news One of Oracle’s most senior executives has labeled board-level engagement between the giant US vendor and local customer National Australia Bank as having been key to the bank’s unusual Oracle-based core banking IT upgrade project, which has seen the vendor develop its software with the direct input of NAB.

The bank first announced its plans to modernise its core IT systems back in August 2008. At that time it was only the second major bank in Australia to commit to such a project, after the Commonwealth Bank of Australia allocated some $580 million to its own overhaul a few months earlier. But where CommBank at that stage dove straight into its SAP-based revamp with a vengeance, NAB took a different path.

The first notable aspect of NAB’s core banking overhaul plans was its choice of enterprise IT giant Oracle for the project. While Oracle is a household name in enterprise IT circles and has software (and sometimes hardware) solutions in virtually every area which a chief information officer could want to spend money in, the vendor’s presence in banking and financial services was as yet relatively undeveloped, unlike rivals such as CSC, whose Hogan core banking platform is virtually an institution in banks right around the globe. Oracle’s strengths in the area centred on its acquisition several years previously of i-flex, an Indian software firm which had carved out a niche in the banking sector.

It was this product which then-NAB chief information officer Michelle Tredenick cited as being the centrepiece of Oracle’s financial services product strategy. “Oracle had been on an acquisition path in the financial services sector and has really been about assembling a set of products that are best of breed and that will form a broad platform for us to choose from,” the CIO told ZDNet at the time. “I think the i-flex acquisition was quite fundamental to that and will form the core of their offering to us.”

But the factor Tredenick didn’t mention at the time – and what has no doubt puzzled many in Australia’s technology sector since NAB’s project was announced – was the key role which NAB would take in not only implementing Oracle’s technology in its operations, but also helping to define that technology right from the start. NAB’s top IT executives have recently made clear in media briefings that the pair were undertaking what was referred to as a “co-development” effort.

It has been a symbiotic relationship, with Oracle seeking direct inspiration from NAB on how to shape its product offering, and NAB being the first customer to adopt that offering, tailored more closely to its own needs than it would have been able to achieve with another vendor.

In a media briefing this week associated with Oracle’s launch of greatly expanded cloud computing services in Australia, the vendor’s global co-president Mark Hurd praised the top-level engagement which NAB and Oracle had been able to forge.

“We’re thrilled with out relationship with National Australia Bank,” Hurd told journalists, in response to a question about the unusual nature of the engagement and whether it was risky.

Hurd said any time organisations engaged in this kind of project, it was important to have consistency of vision between the vendor and the customer, so that both “clearly understand what products we want at the other end” and so that “there’s agreement on approach and consistency of the management”.

“Those attributes have been key to our initiative,” Hurd said. “The [NAB] team there, from the CEO, [group executive of Group Business Services Gavin Slater], have been the same team through that. We’ve communicated back and forth frankly at the board level.” When you could get this kind of high level engagement, the Oracle executive added, it was possible to achieve “a tremendous depth of industry capability” through a “very powerful model”.

And NAB’s relationship with Oracle has indeed played out at the highest levels. Hurd, Slater told the media late in 2012, has presented to NAB’s board of directors in Australia on the issue, and Slater himself has met with Oracle co-founder and chief executive Larry Ellison to discuss the project and Oracle’s vision for its place in the financial services industry.

The relationship between NAB and Oracle is an unusual one if considered in the wider context of enterprise IT technology deployments both in Australia and globally. It is very common for products to have significant systems integration work conducted on them to bed them into customer IT environments, and sometimes bits and pieces of that work make their way back up into the vendor to be incorporated into the overall product. Customisation around the edges of a major piece of software is quite normal in the IT industry.

However, what’s not normal is for a customer to commit very strongly to a vendor’s long-term product roadmap when key chunks of that roadmap haven’t yet been delivered; and for the customer to help shape that roadmap directly as the systems are implemented in their own operations. Some in the IT industry would see such a model as risky, given that the vendor’s products which the customer has committed to have not yet been fully developed.

However, Hurd concluded his comments on the issue by noting that he believed the co-development system was “a very acceptable model” – provided that the partnership had the attributes which he described of high-level engagement and a common understanding of the work ahead.

opinion/analysis
It’s been a slow process for NAB, but then core banking upgrades are a very slow process, and I have to say that the bank is still likely ahead of most of its rivals in this area in Australia, excepting of course the Commonwealth Bank. And you’d have to say that if NAB was to pick any company to go through this kind of co-development exercise with, Oracle would be the right partner. If things go pear-shaped (as no doubt, at least some minor things will … they always do in a project of this size and complexity), Oracle is the sort of company which can throw squillions at the effort to fix it.

From Oracle’s side of things, clearly it’s a very good relationship. The vendor gets the benefit of having NAB – a real, live, major bank – guide its financial services product roadmap. Then Oracle can take that same product to dozens of other major banks around the world and start convincing them to start swapping out CSC’s Hogan and other platforms and jumping on board with Oracle.

Personally, I’m reserving judgement about NAB’s core banking overhaul project and the relationship with Oracle. I’ve seen too many massive IT projects go off the rails over the past few years to feel entirely comfortable with the way the pair are going about this one. However, for now at least, it looks as though things are going well.

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