feature When Bob McKinnon’s appointment as Westpac’s new technology czar was announced back in July 2008, the shockwaves could be felt throughout the senior ranks of Australia’s entire IT industry — not just among those who have fortune and fortitude enough to call themselves banking technologists.
After all, it’s not as though McKinnon was unknown. The executive for more than half a decade ruled the IT operation of Westpac arch-rival the Commonwealth Bank of Australia — one of the nation’s largest IT shops. The title of Commonwealth Bank CIO is not held or given up lightly, and McKinnon made his mark on the industry with the implementation of the CommSee platform as part of the ‘Which New Bank’ program.
Today, it’s McKinnon’s successor at the CBA, Michael Harte, that is known for pushing vendors to the utmost of their ability and trying to drive change in the industry. But as the public sector outsourcing boom of the late 1990’s faded in the early years of the past decade it was McKinnon’s ear and the Commonwealth Bank’s purse that many of the Australia’s largest technology suppliers paid the most attention to.
There are probably still senior account managers at EDS — now HP Enterprise Services — that quake when they hear the CIO’s name mentioned.
Then too, McKinnon came into Westpac at a fascinating time. The bank’s long-time chief information officer Simon McNamara had been somewhat absent from the public circuit for some time, with one of his sole high-profile outings being the revelation of a massive Cisco IP telephony overhaul.
In August 2006 it was then-Westpac chief security officer David Backley – who would later become the bank’s chief technology officer – who would publicly tell of the bank’s “battle” with outsourcing partner IBM over security governance.
Diane Sias – a former McKinsey consultant – joined the bank in September 2007, replacing outgoing group executive of business technology solutions and services Michael Coomer – who left to join outsourcer EDS. Another prominent executive was Alison Bichsel, the CIO of Westpac’s Corporate Centre, covering finance, HR and group risk. Bichsel’s position was one of about five divisional CIO roles to report to McNamara.
But all this was slated to change when St George CEO Gail Kelly won the right to lead Westpac in August 2007. Kelly’s appointment would spur the bank’s acquisition of St George – and the eventual departure of the Westpac IT executives listed above who hadn’t already left – as well as well-regarded St George CIO John Loebenstein, who retired.
In this maelstrom of M&A activity and departing IT executives, McKinnon’s appointment was a landmark event – of the sort of magnitude that reminded one of the dramatic departure of Fiona Balfour from Qantas, only to take the role of CIO at Telstra – which ended in tears only 10 months later.
Or the triumphant arrival of former Telstra CIO Jeff Smith at Suncorp in March 2007 – to lead the bank’s own extensive ingestion of the IT systems of Promina.
In a wide-ranging briefing with journalists held in Sydney this week — one of his first and most open since taking the role several years ago, McKinnon made clear that the former occupants of Westpac’s IT department had left the place in a mess – although he won’t say what his suspicions are about how it got that way.
The CIO tells stories of branch staff who had to wait 45 minutes for their desktop PCs to log in for them to start work – and then even when they could log in, the PC would freeze.
“The greatest challenge that we had is the stability of our technology,” he says, noting that back in 2007, Westpac had been going through about 30 Severity 1 IT outages per month. In banking land, Severity 1 is the worst type of outage – one where there may not be an immediate fix, and the bank’s ability to conduct its business is affected.
The problems even spilled over into Kelly’s lap, with the CEO lamenting the performance of Westpac’s IT division as a “low light” at the bank’s annual earnings announcement in late 2008. “It’s clear they need work to enhance reliability and to equip us to support our customers in the way we’d like. And we have certainly identified this issue, we are strengthening our team and I believe we have it in hand,” said Kelly at the time.
This week, McKinnon acknowledged the depth of the shake-up that took place in Westpac’s IT ranks upon his arrival – which resulted in most of the department’s top executives being replaced and hundreds of workers made redundant.
“There are probably only two people in the organization at a general manager level still in their roles,” he says. “We started in August just after Gail split the technology and operations teams – rebuilt from the top down.” McKinnon says his first priority when he stepped on board at Westpac was building what he calls the “A-team”.
Clearly McKinnon’s prize hire was Sarv Girn (pictured below), the bank’s chief technology officer who had worked with McKinnon at CommBank in the past. Industry observers often highlight Girn’s technical savviness as being one of the critical factors in helping McKinnon – with his accountancy background – navigate the complicated waters of modern banking IT architecture.
This week Girn described himself as having been “made in India, assembled in the UK, and since 1994 operational in Sydney”. The executive can claim a quarter of a century in banking IT – with a decade in the UK working for names like Citibank and Reuters.
Other McKinnon hires include Clive Whincup, the bank’s general manager of service delivery applications, and Bernadette Inglis, the general manager of the bank’s Strategic Investment Priorities program, who stepped on board in May this year.
The bank picked up Gary Sim as its new general manager of service delivery infrastructure, and – in a swap for Coomer – nicked EDS’ Asia-Pacific chief information officer Randy Fennel to be its new general manager of engineering & sustainability; technology.
“Randy is the rocket scientist – he started work in Boeing,” says McKinnon. Among Fennel’s former titles is included – according to his LinkedIn profile – the role of senior manager at Boeing’s Joint Strike Fighter Program in Seattle.
If getting the right staff on board was one piece of solving the puzzle of Westpac’s technology headaches, another part was a substantial remediation program which McKinnon has driven within the bank over the past several years.
The executive says the online banking area was delivering “its fair share” of severity one incidents. So Westpac spent $30 million in 12 months cleaning up the infrastructure. Whincup says the bank’s IT infrastructure had a lack of “currency” – which is a measurement of how it has continued to upgrade and maintain systems over the years.
When you factor into the equation what he says was the fact that Westpac’s ability to introduce change into its business had become weak, and add in the complexity of its IT systems, the bank’s resiliency was suffering a triple hit.
So McKinnon’s teams set about replacing old technology – including some 12,000 desktop PCs, but also back-end infrastructure such as a two-year program with IBM that has seen the bank’s storage area network remediated. The bank has needed to work with key suppliers IBM and Telstra on the problem.
Another 12 month project saw the bank go through and rationalise all of its IP addresses — there were incredible amounts of duplicates. “We had gazillions of them — they all had to be cleaned up,” says McKinnon.
And, according to the executive, the change has been noticeable.
The bank gradually reduced the monthly average severity one quota to fifteen, then seven. In the last quarter it had an average of three per month. So far in October there have been only two, both quite small. One was as simple as a circuit-breaker switch being tripped in a call centre. Whincup says McKinnon has a “zero tolerance” attitude towards problems — realistically, there will always be problems, but it’s about the having the right mindset.
And Kelly has noticed. “Extraordinary what Bob has achieved in two years,” she said at an investor briefing last week. “Technology is an area of strategic focus. We have an advantage over our peers.”
If the remediation project has been a big focus for Westpac, another of its major targets for work has been the integration of St George’s systems with its own.
Former St George CIO Loebenstein was highly regarded for his work at the bank over the years, and CTO Girn says much of the smaller bank’s systems had been designed in a tiered way over the years, utilising approach service-oriented architecture to make sure that they were scalable and flexible enough to be re-used.
It’s normal when M&A activity takes place for the systems of the firm being bought to be migrated to those of the larger company — not the other way around. but McKinnon says “a lot of good technology gets trashed” that way.
Kelly, Girn says, gave the bank’s IT team the latitude to use the best system — rather than just the Westpac one. So some of St George’s systems — its teller platform, HR and CRM systems are coming across to Westpac. On the other side of the fence, Westpac’s treasury systems were better, as well as its general ledger platform, so those are being implemented at St George. And of course the basic email, telephony and collaboration systems had to be integrated internally, as well as a widespread datacentre consolidation project, which is currently under way.
It’s all about what Westpac calls its multi-brand strategy. “If you walked into a St George branch today you wouldn’t know they were owned by Westpac,” says McKinnon. “We were given a mandate to focus on the best platform,” says Girn.
Of course, the most sensitive part of the St George integration is Westpac’s plans to adopt the smaller bank’s core banking system, CSC’s Hogan. Westpac last week delayed the timing of the shift until 2014 while it focused on a raft of what it calls Strategic Investment Priorities that are more broadly focused around customers rather than IT for IT’s sake.
Any move by Westpac in the area cannot help but be seen in the context of CommBank’s own migration – largely complete – to SAP’s banking platform, with the help of Accenture. The program of work, with in total some $730 million, has grabbed the attention of an industry which loves to focus on big bang projects.
During his own briefing, McKinnon didn’t mention the CBA by name, but he notes a number of people in Girn’s team worked on SAP at “a different place”.
Harte has made much in public of the shift to “real-time banking” that CommBank’s move has allowed it. But McKinnon points out St George already has real-time courtesy of its Hogan platform, and notes that Westpac in general needs to solve a different set of problems than its competitors. “That business case may have worked for them, but that business case doesn’t work for us,” he says.
In addition, most banks around the world are spending more money on front-end systems such as internet banking, McKinnon says. Transactional systems are also soaking up cash. And core banking investment is coming third. In the Asia-Pacific region, he says, those numbers are different – because a couple of players are bucking the averages.
When Westpac does shift its core, the bank will be ready for it. McKinnon says there is still a great deal of Hogan expertise within its ranks courtesy of earlier BankSA and St George migrations. This is one of the reasons the move to adopt St George’s platform makes sense. “It is something of a lay-down messiere to move Westpac onto that platform as well,” he sais.
One final aspect of Westpac’s IT strategy which McKinnon has overhauled is the company’s relationships with its partners.
There has been constant speculation over the past several years whether the bank will renew its 10-year comprehensive IT outsourcing contract with IBM, which had an initial value of $2.3 billion when it was first signed. Given the expanded scale of Westpac’s operations now, one can’t help but feel that value might be a bit larger it gets renewed.
The bank has had its troubles with IBM over the years, McKinnon acknowledged last week. “We set out two years ago with a view to working out whether we could rebuild the IBM relationship,” he says.
And things are looking good, although a decision has not yet been made. IBM has stepped up to the plate over that time, McKinnon says, with IBM having been “very proactive” particularly in the way the outsourcer has helped Westpac work through its Severity 1 headaches.
Other major partners include Telstra, Microsoft, Optus and Oracle, as well as companies like VMWare, EMC and Cisco, with whose help Westpac has constructed its own private cloud infrastructure over the past several years.
And Westpac has also rationalised its list of service offshore partners down to four in India — Infosys, TCS, Wipro and IBM. Westpac has been steadily ramping up the size of its IT resources — both onshore and offshore — to deal with the volume of integration and applications development work it is doing.
For example, in May the bank revealed it had hired 304 additional technology staff over the past year, and this week McKinnon said the figure was 1200 — with much of the resources being located in India through its partners, or working in Australia on a temporary basis. “For us, the relationship with the panel suppliers is much more important,” says McKinnon when asked if he’s tempted to poach some of the staff permanently. “We need the skills for a period of time.”
Complex, but satisfying
When you look at Westpac’s approach to technology under McKinnon, there’s a sense from several members of his team that many of the problems they’re dealing with, they’ve seen before at other banks — the Commonwealth Bank of Australia, for example, or Standard Chartered.
The bank still has its challenges — ongoing Severity 1 incidents, a number of disparate systems across the various brands that need to be integrated, and of course the core banking conundrum. And whispers from within the bank from time to time still speak of unreported problems. But what shines throug is the enthusiasm that McKinnon’s senior team has for the vision that Kelly is leading right from the top of the bank.
Whincup says he’s worked in IT in banks for more than 25 years, including in the UK and continental Europe. “I don’t get invited to many parties,” he jokes. He says one of the things he gets asked a lot — even by his kids — is why he’s in Australia, and why with Westpac.
His answer is that he’s been in the middle of banking mergers before — and that from an IT side it was usually a case of “lift and insert” the larger bank’s systems into the smaller bank — destroying much customer value along the way. Westpac’s different, he says.
“My belief is, the way the Westpac story is articulated, putting the customer at the centre of everything we do drives a focus on the long-term,” Whincup says. It’s a message that all of McKinnon’s senior team and the CIO himself broadly echoed this week when speaking to journalists — a confidence that Kelly’s leadership and Westpac’s multi-brand strategy means they can focus on doing the right job with technology rather than taking the short cut.
The bank’s technology focus on smaller projects — what it calls Strategic Investment Projects — over the mid-term, instead of the much-hyped core banking revamp — reflects this customer focus.
And of course — despite the complex strategic projects he is grappling with — McKinnon himself hasn’t lost his enthusiasm for the basic building blocks of IT either. He’s still a geek. iPads, for example, have been rolled out to Westpac’s senior leadership team — they use them in high-level strategy meetings. And McKinnon himself could be interested in one of Microsoft’s new Windows Phone 7 devices, noting he had a chance to play with one of the handsets recently in the US.
“Have you seen them yet? They’re really cool,” he says. Core banking or a new mobile — it’s all just great technology.
Image credit: Westpac