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.

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

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

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.

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

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.

news Microsoft has attempted to dampen concerns about US Government access to Australian information hosted in American cloud computing facilities by claiming cooperation between governments would likely mean either country’s law enforcement branches could get access data they wanted anyway — regardless of where it was hosted.

Over recent months, Australian cloud computing companies such as Macquarie Telecom-backed Ninefold have raised worries about legal jurisdictions with regard to cloud computing facilities. For example, in mid-July the company warned any datacentre set up by global rival Amazon Web Services in Australia would still be subject to US legislation, despite being located in a different jurisdiction. And earlier that same month, the company highlighted a case in the US which saw the FBI seize a number of servers at the US-based datacentre operated by DigitalOne, without informing customers hosted in the facility about the raid.

At the centre of the debate is the controversial Patriot Act, which was signed into law in 2001 under then-US President George W. Bush. The legislation was a response to the September 2001 terrorist attacks, and reduced restrictions on law enforcement agencies’ abilities to access information held by organisations in the US.

However, in a blog post published last week, Microsoft Australia director of legal & corporate affairs Jeff Bullwinkel appeared to attempt to clarify the debate for those not familiar with the legal niceties.

“When I’m talking to customers, they’re often concerned about the idea that the U.S. government might have the ability to gain access to data stored outside the United States when the data is held by a U.S.-headquartered provider of cloud services. For a number of reasons and for the vast majority of organisations, however, the true impact of the Patriot Act in this context is negligible,” the executive wrote.

Bullwinkel stated the Patriot Act was really a compilation of amendments to other pre-existing laws — which had often already given the US Government access to information held by organisations in the country anyway. “US courts have long held that a company with a presence in the United States is obligated to respond to a valid demand by the US government for information – regardless of the physical location of the information – so long as the company retains custody or control over the data,” wrote Bullwinkel.

The rub for Australian organisations, he added, was that our own Government — like many other Governments around the world — complied with most requests for information from external governments for law enforcement purposes anyway.

“… even when data is hosted by a major cloud services provider with absolutely zero presence in or contacts with the United States (an unlikely scenario, given the economies of scale involved in cloud computing) that information would generally still be accessible to the US government if needed in connection with a criminal case,” wrote Bullwinkel.

“That’s because Australia and the United States, like most countries around the world, cooperate closely in law enforcement matters. Under a longstanding bilateral mutual legal assistance treaty providing for law enforcement cooperation between Australia and the United States, either government can gain access to data located within the territory of the other.”

“Are there interesting and challenging policy and regulatory issues that arise in the context of cloud computing? Yes there are, and organisations transitioning to cloud-based technologies are wise to consider them. But it’s important to ensure that the discussion isn’t clouded by misunderstandings or confusion about the legal landscape.

opinion/analysis
I’m not sure whether Bullwinkel’s comments are intended to reassure Australian organisations that it’s safe to host their data in Microsoft’s global cloud (which is served from datacentres in the US, as well as other countries such as Singapore and Hong Kong), or not.

In one sense, they would appear to be a useful, factual addition to the debate, and a useful counter to the somewhat fearful comments which Australian cloud computing providers like Ninefold have been injecting into the market. However, on the other hand, the arguments which Bullwinkel has outlined in his post, I would bet, would make many Australian organisations — particularly governments — even less likely to want to host their data in a global cloud computing facility with links to the US.

If cooperation between the Australian and US Governments on this issue is so well-established, even more reason to host your data in Australia, so the argument would go — at least you’re on your home turf and able to deal with your local law enforcement authorities, with your own local expert lawyers, if there’s a problem.

The fact remains, regardless of what the true legal situation on the ground is, that Australian organisations in a number of sensitive sectors — especially in the financial services and public sectors — remain highly reluctant to host their most sensitive data in the US, because of a perception that the country has gone too far in allowing its Government access to privately held data.

Microsoft needs to attack this perception, serve its customer’s needs and help them defend their rights if it is to make any headway in the ongoing debate on this issue. Simply pointing out that their data has always been accessible to shadowy foreign interests is not going to help its case at all.

Image credit: Karina Faiani, Royalty Free

Insurance giant QBE this afternoon confirmed it had made a number of staff in its IT department redundant and was seeking to hire a new chief information officer, as the company’s profits took a hit following the global series of natural disasters.

The Financial Review this morning reported the insurer had made up to 200 IT staff redundant, following a review of its operations, and was currently seeking a new chief information officer.

This afternoon, QBE confirmed sections of the AFR report, stating that, following a recent review of its IT function, it had recently implemented “a new operating model” aimed at providing more effective and robust IT services for its staff and customers. “Unfortunately, this process has resulted in a number of IT roles being made redundant,” the company said in a statement.

The company said it remained committed to redeploying staff wherever possible, and still maintained “a significant IT presence in Australia”, with over 400 IT staff employed across the country. The insurer was also currently recruiting for a new chief information officer as part of what it described as its “continuous improvement cycle”.

The news comes as QBE has recently suffered a number of financial headaches. In mid-June the company’s share price hit a six month low after the company downgraded its projected profit margins on its insurance lines. A statement the company sent to the Australian Stock Exchange at the time laid out the extent of the damage which had recently hit its operations.

“Large catastrophe claims for the financial year to date include Queensland storms, Cyclone Yasi, Victorian storms, other storms in Australia, Christchurch earthquake, Japan earthquake and eight major tornadoes in the US,” it said. But the company’s group chief executive office, Frank O’Halloran, was upbeat about the company’s woes.

“The unprecedented frequency and severity of catastrophes in the first five months have materially impacted a large number of insurers and reinsurers, with many announcing significant underwriting losses,” he said. “However, our diversification and comprehensive reinsurance protections will enable us to outperform the majority of our peers in the first half [of the financial year].”

It’s not clear which companies are key technology suppliers to QBE in Australia. However, internationally, the company is known to have a strong relationship with IBM, following the signing of a strategic outsourcing deal with Big Blue to transform and manage QBE’s UK and Western European operations in October 2009.

Image credit: Jeremy Tarling, Creative Commons

Credit Union of Australia today announced it would deploy a new core banking system based on Tata Consultancy Services’ BaNCS platform, which the Indian services provider acquired a handful of years ago with its buyout of Australian software firm Financial Network Services.

India’s largest industrial conglomerate, TCS is an IT services, business solutions and outsourcing organisation which employes over 185,000 IT consultants in 42 countries. One of those unist is TCS Financial Solutions, which develop application solutions for financial insititutions — such as BaNCS. Through the deal announced this morning, CUA will deploy the BaNCS platform over the next two years.

CUA bills itself as Australia’s largest customer owned financial institution, providing banking services to over 400,000 customers all over the country. In a press release issued today, TCS said BaNCS would provide greater flexiblity and integration across CUA, underpinning the bank’s growth strategy. TCS Financial Solutions president NG Subramaniam said his company was happy with the deal.

“TCS’ BaNCS core banking solution will definitely assist to drive new product development and improve efficiencies for CUA,” he said. “We will be utilising our local industry knowledge and extensive global experience to ensure CUA’s new banking platform will be scalable and flexible enough to meet its long-term customer service expectations as well as its back-end operational and data management requirements”.

The move will be a major change for CUA which in 2006, Computerworld reported, moved its 400,000 customer data to Abacus, on an IBM mainframe, after acquiring the Australian National Credit Union.

CUA chief executive officer Chris Whitehead said the investment would be a cornerstone in the future growth of the financial institution. “The implementation of a new core banking system will enhance our business capabilities, enabling us to meet our growth objectives and bring greater efficiencies across the business,” he said.

Whitehead added the new core banking system would ensure better customer service, by enhancing flexibility. “It will also ensure our customers get greater and faster access to innovative products and a consistently good customer experience every time they bank with us,” he said.

”TCS was awarded the contract following a rigorous selection process and we are confident it will be able to deliver a world-class core banking system that will meet our needs and those of our customers for the years ahead,” he said. Financial terms of the deal were not published.

The news comes as other Australian financial services organisations are increasingly examining the potential to migrate off legacy core banking platforms and onto the next generation.

Commonwealth Bank chief information officer Michael Harte several weeks ago shrugged off rival NAB’s core banking overhaul as the “Jetstar” of overhaul projects, in a briefing in which the executive and other CBA leaders repeatedly emphasised that CBA’s own $1.1 billion revamp put it technologically between two and five years ahead of its rivals.

And the Financial Review reported this morning that Westpac would use a deployment at the Bank of Melbourne to trial a migration of its own.

Image credit: Ivan Prole, royalty free

One of Australia’s main financial regulators has issued a blunt general warning to the entire financial services sector regarding cloud computing services, warning that the “innocuous” nature of such services could mask hidden concerns about offshoring.

The Australian Prudential Regulatory Authority oversees banks, credit unions, building societies and insurance companies and, along with sister regulators like the Australian Securities and Investments Commission, is one of the main government instruments for maintaining the stability of Australia’s financial system.

In an open letter to its entire constituency issued yesterday (PDF), APRA wrote that the use of cloud computing was not yet widespread in the financial services industry, but several organisations were considering, or already utilising, selected cloud computing services — with examples including email, instant messaging, scheduling, collaboration and customer relationship management applications.

“While these applications may seem innocuous, the reality is they may form an integral part of an institution’s core business processes, including both approval and decision-making, and can be material and critical to the ongoing operations of the institution,” Puay Sim, the regulator’s general manager of its supervisory support division, wrote.

Sim added that the institutions it regulated “do not always recognise the significance of cloud computing initiatives” and “fail to acknowledge the outsourcing and/or offshoring elements in them” — which could be a risk.

“As a consequence, the initiatives are not being subjected to the usual rigour of existing outsourcing and risk management frameworks, and the board and senior management are not fully informed and engaged,” the public servant said.

The strongly worded letter — in which APRA also warns its ability to fulfil its duties as prudential regulator should not be compromised by cloud computing services — is not the first time the regulator has become enmeshed in the public eye for its views on cloud technologies.

In June, technology publication iTNews.com.au published an account by local company Perpetual Private Wealth, which had been attempting to host its customer relationship management systems in a Singapore datacentre — involving software as a service vendor Salesforce.com.

APRA’s regulations forced the company to draw up a risk management report, according to its general manager of strategic initiatives, Nathan Jacobsen, and get board approval for the project. But even then further concerns about data sovereignty popped up. iTNews.com.au reported, however, that other financial services companies were happy with APRA’s approach.

APRA’s letter states that the institutions it regulates are required to consult with the regulator before they entered any offshoring agreement involving what it calls a ‘material’ business activity — in other words, where an arrangement, if disrupted, could have a significant impact on business operations or an institution’s ability to manage risk effectively.

The risk assessment which organisations are required to carry out before offshoring must include details of the location from which services are to be provided — among other details.

However, the nature of many cloud computing services would appear to mediate against a location being strictly defined in some cases. A number of providers of software as a service or on-demand applications, for example, sometimes do not precisely specify which of their datacentres customers’ data is being stored in, as they can be part of an amorphous global cloud.

In APRA’s letter, it stated that to date, assessments of cloud computing proposals that it had seen “typically lacked sufficient consideration” of factors such as the technology architecture used by providers, how sensitive information was stored and an understanding of the businesses processes involved.

The news comes as offshore cloud computing or software as a service deployments amongst financial services companies in Australia remain rare, although many do operate offshore processing centres in companies like India. One example of a successful deployment has been Mortgage Choice‘s deployment of Google’s enterprise Apps suite. CommBank IT czar Michael Harte has previously spoken of the need to work with regulators on the issue of cloud computing.

Large banks such as the Commonwealth Bank and Westpac instead appear to be focusing on rollouts of what has come to be termed ‘private cloud’ computing technology — datacentre modernisation and virtualisation techniques which provide many of the benefits of cloud computing, but in a model that can be hosted in Australia, avoiding any perceived data sovereignty and security issues.

Image credit: Dimitri Castrique, royalty free