IT comes out of OCBC's backroom

ZDNet Asia goes one-on-one with the new head of technology at OCBC Bank, to find out how he's realigning the group.

Barely three months into his new role and Ching Wei Hong is looking to change the way IT is viewed at OCBC Bank, one of Singapore's leading financial institutions.

The new head of group operations and technology wants to run IT with a business angle. It is time, he says, for IT to come out of the backroom and play a more strategic role within the bank.

He believes this is a better way to realize unit cost reductions and business improvements.

Previously head of group transaction banking, Ching's new role takes him into new territory. Having to run both the company's IT and operations makes this transition "a pretty dramatically different one", says the banking industry veteran.

In an exclusive interview with ZDNet Asia, Ching reveals how OCBC's employees are responding to this "major cultural shift". He also laments the bank's huge IT bill and the difficulties in finding good technology vendors that are also business-problem solvers.

Q. Since taking on this new role, what have you been busy with?
A. The intention now within the bank is to give IT a different focus--managing IT with a business angle. In the traditional world, organizations would look at IT as a backend or backroom function. However, in today's world of business, you can't treat IT that way, not when you think in terms of people, cost and importance. Is IT a core engine of the bank? Of course, but we've always called it backend processing. In the last 60 days, what I've done is clearly define 'processing factories' within the operations group. For example, payments fall within a 'payments factory'. Trade finance is a 'trade finance factory'. And we've organized it so that you have the head of payments running the payments factory, and who is held accountable for delivery, for capacity, as well as for the total costs, which includes the supporting IT services as well.

Does this mean that IT and operations are folded into one organization?
No. What we're doing is have them work closer together as a team. Let me explain. The payments factory has customers who are from business or consumer banking. So, the payments owner will now provide payment services to the end-customers of consumer banking or business banking, at a price, and all the costs (including IT) should be in that one price. In the old world, the way one would approach it is, I've got 100 staff, this is my rent and after dividing by the volume, this is my unit cost. Then we give the consolidated IT bill to the head of consumer banking and the head of corporate banking, and leave it to them to figure out the components. So now, I've reorganized it such that if you're head of the payments factory, you're responsible for the end-to-end costs. In terms of IT investments, it won't be the IT manager who writes the investment proposal for the payments processing engine. He's going to work with the payments factory owner, where the payments factory owner will develop the investment proposal and business plan.

All this has happened in the last 60 days?
We're in the midst of reworking the organization along these lines.

What's been the staff's response?
It's a major cultural shift. In the old days, IT somewhat dictated the systems. But you can't dictate the system without accountability for unit cost. So, if we're going to invest, say, $10 million and end up saving $1 million a year, that's wrong. The payments factory owner needs to be accountable. If he wants to make a $10 million investment, he needs to know what's he going to save, what's his payback, what increases in capacity will he create, and what's his new unit cost for the product and services that will be provided to this customers. We have to run IT like a business; IT is not a backend or backroom function, it's not a cost center. That said, we're not curtailing our investments, innovation and capability building. But we mustn't allow this to be turned into a cost-cutting exercise. What's important is that the people must be accountable, and there must be a focus on building capacity, process improvements, reducing unit costs, investing correctly.

How well do these 'factory owners' understand IT? Are OCBC's heads of business ready to take on this role that you've talked about?
They are going through a learning curve. They need not be technology-savvy because our IT managers are part of the team. The engagement of the factory owners (with IT) is stepped up. They no longer take whatever IT gives them. It's no longer that way now. They've got to look at benchmarking. They need to know what the competitors are doing, because at the end of the day in banking, it's a volume game. Every day, our customers demand discounts, better pricing, and we've got (to cope with) increased competition from the foreign banks. So the importance of unit cost management is extremely important for us. We want to invest, but we should be investing only where it gives us the ability to build capacity so as to better handle greater volumes, as well as improve our processes and service levels. The cost savings there will then help us drive down unit costs.

So, how capable are these managers today?
They all have the potential, and most of them are already there. But what's important now is when they want to make an IT investment, he or she will have to know what the competitors are doing. They should go on-site to see what other institutions are doing, to see how well they're using such an application, and then look at how to deploy it at OCBC. I don't think there's a need to reinvent the wheel because payments, trade finance, treasury operations are not new businesses, but they are getting complex in some way or another. At the end of the day, it's important we adopt industry best practices within the bank. -- by Isabelle Chan, ZDNet Asia

Click here for Wei Hong's views on Internet banking.