Delimiter » financial services

Two good Australian CIO interviews

Renai LeMay — Wed, 16 May 2012 03:45:14 +0000

blog There have been a couple of good interviews with Australian chief information officers done by various media outlets over the past couple of days — good enough that we thought them worth highlighting to readers on Delimiter.

At iTNews (click here for the full article), Ry Crozier (who we consider one of the best and most straight-up enterprise IT journalists in Australia) goes through the Queensland Department of Transport and Main Roads three-year integration of two previous departments. A representative paragraph:

The department’s Information Division – internally known as iDivision – is a “hybrid” of the two former departmental ICT teams, according to [ chief information officer Chris Fechner]. “We didn’t try and subvert one or the other,” he says.

Over at ZDNet.com.au (click here for the full article), there’s a solid yarn by Luke Hopewell, focusing on Allianz chief information officer Steve Coles, who was at a CSC event this week talking about re-using technology. A sample paragraph:

“I hate the term ‘legacy’ technology,” [Coles said.] “Legacy means [a system has] got to be replaced, and we’ve got to get a shiny new one. For us, it’s been a key part of our strategy to reuse and simplify rather than rip and replace.”

What did we like about both interviews? They both went deep, and they both went into what we call “high” enterprise IT. In other words, not just surface-level questions such as desktop operating system upgrades or “how do you use iPads in the enterprise”, but into questions of enterprise IT architecture and technology strategy. Some very interesting themes came out of both. Kudos!

Westpac delays shift off Lotus Notes

Renai LeMay — Tue, 10 Apr 2012 05:20:55 +0000

blog Remember in May 2011, when we broke the news that Westpac confirmed it would finally shift off IBM’s troubled Lotus Notes/Domino platform, in favour of an organisation wide shift to a hosted version of Microsoft Outlook/Exchange? Well, it appears that shift isn’t going too well. iTNews reports today (we recommend you click here for the full article):

… the bank has decided to “defer the project until a later stage.” Sources told iTnews that Westpac CIO Clive Whincup and CTO Jeff Jacobs, both installed in late 2011, ultimately took the decision after a group-wide review of ICT priorities.

Presumably this means that the bank’s tens of thousands of staff will remain on Notes for the forseeable future — and that those working for the bank’s St George subsidiary will remain on Novell GroupWise. Fantastic.

Does it seem to anyone else that things have started to unravel in Westpac’s IT department since mid-2011? The bank’s superstar chief information officer Bob McKinnon steps back into a more limited role, the bank kicks off widespread offshoring initiatives that are hitting its Australian headcount, it confirms it’s still running Internet Explorer 6, chief technology officer Sarv Girn exits stage left and from our point of view the bank doesn’t have a long-term plan for dealing with its ageing core banking systems … a situation St George, for example, dealt with quite some time ago.

Furthermore, in this morning’s Financial Review, McKinnon’s replacement Clive Whincup is quoted as saying there is “little demand” from staff for the bank to implement so-called Bring Your Own Device computing policies, despite industry analysts flagging BYOD as one of the hottest trends in current enterprise IT thinking, and fellow financial services giant Suncorp going headlong down that path.

All of this is dramatically different from the road paved with gold vision which McKinnon was selling technology journalists in October 2010. At that point it looked like Westpac was poised to start challenging CommBank for the crown of Australia’s most technologically progressive financial services group. Today it is increasingly looking like that title might go, ironically, to NAB — historically one of the most conservative of Australia’s top banks. Ironic. From my point of view it looks like Westpac is now heading full steam ahead into cost-cutting mode when it comes to IT.

Westpac’s decision on its unified collaboration platform does also raise a number of questions about the bank’s capacity to deliver. This should not have been that complex a project in the grand scheme of things. It uses standardised software from the Microsoft stack, and was slated to be implemented with the help of several gold-class IT services firms — IBM and Fujitsu. It would have brought uncounted productivity benefits to the bank. If Westpac can’t get this kind of ‘basic hygiene’ IT infrastructure project off the ground, how will it go trying to implement the much more ambitious core banking overhaul projects which are going on at CommBank, Suncorp and NAB?

Image credit: Winam, Creative Commons

ING DIRECT rolls out Microsoft cloud deployment

Asha Jacob, Chillibreeze — Wed, 21 Mar 2012 00:03:04 +0000

news ING DIRECT Australia has deployed Bank in a Box, a private cloud infrastructure, in collaboration with systems integrator Dimension Data and backed by technical expertise from Cisco, NetApp and long-term partner, Microsoft. A case study published by Microsoft this month reveals the background to the technology deployment at ING DIRECT.

ING DIRECT Australia is the country’s fifth-largest mortgage lender with more than 1.5 million customers. The bank needed a cloud-enabled operating solution to reduce its development time-line and accelerate delivery of its new products and services, for a quicker delivery of innovative ideas – in short, for improved IT efficiency.

ING DIRECT’s earlier delivery model had limitations on how many concurrent projects and changes it could manage. The ING DIRECT team’s goal was to work towards providing a copy of the bank to anyone, at any time, for any purpose, at the lowest possible cost. This included the full set of the bank’s applications, services, configurations and 5.5 terabytes of data. Bank in a Box was the solution to achieve this goal – it was a fully integrated solution that would enable rapid provisioning of entire environments, speeding up time to market for new ideas.

Windows Server Hyper-V provided the foundational virtualisation platform that facilitated ING DIRECT’s transition to the cloud. The private cloud solution features datacentre infrastructure built on Cisco Unified Computing System (UCS), Cisco Nexus switching and NetApp storage with Windows Server 2008 R2 Hyper-V virtualisation technology.

The case study (available in Word format here) claims that the solution reduced the time and cost associated with environment provisioning, and that has reduced the testing backlog appreciably. Andrew Henderson, CIO, ING DIRECT Australia stated: “The solution enables us to streamline processes that previously took eight people three months with a very simple self-service model.” Henderson further stated that the staff could now provision copies of the bank faster than before; new ideas could also be tested faster – all this giving ING DIRECT a competitive edge, he claimed.

Ben Issa, Head of IT Strategy, ING DIRECT Australia observed: “Our idea for the solution was unique, uniting technology from across the market to give us the capability to innovate and differentiate faster and better.” Issa added that Windows Server with Hyper-V and System Center (which helped coordinate the provisioning processes) helped ING DIRECT transform the bank’s datacentre environment into an automated, self-service private cloud.

Furthermore, the solution eliminated the need to build physical servers that required testing. Developers found it an efficient solution since Microsoft technologies were integrated into the private cloud.

The case study states that after successful pilot testing, ING DIRECT brought in Dimension Data to deliver the solution. Issa remarks that currently ING DIRECT uses the cloud based solution to meet different needs – from providing customer service representatives access to bank applications for training purposes to giving developers a full version of the bank at induction. Customer related or operational issues are easier to solve and the bank can redirect its skilled people and funds towards innovation.

ING DIRECT credited the close integration and collaborative relationship between Microsoft, Cisco, NetApp and Dimension Data in realizing the final vision of Bank in a Box. ING DIRECT is looking at deploying the solution globally this year in three of the bank’s locations.

opinion/analysis
There are two things which came to mind after reading this case study. The first was that virtualisation technology has truly come of age. To think that a bank could replicate its entire banking platform in a new instance for development purposes is remarkable. It will be fascinating to see what other uses of advanced virtualisation we see over the coming few years, and how the technology itself evolves.

Secondly, as with another major deployment with Coles revealed by Microsoft last week, it is fascinating to see that it is predominantly Microsoft infrastructure platforms being used here — not those from rival suppliers such as VMware. I have no doubt that this kind of rollout could also have been done with VMware — and I’m sure ING DIRECT, like virtually every major organisation in Australia, is also a heavy user of VMware. But it does show the extent to which corporate Australia is starting to use Hyper-V more and more at the moment.

Opinion/analysis by Renai LeMay

Macquarie opens kimono on IT operations

Renai LeMay — Thu, 09 Feb 2012 06:32:23 +0000

analysis One of Australia’s largest but most secretive IT end user organisations has this week given industry observers a tantalising glimpse of its broad IT strategy, including staff restructuring across the board, back-office systems integrations and offshoring moves.

It’s one of Australia’s largest financial services organisations and investment houses, but to the public — and even many of its own staff — Macquarie Group has always remained something of an enigma.

Those of us who’ve spent any time perusing the pages of the Financial Review or hanging out in the financial district of downtown Sydney will be familiar with the company’s reputation. Courtesy of its private banking operations, the organisation holds the fortunes of many of Australia’s richest individuals. Courtesy of its consultancy division, its hands had been involved in many of the nation’s largest corporate transactions — mergers and acquisitions. And courtesy of its stock exchange trading operations, it’s the first port of call for many Australians who love a punt on the sharemarket.

Perhaps most of all, it’s known for being Australia’s ‘millionaires factory’ — working at Macquarie, for many people, is a quick path to complete financial security.

But not much is known about what actually goes on within Macquarie. The company’s strictly separated divisions are literally separate companies in many cases. Employees are usually sworn to strict codes of secrecy and the group has a troublesome habit of declining press inquiries about its operations.

That aura of mystery extends to its IT operations. Over the past half-decade I’ve tried to interview the group’s long-serving chief information officer Nigel Smyth a number of times, but failed. Macquarie rarely issues any media releases about its IT operations, and I’ve never seen a press release from a vendor touting the company as a customer. Leaks are virtually non-existent.

However, if you peruse the pages of the group’s operational briefing (PDF) this week presented to analysts and investors, for the first time in years, you’ll be able to get a rough outline of what’s going on at Macquarie when it comes to technology. The key sections are those presented by Greg Ward. The executive is labelled in the documents as ‘deputy managing director’ of Macquarie Group itself, but Ward is actually more than that. He’s also chief executive of the Macquarie Bank division and has for many years been the bank’s and wider group’s chief financial officer.

At the moment, if you look through Ward’s presentation, it seems as if the executive is fulfilling more of an operations role for Macquarie. And if you look at Macquarie’s organisational chart, it’s also apparent that he oversees the bank’s technology support division — which the bank’s chief executive Nicholas Moore does not have a straight organisation line to.

Macquarie’s technology support division used to be called its Information Services Division (ISD). However, from Ward’s presentation this week, it seems apparent that the group has followed other major Australian banks and morphed ISD into a merged operations and technology division, representing their increasingly integrated nature.

In Macquarie’s case this division is called ‘Market Operations and Technology’ (MOT), and according to Ward’s presentation, it’s becoming a bit of a beast.

It looks like MOT’s formation dates back to 2010, when separate divisions Macquarie Securities Group and the Fixed Income, Currencies and Commodities group started sharing some back-office systems and data, as the pair moved towards a single view of clients’ financial resources. At that point, it looks as though Macquarie was also trying to consolidate some IT systems. I don’t know precisely what those systems do — but Ward lists them as ‘CONNECT, FIDESSA, Calypso, MTS and market data’.

The next stage took place in April 2010, when other systems and functions were consolidated into a new unit, the Market Operations Division. The driver at that point was to combine overlapping back office functions so Macquarie as a whole could reap efficiency benefits. By this stage, Ward’s presentation notes, the bank had racked up $28 million in savings.

Following that point, in December last year, the IT teams of MSG and FICC were merged, and the group started looking at using “lower cost locations” for some IT work. At another point in the presentation, it’s mentioned that Macquarie is using Manila in the Phillipines for IT development work (which we kind of already knew, due to rumoured job losses at Macquarie last year), although MOT is still quite large — with a combined headcount of some 3,500 staff. In total (across finance, technology, HR and business services), the group has over 1,000 offshore staff.

And the next stage is to leverage the combined MOT team across the other Macquarie divisions — with Macquarie Capital looking to be next, with integration occurring through the 2013 financial year.

So what does all of this mean? To my mind, it represents a fascinating shift in the Macquarie Group mindset.

Previously, it has been my impression that most of the group’s divisions attempted to be quite self-sufficient. This has been useful in maintaining the cut-throat competitive internal culture at the group, as well as maintaining so-called chinese walls between divisions when necessary. You don’t want a division aiding with secret M&A deals to be chatting casually with the staff in your equities trading division, for example.

However, it looks like Macquarie is currently trying to shift its administration footprint into being much more comprehensively cross-division, with IT as a core enabler of that shift. This is likely, of course, to bring the group significant efficiency dividends, as Ward mentions. However, it is also likely to give it a better view of its customers and a much more cohesive dataset about financial movements in Australia as well.

As its momentum in this area gathers pace, I would also expect Macquarie to run into some speed bumps. Because of the highly specialised nature of its business — even more specialised than the operations of major banks like CommBank and NAB, for example — Macquarie is likely to be currently running all kinds of niche financial software applications, and probably even quite a high degree of custom and in-house developed apps.

With several decades of that development work behind it, and with its divisions having previously operated on a more siloed basis, I would guess that integrating some of those IT systems will prove a lot more problematic than Ward would let on publicly. I’m also betting that some of them won’t end up being integrated — but rather just segregated off into convenient virtual containers, to keep running as they are.

One last thing: It’s interesting to see the difference in attitude between Macquarie and some of the other large financial services organisations when it comes to technology. The emphasis for Macquarie right now definitely does not appear to be on using technology to drive positive revenue and customer service outcomes for the group, as it is at CommBank. It appears to be more on the side of gaining efficiency dividends and taking cost out of the business. None of that is to say that positive technology improvement isn’t going on. But it’s not where the overall focus of the group is.

Regardless, as it is in Australia’s other major financial groups, technological change is definitely in the air at Macquarie. It will be fascinating to see what other tidbits of information escape from the mothership over the next year, after the unexpected treasure trove which Ward gave us this week.

Image credit: derivativeofcourse, Creative Commons

Westpac still running IE6

Renai LeMay — Mon, 30 Jan 2012 23:36:18 +0000

blog iTNews has published an excellent article today detailing how almost all of Westpac’s staff are still running Internet Explorer 6, and, presumably, Windows XP). The publication reports (we recommend you click here for the full article):

“Westpac staff have been left running outdated operating systems and browsers after the bank indefinitely postponed a $20 million technology refresh project aimed at delivering a consistent desktop experience across the group.”

We’d ask what gives, given that XP first came out in 2001, and even Microsoft itself has set a global countdown watch on the long-lived version 6 of its browser. But the sad truth is that many major financial services organisations and government departments in Australia are still running both. NAB only upgraded to Windows XP from NT (yes, I said NT) in 2008, while CommBank still runs Windows XP (on its MacBook Air fleet, no less) and the Department of Defence only recently upgraded to IE7. Disclosure: Delimiter runs predominantly on Chrome, with the odd Firefox flirtation.

Bendigo and Adelaide Bank deploys next-gen IBM storage

Chillibreeze — Mon, 30 Jan 2012 22:45:45 +0000

news IBM XIV Storage System Gen3 will be a key infrastructure component for Bendigo and Adelaide Bank, forming an underlying foundation for the ongoing development and delivery of customer-focused business applications, according to an announcement by IBM yesterday.

Bendigo and Adelaide Bank, which owns and operates Bendigo Bank, Adelaide Bank, Sandhurst Trustees, Leveraged Equities, Bendigo Wealth, Rural Bank and Oxford Funding among others, is the first Australian organisation that will deploy the recently announced XIV Gen3 disk storage systems.

IBM claims that IBM XIV is a proven high-end disk storage system designed to eliminate storage management complexity and deliver high performance. The company asserts that the Gen3 models are optimised for cloud computing and virtualisation, and will provide the bank with ample room for service expansion in the near future without the economic and environmental costs of extra hardware.

The two XIV Gen3 units to be deployed will be part of a set of upgrades, which includes new IBM SAN Volumes Controller nodes, to improve capacity for Bendigo and Adelaide Bank’s customer service operations. The storage systems will support file/print applications, Exchange, SQL databases and backup and recovery applications. The upgrades are also expected to address the issue of steady increase in IO load and storage server CPU utilisation with deployment of new customer applications.

“The new IBM XIV Gen3 units will provide us with the capacity to deliver and maintain significant performance improvements as our storage utilisation grows, without storage issues. We expect to see considerable benefits, including improved and consistent application response times,” said Greg Smith, Storage Team Leader at Bendigo and Adelaide Bank. “Our objective is to be the number one customer-connected bank in Australia. The main thrust of application development has been around knowing and understanding customers better, and delivering applications which provide better services to them.”

He added, “We’re able to consolidate our storage requirements into a smaller number of controllers on the floor. The IBM XIV Gen3s will ensure performance improvements in our applications, allowing us to provision storage quickly so that the bank can continue to grow, within its current data centre footprint.”

All praise for the “seamless installation process” which would allow them to “leverage the new infrastructure well before the peak Christmas period,” Smith gave credit for this to the ongoing relationship between Bendigo and Adelaide Bank, IBM and ISI. ISI, an IBM business partner, is an Australia owned and operated IT solutions provider that is working on the implementation.

Image credit: Patrick H, Creative Commons

E*Trade flooded with DDoS before Christmas

Nayantara Mallya, Chillibreeze — Thu, 05 Jan 2012 23:14:36 +0000

news ANZ Bank’s stockbroking service E*Trade was hit by a distributed denial of service attack in the lead-up to the 2011 Christmas season. After initial denials that the site had been attacked, the company sent its customers a letter informing them about the attack yesterday.

The problem was first reported by the Australian Financial Review when the platform’s overseas customers were unable to access the trading platform for more than a week (with some reporting access issues for two weeks) in the latter half of December.

A DDoS attack implies that numerous independent, or distributed, computers continuously make millions of requests for information and overwhelm the victim’s resources. The consequent slowdown or shutdown in response hinders the ability to provide efficient service to legitimate requests. Executors of DDoS attacks usually target services that are hosted on high-profile Web servers, including those of credit card payment gateways and banks. DDoS attacks violate the acceptable use policies of Internet service providers.

In the letter sent out to customers, Stuart Sayers, Managing Director, E*Trade Australia, stressed that immediate action had been taken to restrict access from some overseas locations, and that the security of the E*Trade website had not been breached at any point. It is believed that access was restored after risk assessments were completed on each country. Sayers explained the initial lack of information to customers as being due to the nature of the incident, and conveyed the company’s apologies for the inconvenience and frustration caused to customers.

Customers from the United States, China, United Kingdom, Indonesia, Thailand, United Arab Emirates and Japan were among those who experienced interruption of service from 19 December onwards. To carry out trades, overseas customers had to phone the bank directly. Some affected customers have threatened on online forums to leave the trading platform, expressing annoyance at the lack of communication about the problem and assurance about security of their funds and accounts.

E*Trade began as the Australian wing of the global E*Trade brand that made it big in the 1990s, and was acquired by ANZ in 2007.

Image credit: Robert Linder, royalty free

The Westpac dialectic: IT outsourcing and warring narratives

Renai LeMay — Mon, 14 Nov 2011 06:05:19 +0000

opinion/analysis If you were a guardsman patrolling Westpac’s chrome and steel fortress in downtown Sydney as the company held its annual results briefing session several weeks ago, it would probably have been inevitable at some point that you would have recognised that something had gone rotten in good Queen Kelly’s normally prosperous realm.

On the face of it (as all great enterprises constantly strive to assure the public) everything was going swimmingly. The bank had announced record profits — up 10 percent to almost seven billion dollars — for the past year, and the future was looking swell. The annexure of luscious tier two target St George? Complete. Deeper relationships with loyal customers? Growing. Productivity savings kicking in? Nice.

Tick, tick, tick. As with all annual results sessions, you got the feeling that Westpac was heading for an explosive finale. Boom! We conquer the world. Make all of our shareholders millionaires. Buy CommBank. Whatever. Something larger than life. Something to inspire us all.

But as the day — and the week following it — wore on, it became increasingly clear that a thread of unease had made its way into Westpac’s golden future. A hint of that horrible concept which every major Australian corporation constantly dreads being associated with. Something rotten in the back of the fridge. As Gail Kelly smiled, nodded and accepted the plaudits of analysts graciously, whispers were beginning to circulate that the bank was planning a large round of job cuts in its technology operation.

To have this scenario associated with a record annual results session is the definition of a no-no, as viewed by any company’s board. Instantly, your successes turn into failures, as the redundancies become the story. A layoffs angle associated with a record profit session is every journalists’ dream and every chief executive’s nightmare. It allows the press to feel good about itself and get on its high horse — exposing corporate greed, putting the manacles on power and portraying smiling, well-dressed executives as Machiavellian manipulators. It allows unions to do the same, and forces the public into believing the worst of Australia’s corporate giants. In short, it’s top stuff. Not exactly the image that Westpac wants to be associated with.

And so, in its own moment of crisis several weeks ago, Westpac bank tried to spin its way out of its little mess.

Applying tried and tested techniques imported from Westpac’s marketing department, Kelly re-branded the offshoring of jobs as “best-sourcing” of the bank’s technology resources. Redundancies aren’t redundancies in 2011. What they are is bringing “rigour, discipline and cost efficiency”. They’re “more efficient workforce management”, ‘leveraging partners’, suppliers managing functions on “an outcomes basis”, “scalability”, “flexibility”, “a step change” in supporting the bank’s applications, and more.

The changes would involve “systematically identifying and engaging the most skills and cost efficient resources to identify functions or processes, whether they work through us directly or indirectly through one of our local or off-shore supplier partnerships”, iTNews quoted Kelly as saying.

“In other words, we specify what we’re looking for from that function, the processes are clearly documented, they bring their resources, expertise and people to it and we get the flexibility and get the best practice that they can bring to us,” she added later, according to The AustralianIT. “It’s a new model, it gives us scalability, it gives us flexibility.”

And Australia’s technology press ate it up wholesale. Headlines like “Westpac details multi-sourcing plans”, “Westpac CEO Gail Kelly spruiks ‘best sourcing plans’” and even “Westpac trusts contractors with more work” exploded across the web, as the bank’s new IT strategy found its footing and took on a life of its own.

If you believed the hype, a newer, more complex form of banking was emerging. One which would take us all forward into a glorious future, leveraging the right “resources” and improving productivity and effectiveness. As Westpac’s results briefing calmed down, this became the dominant narrative externally to the bank. There were no outraged staff members. No journalists asking pesky questions. No — God forbid — political interference. I’m sure the executive team down at Westpac Place was satisfied. All was well in Kelly’s kingdom. Calm and quiet — just the way CEOs like it.

Pedal hits the metal
But inside the bank, unfortunately, all was not well.

Just days after Kelly announced Westpac’s new ‘best sourcing’ IT strategy on Thursday November 3rd, the bank’s employees began to feel nervous. What, after all, did ‘best sourcing’ mean? Some articles on Westpac’s announcements — this one by iTNews being the most notable and detailed — had contained disturbing implications. Did Westpac expect “staff cuts”, as the publication reported? Was it true that possible suppliers included Indian outsourcing giants Tata, Infosys and Wipro, as well as IBM (which also has a substantial facility in India)? Sure, most of these names were already strongly associated with Westpac. What did “best sourcing” truly mean?

The answer was to come swiftly.

“Westpac is outsourcing all development functions over the next 20 months,” one industry source told me early the next week, as the rumours caught fire. “Affects maybe 2,000 jobs under the Software Delivery Applications area.”

The whispers continued to come thick and fast. Firstly, the announcement was to come from Kelly herself. Then, things shifted and it was to come from highly regarded Westpac chief information officer Bob McKinnon. The figure shifted as well. First, 2,000 staff were to be under review, as that was the total amount of staff in the Software Development Applications area. Then things moved — the outsourcing was to affect just some 1,200 staff who did development and testing work. Now, the rumour mill has focused on compulsory leave over Christmas for some staff.

As is turns out, Westpac did make an announcement on the day the rumours suggested. The bank confirmed in a statement last week that it opened consultation with staff on the matter on November 8 — a Tuesday. Five days after its annual results announcement the previous week. Five days in which rumours flooded around Westpac and the remainder of the banking sector like wildfire.

And indeed, although the bank said it doesn’t know how many staff were to be affected by the cuts, the 1,200 number keeps on floating around.

“As you know, we are currently at historically high levels of employment and have bought in an additional 1,200 contractors in the past year and a half to work specifically on application services work,” the bank’s spokesperson said last week. “As we are currently undergoing consultation and then transition we are not yet in a position to confirm future staffing levels and the breakdown between permanent staff and contractors.”

After the announcement, the situation only got worse for Westpac, as panicked internal staff called their union representatives in for help. That same Tuesday, the Financial Services Union wasted no time in issuing an inflammatory statement on the matter, including all the keywords to get journalists fired up. “Westpac announces first job cuts after making record $7 billion profit,” the union’s headline screamed. “The job cuts, mainly in Sydney and Adelaide, will mean that a number of IT functions will no longer be handled by Westpac, and will instead be provided by outside companies both in Australia and offshore.”

Boom. There’s a hot story right there. And as they had the week before, the headlines flowed in. But this time, Westpac wouldn’t have been too happy with them. “Best sourcing” was out. “Outsourcing to India” and “cutting Australian jobs” was in. “Union fires up over Westpac outsourcing,” wrote ZDNet. “Westpac to shed jobs as cost cutting bites,” was how the Sydney morning Herald labelled it. And iTNews was more blatant: “Westpac cuts 188 tech jobs”. Even Delimiter itself got into the act, with “Outsourcing to affect 188 Westpac jobs”.

Despite the bad press, the headlines didn’t appear to phase Westpac. The bank issued a cool statement noting it had announced to staff that it was “changing the way we outsourced some roles” and that the 188 jobs referred to “an initial consultation process”, but that it would “minimise the overall impact on our technology workforce”. Above all, Westpac emphasised it couldn’t be sure how many Australian jobs could eventually be affected. “The final impact on our full-time staff will not be known for a number of months as we work through the transition,” the bank said.

But despite Westpac’s best intentions, these comments sent a number of readers hopping mad.

Delimiter subsequently received a throng of anonymous tips alleging that the bank — as the union had already stated — had been outsourcing “for well over 18 months already”, was already using Indians in bulk for onshore jobs under 457 Visa, was handing over intellectual property to companies like Infosys and Tata, and was even keeping some Australian jobs just until they could ensure the Indians were reliable.

And there appeared to be some truth to some of the comments.

Westpac’s spokesperson confirmed it was already using a combination of permanent staff, local contractors, specialist organisations and its “existing offshore suppliers” to support its application development and maintenance needs. They confirmed the bank was looking at how that mix might change, as the bank’s business requirements changed. And they also confirmed comments that the bank had recently been integrating its BT and institutional bank technology workforce into its main technology division.

Do I think Westpac is looking to outsource 2,000, or even 1,200 staff? Do I think it’s not protecting its intellectual property? Do I think it had shoddy employment practices? No — there’s not much evidence that things are that bad, although I’m sure there are elements of these issues floating around, as there are at most companies. But some people do believe these things. And some of those people are the bank’s own staff members.

The wash
Now, what I don’t want to do with this article is give readers the idea that there is anything wrong with Westpac’s strategy of outsourcing jobs to Indian IT firms.

Frankly, and I can’t stress this highly enough, the Australian business community is currently extremely reliant on offshoring initiatives for one simple reason: It is completely impossible to source the amount of skilled labour which major companies like Westpac require purely through on-shore labour — and certainly not at any price level which would be considered reasonable. I’ve heard this story time and time again from Australian executives — enough times that I believe it to be true.

Secondly, it is also true that if you are one of the Westpac staff affected by the move, it is highly likely that your experience in Australia’s banking sector will enable you to find a new job — or, more likely a new, well-paid contract — pretty quickly. Good IT skills are in short supply in Australia right now, and the banking technology world is a small one. If you’ve got a few connections, you’ll probably pull through OK.

The angered emails I’ve received over the past several weeks on the matter, the heavy-handed union claims on the issue and the level of angst out there about Westpac’s actions … are pretty much overblown. Calm down, people. Westpac is enacting a legitimate business strategy here. It’s not the end of the world. ANZ has had a whole in-house IT facility in Bangalore for years. Offshoring is speedily becoming the norm — not the outrage which the unions would have us believe.

However, what is also true is that Westpac has enacted this strategy in a coldly manipulative way which I, and I’m sure many of its staff and contractors, find fairly offensive and a little Orwellian. It has attempted to rigorously control the way it communicates its job cuts, both externally and internally, in a way that will lead it to the greatest advantage — but in a way that has required it to obfuscate and hide the truth deceptively.

The bank’s marketing-esque ‘best sourcing’ language used at its annual results session was a blatant attempt to cloak its IT offshoring initiatives in a golden varnish of shiny corporate-speak. Take this example of nonsense doubletalk, for example:

“The current challenging market conditions require Technology to improve our capability, agility and productivity. To achieve this, a “step change” is required in our approach to sourcing and delivering applications services. We are moving to adopt an outcomes-based services approach to sourcing and delivering applications services. This approach will improve our productivity and agility through optimising our engagement with and value obtained from our preferred suppliers.”

What exactly does this mean? To most Australians, it will mean just one thing: Absolutely nothing. To a certain variety of corporate yes-man, it will mean: “We’re doing something, but we don’t want to put it in words which actually mean anything”. And to Westpac’s panicked staff, right now it means: “Get off the sinking ship before you’re forcibly jettisoned.”

I also don’t really believe Westpac when it says it has no idea how many staff will eventually go. These things don’t happen overnight — if the bank is confident enough to begin discussing the matter publicly, it has to have been in closed door discussions with the outsourcers for months — perhaps many months. In my experience, McKinnon and the other Westpac technology brass have always had a very, very concrete and solid idea of how they want the bank’s IT strategy to go forward.

Despite this, however, the bank last week chose to tell staff and union members that just 188 jobs were at risk in the short term. This action represents something fairly cold — a calculation that the bank can get away with more cuts than it would otherwise, if it sugar-coats them and extends them into a lengthy series of small job loss packages over time rather than a lot hit on the head in one fell swoop.

The difference between the narratives generated by Westpac and the Financial Services Union is that Westpac was easily able to predict what the union would do, confronted with any job cuts at all. So, in a calculated fashion, it limited its losses. Instead of fighting one major battle, it chose to fight the union — which represents its own employees — in a guerrilla war of attrition. It will cut down resistance to the job cuts one step at a time, one small division at a time, until it reaches the level it wants to. It’s a proactive strategy which will ultimately defeat the more reaction union, as it is designed to do. In comparison, the union is reacting entirely as predicted. Outrage, outrage, burn and outrage. It’s what unions do best. Westpac knows this.

The interesting thing about the first (at its annual results) and second wave (the union’s statement the next week) of reports about Westpac’s IT outsourcing efforts over the past several weeks is that they actually contain almost the exact same information. But the information was framed differently. One man’s “best sourcing” and “more efficient workforce management” is another man’s “188 jobs offshored”. One man’s ‘valued partners’ becomes another man’s Indian offshoring initiative.

From my perspective as an onlooker, it’s like watching a vast smothering blanket being draped over Australia’s banking technology coversation. Right now, with respect to its staff internally, onlookers externally and third-party stakeholders like its unions, Westpac is not being clear. It might be taking the right business strategic approach — in fact, knowing its CIO, Bob McKinnon, I’m sure that it is. But the way it is communicating that change reminds one of a vast, multi-headed bureaucracy stifling all dissent.

From this angle, it’s not hard to see why unions and other employee groups get so frustrated with corporations like Westpac. In a vain attempt to find out what’s happening with the bank’s workforce, they are confronted with waves of corporate jargon. Journalists are pre-brainwashed so that repetitive small rounds of cuts can be made later without fanfare. And staff members only find out about things after everyone else … including, most likely, many staff from the vendors who will help replace them.

One of the most extraordinary things about this whole process is that previously, I had considered Westpac one of the most open of Australia’s banks. I’ve sat down over lunch with its CIO Bob McKinnon and other senior executives. I’ve quizzed the bank many times on individual news stories — such as its shift to Microsoft Exchange — and gotten fairly normal responses. But after what we’ve seen from Westpac over the past few weeks, I’m disinclined to continue to trust it as I have been.

As a technology journalist, I’ve always been willing to accept a certain amount of conceptualised thinking. When you’re at a 30,000-foot view as a CEO or CIO, overseeing thousands of staff at a major organisation, those staff necessarily become ‘resources’ rather than people. Trends, cycles, variances. All of these things become more important than individuals when they’re writ large over such a huge canvas.

But there is a difference between that kind of conceptual thinking and the kind of cold manipulation which Westpac has carried out over the past few weeks. “Best sourcing” is not an acceptable metaphor for reviewing thousands of people’s jobs. “More efficient workforce management” should not be used as a catchphrase for a process which will influence the future careers of staff members who have worked passionately for your business’s advantage.

At a certain point, corporate-speak becomes more than an abstraction. It becomes more than a useful metaphor. It becomes something which is simply undesirable in the honest relationship between an employer and and an employee. It becomes something which is all-too pervasive in our media-saturated society. It becomes something which we must make war against, and attempt to outlaw. It becomes nothing more than that most odious of things: Spin.

Spin, spin, glorious spin.

Granularity enters APRA’s cloud computing stance

Renai LeMay — Wed, 21 Sep 2011 03:53:25 +0000

blog Fascinating news arrives courtesy of iTNews (which does great cloud computing reporting) that the Australian Prudential Regulatory Authority appears to be shifting its historically antagonistic stance towards cloud computing technologies.

Those with long memories will remember APRA — which regulates Australia’s financial services organisations, such as banks and insurance groups, has previously issued warnings about cloud computing, warning that the “innocuous” nature of such services could mask hidden concerns about offshoring. However, in a speech reported by iTNews this week, APRA appeard to take a more granular approach to cloud computing — a data management guide pending and the group’s head of IT risk David Pegrem noting:

“The number one step is to understand and to be able to classify your data in order to understand what data is going out [to third-party service providers] and what level of sensitivity has to do with that data.”

This more practical approach from APRA to cloud computing reflects the approach which the banks are starting to take themselves. A few weeks ago, Westpac revealed, for example, that it was recently able to host some data in Microsoft’s Azure public cloud because no identifiable customer information had headed offshore.

As I wrote a few weeks back, the debate around cloud computing in Australia is becoming more granular and tactical — as organisations gradually shift to a more mature understanding of this new class of technologies. In some ways, this is not a revolution; but an evolution; not a black and white scenario, but one of shades of grey. It’s good to see some recognition from APRA of this fact.

Image credit: Gareth Weeks, royalty free

Westpac: A case study for the complex cloud

Renai LeMay — Fri, 02 Sep 2011 04:23:35 +0000

opinion If you were primarily a non-technical person such as a chief executive or financial officer, you would probably believe right now that cloud computing was the panacae to all of your ills.

As you walk through airport gates, images of cumulus greet you, breezily beckoning you into a soft and welcoming environment courtesy of Telstra and Accenture. From the pages of a magzine, Fujitsu exhorts you to ‘go domestic’ with its on-shore cloud, while iPad advertisements pop up inviting you to learn about Microsoft’s Windows Azure platform. Salesforce.com’s gentle blue colour scheme beams at you from marketing collateral which arrives unexpectedly in your inbox.

In short, the public messages about cloud are everywhere right now — gently blanketing corporate decision-makers in a cosy warm glow and encouraging them to learn more about the new paradigm. And strung throughout them is one consistent message, which every vendor is singing in tune to: The cloud is easy, simple to adopt, and will take responsibility for problematic IT infrastructure off your shoulders, while cutting your costs.

Any senior executive right now who hasn’t been receiving these subliminal messages about the cloud for the past six months must have been living in a remote village somewhere in Africa. Because they have been universal.

Now, of course, there’s a strong element of truth to the cloud marketing push. Cloud computing is here to stay for a reason. It does represent a revolution in how organisations and individuals consume IT resources. And it is a revolution which senior executives everywhere need to pay attention to — to say something of those lower down the IT food chain who will actually be tasked with implementing the new hotness.

However, what is also true is that the case for cloud computing is far more complex than the vendors would have their customers believe. And the best example I can think of right now to illustrate that fact is the extremely dynamic way in how one of Australia’s major banks — Westpac — is using cloud computing technologies to meet its complex business challenges.

Articles about the bank over the past year have made clear that Westpac is not using the services of one or two cloud computing vendors to meet its needs. Nor is it retraining itself to using just private clouds, or just public clouds, or just software as a service, or just infrastructure as a service. It’s using an “all of the above, when appropriate” approach which defies easy classification.

For much of its basic infrastructure needs, for example, Westpac has built its own private cloud using technology from the VCE consortium built by VMware, Cisco and EMC to do so. To be clear, this isn’t a platform outsourced to a vendor — although we’re sure Westpac’s primary outsourcer IBM had a hand in it. It’s internal infrastructure which is nonetheless extensible and able to be used dynamically by Westpac’s many internal project teams.

Westpac’s staff collaboration platform has also gone into the cloud — but a completely different cloud. Email, directories and internal documentation isn’t the sort of thing Westpac is comfortable seeing hosted offshore, so the bank has recently inked a contract for its collaboration serices to be provided as a service from an on-shore Fujitsu datacentre. The contract includes the use of Microsoft’s Exchange, Sharepoint, Lync and Mobile Device Manager software — all from Fujitsu’s data centre. And it’s priced for a base fee, plus a “pay as you go” model on top.

With me so far? So far we’ve listed cases where Westpac has built its own internal private cloud, and where it is purchasing on-shore software as a service from an outsourced provider. Now things get more complex again.

This week Westpac revealed that it had deployed Microsoft’s Windows Azure platform to host an analytics package in the cloud. There are no Azure datacentres in Australia, so what this means is that Westpac’s data and processes were being hosted offshore, likely somewhere like Singapore or the US.

Normally this is a regulatory no-no, but speaking at Microsoft’s Tech.Ed conference, the bank’s principal architect reportedly gave a very granular argument for why this was possible — there was no customer information going offshore, but the processes involved required a high degree of normally expensive compute power.

And now things will get more complex again.

In another article last year, the bank’s chief information officer Bob McKinnon even discussed the possibility of pooling some infrastructure and applications between banks. In the case where there was no competitive advantage from the banks running separate platforms, the executive argued, this might be possible — such as the fact that there is no competitive advantage in the banks’ separate mortgage platforms.

If you’ve gotten this far through all of these examples, what you’ll realise is that when you say the word “cloud computing”, to an organisation like Westpac, this term can mean many different things. The reality is that right now the bigger conversation around the cloud — which typically revolves around “onshore versus offshore” — is just not granular enough to be a meaningful discussion for many organisations.

When an organisation looks to solve a business problem, in 2011, there are many different ways they can look to do so with technology. Odds are that the cloud will come into the discussion at some point, but it will not come in at the high level which most people are talking about cloud right now. It will come in at a much more tactical level — an “is this the right tool” level, rather than “is this the right toolbox”.

What I’d like to see from the cloud computing discussion in Australia is more of this kind of more sophisticated debate — reflecting the complexity of end users’ actual needs.

Over the past few months we have started to see some of this more considered conversation around cloud computing emerge. Ninefold’s been doing it for a while, and I’m also encouraged by the recent detail encapsulated in a blog post about data sovereignty by Microsoft Australia director of legal & corporate affairs Jeff Bullwinkel. Detailed discussions emanating from the likes of CSC and Fujitsu about how the cloud can be used in its many different incarnations has also been encouraging.

But more thought is needed about how cloud computing can affect individual business problems in individual industries. For example, how can infrastructure as a service be best used by the mining industry, if at all? What is the best software as a service-based CRM platform for Australia’s retail sector? To what level of granularity, and in what sectors, should collaboration platforms be hosted internally, externally, in a public or private cloud, as a traditional managed service? And so on.

Sure, there are still mega-debates we need to have — such as the age-old question about whether it is economical for massive vendors like Microsoft or Amazon to build on-shore cloud computing facilities with their own datacentres. But it is also the answers to many of the smaller, sector-specific, application-specific questions which will aid us in deciding those larger debates anyway.

Until we start to have these more complex debates, Australian CIOs — who are starkly aware of the different cloud offerings out there — will face great challenges in explaining the right path forward for their organisation to senior executives such as CEOs and CFOs. Because right now, ‘cloud’ covers so much under one umbrella that many CIOs are switching off when they hear the term used … while most CEOs and CFOs no doubt think, when they think about the cloud, that it’s a catch-all solution to every problem.

The answer, as is usually the case, lies somewhere in between.