Although ANZ Bank chief information officer Anne Weatherston last week made a number of quite substantial statements in a wide-ranging speech about technological change in the financial services sector, for many writers who listened in it was just one comment which the executive made which stood out.

And the headlines reflected that fact.

“ANZ Bank CIO still wary of cloud,” screamed ZDNet.com.au. “Cloud not suited to ANZ Bank: Weatherston,” echoed CIO. iTWire put a timeline on Weatherston’s view of the new technologies: “Another five years for bank clouds: ANZ” and although Finextra didn’t attend, the publication still found room for its own version: “ANZ CIO cool on the cloud“. Even publications such as the AustralianIT, which took a more nuanced version of Weatherston’s speech, still gave the cloud comments quite an airing.

Cloud, cloud, cloud. It’s a topic with which Australia’s IT industry is currently obsessed with, and for good reason. The clutch of relatively familiar technologies which have been relabelled and integrated into the new cloud reality have mostly been around for years, but have only recently found the true acceptance with customers that they’ve been seeking for most of that period.

Reflecting this acceptance, end user organisations, analysts and the media are currently blanketed with messages about how cloud is going to change everyone’s lives. Every vendor’s technology — no matter what type of solution it is — hardware, software or service — now features some kind of “cloud” capability. It’s “cloud-ready”, it can “integrate with the cloud”, or it’s even something or other “dot cloud”.

In this context, every time a significant industry figure makes motherhood statements such as the ones which Weatherston made last week, it seems the natural thing to do seems to be to position them into either the positive or negative side of some kind of never-ending battle.

Although she didn’t provide any real detail at all about ANZ Bank’s approach to cloud computing, Weatherston’s headline cloud statement — that the cloud might suit SMEs but wasn’t yet completely relevant for “large, complex banks at this point in time on a large scale” — saw her placed on the side of the verbal war where cloud doubters lie.

Doing so with Weatherston allowed those writing about the issue of cloud adoption in Australia to classify and interpret the CIO’s comments. Because the executive expressed doubt about the cloud, a whole string of prevailing narratives — Richard Dawkins calls them memes — can be instantly associated with the CIO’s words.

The idea that the Australian Prudential Regulatory Authority is broadly against the cloud. The ongoing debate about what data can be hosted on- and off-shore. The perceived general reluctance by sectors generally regarded as conservative such as financial services and government to host their data outside Australia, or in multi-tenanted environments, or even, in some cases, outside their own datacentres.

Fitting Weatherston and other ‘cloud-doubter’ narrative also allows writers to position them in a kind of imagined conflict against those individuals and organisations perceived as pro-cloud. Thus, it is extremely easy to construct Westpac CIO Bob McKinnon, whose organisation is perceived to be embracing the cloud, as standing on the opposite side of the fence.

Standing with McKinnon in this narrative are fellow cloud enthusiast end user organisations like Komatsu, Visy and Curtin University, as well as vendors like Salesforce.com, Google, Microsoft, Telstra,CSC and Fujitsu. The cloud innovators — those who are taking technological development forward. And of course, there are the vendors perceived as cloud doubters as well — SAP, Oracle, IBM and so on (although they may protest).

The IT industry loves this sort of narrative, and there have been a thousand different versions of it over the past decades. To start with, we had Apple versus Microsoft. Then, as Apple’s fortunes waned, the debate turned into Linux versus Microsoft. We had, and continue to have, mainframe versus mid-range server, SAP versus Oracle, Android versus iPhone and of course, who could forget fixed broadband versus wireless. And after a few years, we’re now having Apple versus Microsoft all over again.

The reason the industry loves these kinds of debates is clear: Often, technologies compete with each other, and it is not clear which one will emerge as the dominant force. Usually there are advantages to each, and usually the battle between the pair comes down to a paradigm of openness and compatibility (think Linux) versus a more integrated and powerful locked down environment (think Oracle).

However, what I want to argue today is that when it comes to cloud computing, utilising such a yes/no narrative is not useful.

Let’s take Weatherston’s comments last week.

All the CIO truly told attendees at the lunch at which she spoke, held by the Committee for the Economic Development of Australia, was that she thought cloud computing would be more attractive for small to medium businesses and that the industry’s regulators were still examining the tranche of cloud technologies.

ANZ had dabbled in software as a service platforms like Salesforce.com, and was continuing to virtualise its infrastructure, she added. But that was really about it.

The difficulty with this is that Weatherston’s comments, in general, could easily be applied to any major Australian organisation at all. I would lay odds that 100 percent of major Australian organisations have already rolled out virtualisation in their datacentres and a pretty similar number have experimented with software as a service platforms like Salesforce.com or Google Apps. In fact, Weatherston’s views could as easily be accurately attributed to “pro-cloud” organisations like Westpac, Visy and Curtin, as they could be to “cloud doubters”.

And to say that cloud computing technologies are more attractive to SMEs … well that’s true of virtually any technology: Because SMEs simply have less legacy infrastructure to worry about, and have much more flexibility when testing new technology.

Worse, Weatherston’s don’t tell us anything at all, really, about ANZ Bank’s attitude towards the diverse bunch of technologies which makes up “cloud computing”. We don’t know to what extent ANZ Bank is pursuing infrastructure as a service, software as a service, private cloud, cloud-based collaboration, public cloud or any other type of cloud. To be honest, given how complex the technology operations of Australia’s major banks are, I do expect that cloud computing solutions are definitely part of the ANZ technology mix in many different ways.

Certainly, to give one example, there is every reason to suggest that her bank, after all, is investigating infrastructure as a service options linked with its massive telco contract with Optus. And I’m sure shifting its email into one cloud or another is on the table. As we’ve seen with Westpac, AMP and others, such a move is pretty much a no-brainer.

However, at the moment, we don’t know anything about any of that.

With this in mind, even if you accept the pro-cloud/cloud-doubter narrative which is dominant in Australian enterprise IT as legitimate (which I don’t), realistically it’s impossible at this point to say where Anne Weatherston sits in that debate. Her statements last week were not granular enough for us to know.

And herein lies the problem with discussing “cloud computing” in general.

As soon as you mention the words “cloud computing”, you are locking yourself into a debate which has no meaning. Previous IT industry stalwart arguments — for example, Linux versus Microsoft, or Android versus iPhone — at least were based on one discrete set of technologies, one ecosystem. You could compare and contrast the platforms involved and argue about them.

But when it comes to the cloud, the same term is used to discuss advanced datacentre modernisation as is used to discuss outsourced email a’la Gmail … when the two are completely different things.
I’ve previously argued Australia’s cloud computing discussion needs to become more granular, and I’ve seen encouraging signs of this over the past few weeks, especially from organisations such as the Australian Government Information Management Office. Let’s keep that trend going. The cloud debate is not like the IT industry’s debates of the past.

We shouldn’t let our intellects slide down that divisive path … it’s not useful for any of us.

news ANZ Bank chief information officer Anne Weatherston has delivered a landmark speech outlining her belief that revolutionary technological change is coming to the global banking sector and the steps – from changing business processes, systems and even human approaches – that she believes will be required to address it.

The traditional relationship between banks and their customers, Weatherston told a lunch of the Committee for the Economic Development in Australia in Sydney today, was the provision of basic bank accounts which allowed customers to save and borrow money. Hence, the fundamental platforms which underly banks are the general ledger systems – often referred to as core banking platforms.

“For a long time,” the CIO said, “this was the only system of necessity.”

Relationships between banks and customers had traditionally been personal, Weatherston said. Branches were the primary channel and risks – for example, issuing a loan – were calculated based on direct knowledge of the individuals or businesses concerned.

However, Weatherston pointed out that this relationship had changed over the years. Banks moved to a more proactive sales model and gained scale, relationships with customers became more distant and new channels – for example, the Internet banking systems we enjoy today – emerged. Banks also diversified their products into many areas of financial services.

Many of the new business demands ended up being “hard-wired” into banks’ core platforms, Weatherston said. Others were implemented as front-end systems interfacing with the core – this, for example, is how modern Internet banking systems function. However, for all that this approach had facilitated many of today’s banking outcomes, Weatherston said she believed it would need to dramatically change.

“It will not be possible to overlay these new business approaches on legacy IT systems”, she told the audience “While at the heart of all bank systems the core transaction system is still a necessity, new systems will be required to enable 21st century service propositions, real-time data, including transactions, and high levels of service efficiency derived from end to end automation.”

“The reality is that the cost of maintaining hard-coded, legacy applications with inflexible or non-existent process automation continues to rise, while the ability to deliver agility declines.”

Weatherston’s comments appeared to run contrary to her bank’s current technology strategy. Although the bank has recently built a number of new technology platforms – for example, its Transactive cash management platform and new core systems for its expanding businesses in Asia, as well as merging platforms in its New Zealand division, the bank has not followed rivals such as the Commonwealth Bank and National Australia in deploying new core banking systems to replace the decades-old platforms which all of Australia’s major banks have relied on for some time.

Addressing the issue
Weatherston said when she looked at other industries which had gone through similar changes, there were three main themes which helped them embrace the future.

The first, the CIO described as ‘effectiveness’, or doing the same for less – cost control. Banks, Weatherston said, had not historically tried to cut costs to the same level as other industries, due to high margins and the low cost of the industry’s essential input – money. In this area, banks could obtain a detailed understanding of costs and their drivers through implemented integrated enterprise resource planning (ERP) systems that would allow all purchases to be controlled and tracked.

Secondly, Weatherston said, banks needed to focus on ‘efficiency’ – or offering more for less against both customer and market standards. In this vein, banks might need to modify not only technology systems but also processes – for example, to meet customer expectations of immediate loan appraisals, or real-time payments.

“The automotive industry has reinvented itself in the last 15 years and year on year reduces costs of manufacturing while meeting increasingly higher levels of customer expectation for added functionality,” Weatherston pointed out. “This is an industry that is also increasingly moving into the age of the personalised vehicle.”

Lastly, Weatherston noted that the third theme of change she had examined was the changing nature of customer expectations. Mentioning dot com companies like eBay and Amazon, Weatherston said bank customers would increasingly expect banks to deliver service standards that they have received elsewhere – demanding banks who offered “interaction and not transaction-based services” and integrated personalised banking featuring multimedia and tailored to meet individual preferences.

When you add in the demand for customers to access services through a variety of channels, Weatherston said bank technologists would need to take a highly integrated approach to process and data design that allowed modular platform builds, “where transactions are held separately from data, message and servicing layers in their IT architecture.

For these changes to take place, Weatherston noted, banks would need new internal architectures – “both business and IT”. The business and technology staff working in banks would need to find new ways of working together – business unit managers giving up some control over processes and technologists taking an increasing leadership role and not just making incremental changes to internal systems every year.

“Financial services companies will need to prepare themselves to deal with all of these internal change management issues, and above all they must make sure IT and businesspeople are not given any opportunity to revert to a legacy system mindset, since this will undercut the bank’s ability to reinvent and respond to market forces,” said Weatherston.

opinion/analysis
To be honest, I was quite inspired by Weatherston’s speech (which I’ll post in full here later on today when I get back to the office). I have previously criticised the CIO and ANZ Bank in general for its purely tactical approach to technology; with one particular Agatha Christie reference which keeps on being mentioned in conversations I’ve had with industry figures on the issue over the past few months.

Weatherston’s speech today demonstrated that although she may not have communicated it perfectly in the past, the CIO deeply understands the issues facing banking technologists in 2011 – as well as what the next few years might look like in her industry.

However, the difficulty – and this is what discussion following the speech focused on – is that Weatherston’s industry-leading speech today is radically divorced from the path which ANZ currently appears to be on. Far from technology and the business working closely together, ANZ’s top IT management does not appear have the sort of internal leadership role that Weatherston might like it to have – at least from the view of my perspective as an outsider.

In addition, the bank’s persistent focus on Asia and avoidance of deep systemic change in its Australia-based core banking platform, as well as what has appeared to be a somewhat abandonment of its innovative goMoney mobile platform, mediates against the argument that that Weatherston is currently walking the vision that she’s talking.

There is a great deal of hope that this might change with the recent internal restructuring which Weatherston has carried out, with ANZ’s IT operation being split along business lines in the hope of developing deep internal domain expertise. And there is also a certain tenacity about the Scottish Weatherston’s character which you can’t help but admire and believe in … a certain humbleness and resilience which you don’t find in, shall we say, the more high-profile characters of some of her contemporaries at other banks.

But at the heart of the matter is that Weatherston just doesn’t yet seem to have the rock-solid internal executive support which a chief information officer like Westpac’s Bob McKinnon enjoys. And until she does, the CIO will find it hard to enact the stirring vision she outlined today.

The Queensland Government has revealed plans to become the first government in Australia to dump the traditional cabinet briefing bags full of paper documents and issue all of its ministers with iPads instead, for electronic access to the same information.

Queensland Premier Anna Bligh told an IT industry lunch yesterday the state would become the “first jurisdiction in Australia to allow ministers to read their cabinet bag via their iPad”. The cabinet bags contain briefing documents issued to ministers to aid them in their work, containing memorandums and reports from departments and other branches of government.

However, Bligh pointed out that Queensland had ministers located throughout the state, with the documents often having to be couriered out to remote locations. The use of iPads as a replacement, the Premier added, would allow ministers located in regional locations to access the documents “much more reliably from home”.

When the state was looking at implementing an iPad-based solution for the problem, Bligh said, it found “there was none”. So a Queensland-based firm, Speedwell eBusiness Solutions, was commissioned to develop a system for the Government. “I’m very confident that we will see other Governments wanting to buy it,” Bligh said, noting the solution that the company had developed was “highly secure”.

The news comes as debate continues to swirl amongst the top levels of the private and public sectors about the extent to which senior executives should be allowed to use their iPads for sensitive corporate and government information consumption and sharing.

ANZ Bank chief information officer Anne Weatherston, for example, told journalists last week that the bank was currently examining its legal position when it came to using the Apple tablets within the bank.

“There are some quirks of Australian commercial law, which I suspect the other banks are not aware of … in the way you use iPads,” the CIO said. “I would be concerned about rolling them out on a wider basis. It’s currently with our board for consideration in terms of how we deploy, and what functionality we allow from the iPad devices.

However, rival banks such as Westpac are known to use the iPad extensively at a board and executive level. The device is being speedily adopted by executives right around Australia, as well as general consumers. In addition, government authorities such as the Defence Signals Directorate have recently flagged their intention to examine Apple’s iOS platform — which runs its iPad, iPhone and iPod Touch devices — in terms of its security, with a mind to more widely deploying the technology throughout Government.

In 2011, analyst firm Telsyte estimates almost 1.2 million total tablets will ship in Australia in 2011 — with Apple’s share some 852,000 units. That number is almost triple the 400,000-odd tablets that sold in Australia in 2010.

Image credit: BBC

opinion It was a cold, rainy and blustery last Friday morning when I roused myself out of bed to get the day started. The sky was grey, my feet were cold and it took a cup of hot coffee before my brain started functioning at a normal level. And yet, as I prepared for the day ahead I felt an aura of anticipation approaching that of a Christmas morning, or perhaps Easter.

The presents that would be opened that morning were expected to be glorious. For the first time since her appointment in November 2009, ANZ Bank chief information officer Anne Weatherston had made time to make public the bank’s IT strategy. For the first time in several years, I thought, Australia’s IT industry would get some insight into what precisely the bank’s technology strategy and roadmap consisted of.

And the question of what that strategy entails is not a trivial one.

With some 6,000 IT staff (including a massive facility in India’s Bangalore), an annual IT budget of around $1.5 billion and systems which affect millions of Australians, every step that ANZ takes with regard to its technology roadmap will send shockwaves throughout the industry.

We have only to examine the influence that the technology leaders of fellow banks wield to see this in action. Bank CIOs like Jeff Smith (with Suncorp’s agile development processes and BYO computing philosophy) and Michael Harte (with CommBank’s massive core banking overhaul) have become larger than life figures in Australia’s IT industry over the past half-decade. Their every move is watched and they are breaking new ground.

However, like a child who awakens on Christmas morning to find that his destitute parents have filled his stocking with Weet-Bix, ANZ’s briefing on Friday was destined to disappoint. Throughout the lengthy briefing, the bank offered little beyond tantalising glimpses of what its technology strategy will entail over the next decade; instead using a series of platitudes and motherhood statements like “customer-centricity”, “critical enabler” and “organic network” to avoid giving any real detail about its plans.

What we do know about ANZ’s technology strategy through 2017 (its strategy through 2012 is mostly complete, not that you’d know) currently consists of dribs and drabs.

We know the bank is not pushing ahead with a core banking overhaul project, unlike all of its rivals (Westpac’s not making the plunge immediately; but has acknowledged it will take place in the long-term). We know the bank is continuing to focus on using technology to support its push into the Asia-Pacific region.

We know ANZ has upgraded its mainframe platforms and is pushing heavily into virtualisation, that it’s upgrading its customer-facing platforms (including Internet banking), as well as specific banking applications such as its Transactive cash management platform. We know that it has recently embarked on a desktop virtualisation project and it is continuing to standard on Oracle’s PeopleSoft ERP platform. We know its recent $500 million Optus contract is seeing its internal network upgraded.

However, in fact, we knew most of this before last Friday’s briefing.

What we don’t yet know would fill a country mile.

We don’t know, for example, to what extent ANZ is following Westpac and CommBank in building its own private cloud computing infrastructure. We don’t know how its internal network infrastructure is being upgraded, or whether it is moving down the path of internal videoconferencing and softphones, again, as CommBank is.

We don’t know what technology that desktop virtualisation project is based on. We don’t know how ANZ’s internal collaboration architecture (think email, authentication and so on) is evolving. We don’t know much about how ANZ is using software as a service platforms (although we do know Salesforce.com is being used in its insurance business).

We don’t know how the replacement of some 50,000 RSA SecurID tokens is playing out inside the bank, or how its security architecture is evolving. We don’t know precisely what the future of ANZ’s innovative goMoney app is, or how successful it has been, and we don’t know what the bank is planning in terms of near-field communications, the integration of its E*Trade brokerage business, the future development of its mobile software, and so on.

We don’t know what the mix of ANZ’s IT workforce is between Bangalore and Australia, how that mix is changing, and what that has meant for the bank’s relationship with its outsourcers. In fact, we don’t know much about who those outsourcers actually are.

Now there are two things to realise here.

The first is that the bank’s CIO Weatherston and its deputy CEO Graham Hodges (who was also at the briefing) did discuss almost all of these areas during last Friday’s briefing. However, they did so at such a high level that no specifics were mentioned. This makes it impossible to know much about what ANZ is really up to.

Secondly, of course is the fact that the bank is under no obligation to go into this level of detail about its operations in public. In fact, it may be to its advantage to keep quite a lot under wraps, so that its competitors can’t match what it’s doing.

However, I don’t believe that that is what is going on here.

After having met Weatherston, and asked the CIO a number of questions about her bank, I get the impression that the bank is facing a much wider problem: A lack of strategic thinking. Long-time banking IT commentator Charis Palmer wrote about ANZ in June that the bank lacks “technology vision and leadership”. I couldn’t agree more.

All of the things which we do know about ANZ’s technology operation right now indicate that the bank is pursuing a purely tactical approach to IT strategy. It’s moving with the demands of its business, implementing systems where it has to, and cutting costs where it can. In some areas — such as with the groundbreaking goMoney app — the bank clearly has small bands of smart people who are driving strong innovation within its operations. But the majority of ANZ’s technology work displays the lack of a guiding hand at the wheel. The rudder is skewing off-course.

In many industries, at many tiers of leadership, this wouldn’t be as evident as it is with ANZ. But we have many visionaries to compare Weatherston to; chief among them Suncorp’s Jeff Smith, CommBank’s Michael Harte and Westpac’s Bob McKinnon, who’s now on his second round of major bank IT leadership efforts.

Weatherston said last week that ANZ’s challenges were different from those of CBA. And she’s right — some of them area. But so many of them, especially infrastructure problems, are common to every large bank in Australia. And there is no evidence that the CIO realises how far ANZ is gradually falling behind.

It is not in 2011 that ANZ will fall behind rivals like CommBank and NAB when it comes to its core banking strategy. It will not be in 2012 or even 2013 that the bank falls behind when it comes to the technology which its staff use internally, or its development processes. It won’t even be in 2014 that the bank will begin to feel how slow and cumbersome it is becoming when compared to rivals.

But it will be in 2015 and beyond, and by the time 2020 rolls around, and Australia’s banking sector has accelerated to light speed and is facing a wave of new, Web 2.0-style competition from non-traditional players with no legacy infrastructure, ANZ will be in hot water. It is to meet this level of challenge that core banking systems and other aspects of internal infrastructure are being rapidly upgraded at its rivals. It is this level of strategic thinking which ANZ is lacking. Because the truth about banks is that they don’t simply use technology to support their businesses. Fundamentally, the provision of technology *is* their business. For those who doubt the veracity of this statement, I encourage you to examine the success of online payments giant PayPal, which is beating the banks at their own game on the Internet.

There are no sharks circling off the edge of the beach for ANZ right now. But there is a cluster of deadly predators on the horizon which will eventually eat the bank alive. Michael Harte’s got a pair of binoculars and a sniper rifle trained on the blighters right now, and NAB and Suncorp are planning to dive bomb them with a couple of helicopters equipped with rocket launchers. But Anne Weatherston … is still sunbathing on the sand with a martini in one hand and an Agatha Christie novel in the other.

Image credit: Delimiter

ANZ Bank chief information officer Anne Weatherston has rejected claims the bank’s technology platform was falling behind that of rivals, stating billion-dollar IT splurges by the likes of the Commonwealth Bank in recent years were necessary because of a lack of ongoing investment in technology infrastructure throughout the past several decades.

ANZ is the only major bank in Australia to have consistently rejected the need for core banking modernisation over the past few years.

The most high-profile project in the space is CommBank’s gargantuan $1.1 billion core overhaul, conducted over the past three years in coalition with technology partners SAP and Accenture. However, NAB’s own Oracle-based project is currently gaining a full head of steam, and even Westpac has long-term plans to tackle its core platform, using learnings gleaned from its acquisition of St George, which already operates a relatively modern system.

In March, CommBank CIO Michael Harte and other CBA leaders conducted a briefing on their overhaul in which they repeatedly emphasised that the project had put the bank between two and five years ahead of its rivals, allowing real-time transaction functionality and the speedy deployment of new financial products. However, the initiative has also proven costly. The cost of the CommBank overhaul was initially pegged in 2008 at $580 million. Since that stage it has since received several additional cash injections — with its budget rising by $150 million following its acquisition of BankWest, and then by a further $370 million in February this year.

Last week, in her first broad public briefing since taking the job as ANZ CIO in November 2009, Weatherston said CommBank was only investing so heavily in the project because it had to.

ANZ had upgraded much of its platform in the 1990′s, the CIO said, particularly building what she described as an “embryonic integration layer” on top of its systems which is still used as an interface between high-level systems and the bank’s underlying core banking architecture. That layer, Weatherston said, was “still very usable”, in terms of integrating channels and customer applications into ANZ’s offerings.

However, she said, it was also something that “CBA didn’t have”.

One of the main benefits of its overhaul, according to the Commonwealth Bank, is that it allows for what it describes as ‘real-time banking’. For example, in an ideal real-time banking world, transfers between customer accounts would occur instantly, even between banks — without the need to wait for overnight clearance, as is currently standard in Australia’s banking sector.

In response to a question about the issue, Weatherston said ANZ already had real-time banking — and had had it for “nine years” in Australia and New Zealand. “We can offer the same proposition as CBA”, the executive said — but unlike CommBank, the bank hadn’t chosen to focus on promoting the technology benefits to customers.

Also present at the ANZ briefing was ANZ deputy chief executive officer Graham Hodges.

In response to a question about real-time banking, Hodges said what was important for the bank was keeping its eye on the ball in terms of customer priorities. “It’s about meeting customer need,” he said, noting that for many customers, real-time banking wasn’t particularly a priority, compared to other potential upgrades the bank could be working on.

“The issue for us is that we’ve got a business strategy which we’re following,” said Hodges. “I’m sure that what CBA is doing in terms of managing their business is right for CBA. What we’re doing is right for us. I’d also say that maybe our systems were in different states as well.”

Where most banks tend to standardise on one internal core banking platform (for example the CBA’s use of SAP and NAB’s project to implement Oracle), ANZ currently has three different core banking systems. In Australia, the bank uses CSC’s popular Hogan platform, which is also used at St George. However, it has increasingly rolled out Infosys’ Finacle platform throughout the Asia-Pacific region as it has expanded its operations, and in New Zealand the bank recently consolidated onto the Systematics platform by FIS.

Unlike Harte at CommBank, Weatherston does not believe ANZ’s business strategy will be impacted by continuing to use its existing systems. “We will continue to have three cores, our business strategy does not require us to replace them,” said Weatherston last week. “Over the next few years, we will not be constrained by our core systems.”

ANZ would continue to focus on outcomes such as new business propositions and better customer service, Weatherston added. However, these outcomes “can be developed by integrating into our existing technology solutions.” “As a result,” the CIO added, in a possible dig at CBA’s SAP focus, “our technology roadmap looks a lot more complex than a single one-box vendor solution”.

ANZ isn’t planning to immediately overhaul its core banking platform. But what is it doing? Stay tuned as we continue to do a deep dive this week into what the bank has in store for its IT strategy.

Image credit: Delimiter

The approach that a number of major Australian companies and government departments are taking to RSA’s revelation that the integrity of its widely used SecurID two-factor authentication system had been compromised is changing hourly, as the nation’s major banks and other organisations discuss the matter with the security vendor and their customers.

The SecurID platform sees small devices commonly known as ‘keyfobs’ distributed to staff and customers of major organisations, who then use the randomised codes which they create to authenticate their credentials when they log in to sensitive systems such as internet banking platforms or government systems which hold vast swathes of data about citizens.

The technology is used by a number of major Australian household names including the Commonwealth Bank of Australia, Westpac, Australia and New Zealand Banking Group, the Australian Taxation Office, the Department of Defence and Telstra, to name a few.

RSA executive chairman Art Coviello disclosed in mid-March a hack attack had taken place against on the SecurID platform, and the news hit headlines again this week as it was revealed that an attacker had tried to gain access to sensitive information at defence contractor Lockheed Martin through the compromised technology. In the wake of the issues, RSA has offered to replace all of the keyfob devices internationally, and has been discussing the issue with customers in Australia. However, not all have taken up the company’s offer.

A Westpac spokesperson this morning had stated the bank would not reissue the RSA tokens to customers, noting that the devices were just one part of its overall security approach and stating that the security of online banking for customers had not been compromised through the recent issues. However, just hours later — and after the revelation that rival ANZ would replace some 50,000 of the keyfobs, Westpac had changed its tune, issuing a statement this afternoon to the effect that it would in fact replace its tokens.

“Our customers’ trust in the security of our systems is paramount,” said Westpac general manager of online and customer service centres Harry Wendt said in a statement this afternoon. “Although we do not believe that our customers are at risk from this event, we have initiated a token replacement program to alleviate any residual concern that our customers may have.”

A spokesperson for the bank said only a small number of customers had raised the issue — but it was enough to change the bank’s stance.

Earlier today, a spokesperson for ANZ Bank confirmed a report by ZDNet.com.au that the bank had taken the reverse approach to its rivals — and had decided to re-issue new RSA tokens to all customers and staff who currently had them — about 50,000 people. “While there is no direct threat to ANZ customers we believe this is the best course of action given recent advice from RSA,” a spokesperson for the bank said. “There will be no expense for ANZ customers as a result of this decision to replace the tokens.”

The bank said it was predominantly its corporate and institutional customers who used the tokens as one component of its multi-layered security systems. The bank has about 50,000 of the devices in use, with about 4,000 being used internally.

The ATO will also replace its tokens.

“We can confirm that as a precaution the ATO has been working with our service provider to replace our RSA tokens,” a spokesperson for the agency said. “However, the ATO employs a range of authentication and access controls and we do not place total reliance on any single control. As such, our security provisions remains effective.”

However, not everyone is jumping to the same conclusions as Westpac, ANZ and the ATO.

The Commonwealth Bank today said it would not replace the tokens it has issued to staff (it does not issue the tokens to customers). “The RSA ID tokens used by staff are only one part of a multi-layered security procedure. As a precautionary measure the CBA has implemented a number of additional security protections, and has continued to be briefed by RSA since the March incident,” a spokesperson for the bank said.

“The CBA takes security very seriously and has robust security measures in place. Our team of security experts continually monitor and review our systems, both internally and with our partners, to ensure our information is protected. We are in ongoing discussions with RSA to explore all options, including the replacement of tokens, but are confident we have put in place the right protections at this time.”

The situation remains a little more unclear with Telstra; with the telco not confirming whether it would replace its tokens. A spokesperson for the company would only say that it had been working with RSA on the issue since March, and was confident that the issue would not impact its customers, its data or its records, due to its multi-layered security approach.

In addition, not everyone agrees that changing the keyfobs over would actually resolve the security situation for RSA customers.

This afternoon, Paul Ducklin, the head of technology for the Australian division of RSA rival Sophos, slammed RSA for not properly disclosing what the actual security break-in had entailed at the company, stating that all RSA had done was allow the industry to speculate about what the problem might be. The solution to the problem for customers, Ducklin said, was unclear as yet — because RSA had not disclosed what access the attackers had to its systems — in effect, what information they had which would allow them to break through the security systems of RSA customers such as those highlighted above.

Because of this, Ducklin said, changing over the tokens might be an ineffective solution. “If you go to a takeaway [restaurant] and realise that you’ve had a dodgy meal, do you want a free meal afterwards?” he asked. “I’d say: OK, that’s great, but show me that you’ve made your place more hygienic.”

“If you ate “one burger with expired meat”, then went back for more, the executive argued, “you’re taking a gamble that next time the meat happens to be fresh”.

Other rival vendors, such as CA, have already started offering RSA customers an easy way out of the mess — offering to swap out RSA’s technologies with their own. CA’s local principal consultant for security, Trevor Iverach, said in an interview today that the hardware token technology was on its way out anyway — with the company seeing a general shift over the past six months to other solutions, such as the software-based offerings which CA sells. Some had seen the hardware as being too tough to manage.

Locally, RSA has been active in speaking to customers about the issue. But a spokesperson for the company declined to comment on the issue at all when contacted this morning by this publication.

Image credit: Crystal Woroniuk, royalty free

Australia and New Zealand Banking Group has given a series of tantalising hints about what technology projects have taken up its time over the past six months, in a half-yearly financial results session today which emphasised the bank’s strategy of focusing on investing on growth in markets in the Asia-Pacific region rather than Australia.

Unlike major rivals the Commonwealth Bank of Australia and the National Australia Bank, ANZ has not pursued a core banking overhaul project in Australia. Instead, in briefing documents today, it said over the past while it had continued to focus on core banking re-development in the Asian markets, as well as New Zealand, where its accounts will see a one-off NZ$98 million charge this half relating to core banking projects in the country.

The bank said its shift to a single core banking platform in the country was slated to drive operational efficiencies, improved services levels and other business outcomes – reflecting similar benefits which CommBank claims to have achieved with its own core overhaul in Australia. “Our move to a single core banking system later this year is progressing well and this will improve our ability to innovate and to serve our customers,” said ANZ NZ chief executive David Hisco. “This work is aimed at simplifying the way we operate and improving our customers’ experience.”

ANZ also focused on launching its cash management platform Transactive throughout Asia and in New Zealand in the half – which the bank has billed the first integrated cash management and paymanets platform across Australia and the Kiwi nation.

In Australia, the bank appears to have primarily focused on developing technologies which affect its end users directly, mentioning investment in customer-facing technologies such as development of its internet and mobile banking platforms, as well as the implementation of multi-lingual ATM machines, consistent with its strategy of becoming the Australian bank of choice for Asian migrants.

The bank’s iPhone application, goMoney, offers features which the other banks’ mobile apps do not – such as the ability to transfer money from customers’ accounts to non-customers directly, requiring just their mobile phone number. ANZ has also recently launched an iPhone app in Taiwan.

ANZ didn’t go into much detail about how its technology costs over the period were broken down. However, the bank’s overall “computer costs” rose 15 percent in the period (to $498 million) compared to the six months previously – an increase which the bank said was largely driven by increased contractor costs associated with technology projects.

The bank’s approach to technology projects – particularly core banking redevelopment – is markedly different from that of several of its rivals.

CommBank has placed its core banking re-development strategy at the heart of its drive to improve its operations, throwing more than a billion dollars at the project over the past few years and discussing the work openly.

In mid-March, Commonwealth Bank chief information officer Michael Harte held a wide-ranging briefing in which the executive and other CBA leaders repeatedly emphasised that CBA’s $1.1 billion revamp put it technologically between two and five years ahead of its rivals. Harte and others emphasised the real-time nature of the bank’s transactional capability, which the systems of most of its rivals do not share.

NAB is also undertaking a core re-development project, although the bank has spoken little in public about the matter over the past several years. Westpac is holding off from attempting a core overhaul – although the bank’s subsidiary St George already shares much of the real-time functionality that the CBA enjoys.

Image credit: Belinda Lester, Creative Commons

Insurance giant IAG has confirmed it is currently examining bids from a number of technology outsourcing partners to support its NRMA Insurance brand, as rumours swirl that the company will offload a portion of its technology operation to a provider in India.

In response to claims by a source last week that the company was considering outsourcing a chunk of work to one of three Indian service providers – Infosys, Tata Consultancy Services or Wipro – a spokesperson for the NRMA Insurance brand of IAG today confirmed the company was looking for external assistance, but wouldn’t name names.

“NRMA Insurance is seeking external IT support and is currently considering a number of providers to assist us in our ongoing operational activity,” the spokesperson said. They would not go into further detail about the nature of the services which could be outsourced.

The source had claimed no redundancies would be made in the company’s ranks, although it was planning to cut its current contractor base back. “We’ve shared this news with our people – there is no impact on them, and they will continue to support our business,” the NRMA Insurance spokesperson said. “We will also continue to use IT contractors and will be better placed to understand what support we will require from contractors as we bring external support on board.”

The news comes as the use of Indian technology outsourcing services continues to grow amongst major Australian organisations, with several of the larger Indian companies operating substantial facilities in Australia and maintaining Australia-focused offshore facilities.

ANZ Bank is not known to have historically had major IT services outsourcing contracts, but it does operate its own substantial offshore facility in Bangalore, India, where it has been steadily increasing its headcount over the years — with the number expected to be more than 3,500 as at early 2010.

Australian IT services firm Oakton has a substantial facility in Hyperabad, India, and in February this year said 50 percent of the staff that would join its ranks over the next six months would be based in India. And in February 2010 IBM Australia was cagey about allegations by the Australian Services Union that it would shift as many as 800 local jobs to offshore locations in India and China.
And the trend is even being felt at the small end of the business world.

In May 2010, local web business accelerator Pollenizer – which sits right at the heart of the technology startup community in Australia and has helped build several successful start-ups – such as group buying site Spreets – revealed it had grown its development team in India from just a couple of engineers to a team of about 50 staff. At the time, the company was looking to build its team in Trivandrum, Kerala.

Image credit: Saleem Taqvi, royalty free

blog The Australian Financial Review took another stab this morning (paywall) at digging some form of core banking systems overhaul strategy out of ANZ Bank, in an interview with Phil Chronican, the chief executive of the bank’s Australian business.

In it, Chronican reiterates the bank’s long-held position that no, it doesn’t need to overhaul its core banking technology (read: mainframes) and yes, the kids are alright (read: money is being spent to ensure internet banking remains up).

It’s a song that ANZ has been singing for some time, despite the best efforts of journalists and vendors to prod the bank into some form of massive technology investment. The second verse goes something like the bank is much more focused on investing in its Asian expansion than tinkering under the hood with risky IT overhauls that could give it engine trouble. Says Chronican:

“Core system replacements are very high risk and very hard projects, which is why most banks put them off for as long as possible … building applications outside of the core systems means you can effectively put off core system replacements for a very long time.”

There’s a reason the bank is so defensive. Over the past several years, Commonwealth Bank chief information officer Michael Harte and his superior officer, chief executive Ralph Norris, have been talking up the bank’s $730 million Accenture and SAP-backed core overhaul greatly. Terms like ‘real-time banking’ and ‘speed to market’ have been running rife. So naturally the other banks are feeling a bit under pressure to follow the CBA’s lead.

It’s a topic that also came up at the recent wide-ranging briefing held by Westpac tech chief Bob McKinnon, held days after the bank delayed its own core overhaul. McKinnon was at pains to defuse the CBA hype, pointing out Westpac subsidiary St George already had real-time banking, and there was much that could be done without it anyway.

Personally, I think the argument in favour of banks upgrading their core systems has not yet been made persuasively enough in Australia.

The CBA has been on a high-spending tech roadmap for the past decade — first with the CommSee project, and now with its core overhaul. But then, it needed to — it probably had the most archaic systems of any bank to start with. And why should all of the other banks play follow the leader if there are bigger problems that need to be solved?

I’d like to see the other major banks talk a bit more in public about this. It’s fair enough for the CBA to hype up its core overhaul constantly — when you’ve spent a pretty penny, you need to show something for it. But that doesn’t mean the other banks need to constantly sign up to the public narrative the CBA is creating for them — “core overhaul or not” is pretty much a false dichotomy — and even the Commonwealth Bank knows it.

Image credit: Belinda Lester, Creative Commons

New Zealand online accounting software provider Xero and Australia and New Zealand Banking Group have announced an exclusive joint marketing and referral partnership where Xero’s online accounting services will be provided as an option to ANZ’s 450,000 small business customers and their financial advisers.

“The integration of Xero’s software provides our customers with a simple and convenient solution to manage their cash flow and provides greater transparency around trading performance.” — Nick Reade, ANZ general manager of Small Business for the Australian region.

A commenter, Harry Sims, said on the Xero blog: “Great work, the timing is perfect to take advantage of the FYE (accounting software changeover period) in Australia. Good to see ANZ is a forward thinking company and they understand small business.”

Xero has been taking on MYOB to provide accounting services to small businesses through its software as a service accounting package. MYOB co-founder and former chief executive Craig Winkler invested close to $15 million in Xero April, three months after MYOB was taken over.

Established in 2006, Xero offers online accounting and financial software for small businesses and personal finances. The services are now used in over 50 countries world-wide and customer base has grown to 17,000. The company has seen a fast growth in the past year with revenue tripled and its customer base almost tripling also, it claims.

Xero chief executive Rod Drury was not available to comment at the time of writing this article. Xero is listed on the NZX.

Image credit: Xero