Australia's banking IT sector is currently buzzing with speculation that Westpac is planning to migrate its core banking system to the CSC Hogan platform used by its new subsidiary St George.
If you happened to merge or take over an organisation, which has an up-to-date system, it would definitely be on the table.
Alistair Newton, Gartner Analyst
The industry debate intensified last week after Westpac CEO Gail Kelly, who previously led St George, said that the smaller bank's systems would be more extensively used than previously thought in the merger between the banks announced last year.
The CEO spoke about the utilisation of systems on both sides of the merger, saying that Westpac was considering using St George's teller and CRM systems and HR portal, although St George's finance and treasury system would reportedly be migrated onto Westpac's backbone.
Kelly did not specify which system would be used for core banking, saying that customer-facing systems would be priorities for the next stage of the technology integration process, after which the bank would turn to core banking.
However, multiple industry sources have claimed that Westpac is scoping a move to the Hogan platform. When asked to respond to the claim, a Westpac spokesperson said only that "a number of St George platforms and systems are being considered for other business in the Westpac Group and vice versa".
The bank was in the middle of conducting "deeper feasibility studies" on the opportunities, the spokesperson said. "The status of this work is commercial in confidence and we will communicate outcomes once our analysis and commercial negotiations are complete," they concluded.
Australia's IT industry is watching Westpac closely as it is the last of the four major banks to open up about its core banking system replacement strategy, with both National Australia Bank and Commonwealth Bank of Australia having publicly revealed some of their plans, and ANZ trialling technology in its Asian operation.
Australia-based Ovum principal analyst for IT services Jens Butler told ZDNet.com.au that migrating to the Hogan platform would certainly be one of several options canvassed by Westpac. He said that the bank would have to take existing partnerships, the availability of resources, scalability, timing and how it interacted with existing systems into account.
Westpac currently has a strong outsourcing relationship with IBM (as well as Telstra as a subcontractor), running a US$2.3 billion contract, which has been active over the last 10 years. This contract does, however, come up for renewal next year.
Hogan owner CSC and IBM have cooperated on functionality for Hogan.
Gartner banking sector analyst Alistair Newton said that although he couldn't say whether Westpac would have chosen Hogan, it had to have been a consideration.
"If you happened to merge or take over an organisation, which has an up-to-date system, it would definitely be on the table," he said, adding that in some cases, perhaps not this one, core banking tools were a consideration in mergers and acquisitions. He added that since core banking systems remained in place for a long time, a relatively new system would still have a long lease of life.
Although Westpac would need to migrate customers over to the system, the pain would be lessened, he believed. "It's been proven and done," he said. "You've got the system up and running. You know the provider should have an idea."
Westpac currently uses an in-house core banking system.