned on a pay as you go basis," he says.

The other shift that has occurred over the past few years is the rise of web services or services-oriented architecture. The ability to drag services from the cloud has triggered a renewed focus on the ability for IT to automate business processes, which has manifested at an organisational level, according to Harte, as the merging between operations and technology, and dissolving the line between IT and "the business".

"We are an enabler at the end of the day. But as platforms are valuable strategic assets, and as those platforms are increasingly mission-critical, the division between IT and the business is blurred," he says.

The SAP core systems overhaul dovetails with the merging of IT, the business and the concept of technology as a service.

Despite Harte's conviction that cloud computing is inevitable, he maintains it's not mature enough today — and that includes services from the world's largest software-as-a-service providers: and Google. CBA famously rejected Google Apps Premier Edition package as "not enterprise ready" and continues its reliance on Microsoft Office 2007. Meanwhile, according to Harte, remains a point solution.

"There is still some distance to get those platforms mature. But we are able to buy those services across the network. Right now we're not at that wholesale basis, but we're doing that point by point. But," he concedes, "it's foreseeable in the future that we could apply it as an enterprise service." Interestingly, Harte reckons this issue will not be overcome by vendors, but buyers from large corporations.

"It will be up to the buy-side community to force the market to go down that path. The supply-side will be less inclined to offer it in a format other than one-off solutions. You know, we can see probably hundreds of new start-ups that offer niche services on-demand in this manner, but it's not until they become enterprise-ready that we will see a tipping point occur. Maybe it's three years away."

In the meantime, Harte's getting on with the job. Next time, we take a look at how his predecessor Bob McKinnon is finding life on the other side of the fence at Westpac as the bank wrestles one of the largest technology integration projects in Australia: the digestion of St George.


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