Delays hit NAB’s core banking project

news Delays appears to have struck the National Australia Bank’s core banking modernisation project, with the bank yesterday revealing it had pushed back the implementation of the foundation of its new Oracle-based platform to 2012, having focused on other aspects of the project this year.

NAB’s core overhaul — dubbed NextGen for ‘Next Generation Platform’ — has been in the works since at least August 2008, when the bank announced it had picked Oracle’s i-Flex platform as the centrepiece of its banking operations moving forward. However, unlike CommBank which has conducted the equivalent of an open heart transplant to replace its core with SAP technology over the past several years, NAB chose to dip its toe in the water first, rolling out the technology in its UBank online brand first to get some early lessons.

In May this year, the bank stated that it had defined the targeted operating state for NextGen, was building the platform, and had already activated some of the new platform’s functionality — such as customer analytics tools. In 2011, the bank noted, it would deploy what it described as the “foundation release” of NextGen, as well as making a new general ledger system operational and deploying extra capability through the program into its securitisation platform.

However, in its annual results briefing yesterday, the bank revealed a key component of its rollout had slipped its planned implementation date. The bank’s new general ledger system is now operational, and it has deployed extra capability into its securitisation program. But the deployment of NAB’s foundation release of NextGen has been pushed back to be a priority in the 2012 financial year — which is already almost halfway over.

In addition, it appears that a number of other NAB IT projects have also slipped. In May the bank noted it was planning to upgrade its contact centre voice telecommunications infrastructure. A pilot of that rollout has been conducted, but the completion of the project has been pushed back in 2012. The bank also continues to wrestle with a project to replace its payments systems.

However, it hasn’t all been delays for the bank’s IT operation over the past six months. In that period, NAB did complete a substantial network modernisation project, and it has also commenced a refresh of its PC and laptop fleet. It successfully deployed additional capability into its securitisation platform, as it had said it would, and a number of new aspects to the core banking modernisation project are being planned — such as the implementation of a new credit risk engine and “funds transfer pricing capability”, as well as an overhaul of the bank’s CRM systems which will deliver it a single customer view.

Extending UBank’s capabilities is also listed as a priority in 2012, and the bank also noted that it had boosted the availability of its customer-facing systems.

Throughout all of this, NAB continued to throw resources — both human and financial — at its technology operation. Although hundreds of full-time technology jobs have been eliminated at the bank as a result of its IT outsourcing deal with IBM inked in December last year (reportedly, some 425 roles were affected), the bank’s Business Services division actually increased by 82 net roles — although its wholesale banking area lost 277 staff, for reasons including “lower technology project activity”. The bank had previous added 948 roles to Group Business Services to May.

Investment in infrastructure was also heavy, with the bank spending $719 million on the area in the year to September 11 — up a whopping 56 percent on the previous year. “Most of this investment was made in the group’s Next Generation Banking IT platform and convergence of key technology and operational infrastructure,” the bank wrote in supporting documents.

opinion/analysis
If you believe the scuttlebutt in the industry, these aren’t the first delays to hit NextGen, and I would bet that they won’t be the last. Over the past year, I’ve repeatedly asked NAB to comment on what’s happening behind its closed doors with respect to the initiative, and mostly what I have gotten in return is bland statements devoid of any context, or refusals to comment on the matter.

This is in stark contrast with the approaches taken by all of the other banks. Westpac, CommBank and ANZ have all been extremely open over the past year or so about their IT transformation projects. I suspect the fact that NAB has not been is reflective of the fact that it has a number of gremlins still to fix in the long-running NextGen project … gremlins which it wants to eliminate before talking more about it publicly.

The bank’s desktop refresh project is also fascinating although little is currently known about it.

Those with long memories will recall NAB was one of the last major organisations in Australia to roll out Windows XP, finalising its deploying only in 2007 to some 28,000 machines. The bank has tested Windows 7, but I’m betting it wouldn’t be hugely keen to immediately move to Microsoft’s latest desktop opus quickly, after the tortured effort that was its previous Windows NT to XP upgrade.

It would be interesting to know whether the desktop refresh mentioned yesterday was only a hardware refresh — and whether, like CommBank, NAB just ported its XP SOE onto the new machines.

Then there’s NAB’s CRM strategy, also mentioned in brief yesterday. Some may recall that the bank was highly focused on CRM back in late 2005, under then-CEO Ahmed Fahour, who was no doubt eyeing off CommBank’s successful CommSee migration and seeking to bring some of its lessons to NAB. I’m not quite sure how far NAB’s CRM overhaul got (at the time, it was using a legacy Teradata package), but I’m betting that the mention of CRM this week means NAB has a long way to go before it gets the much-mooted “single customer view”.

All in all … it looks like NAB has got its work cut out for it on many fronts when it comes to technology at the moment. No wonder it’s spending a bomb. A 55 percent increase in infrastructure spend over just one year is incredible — the bank must be throwing money at all of these areas internally.

The other thing which NAB’s disclosures this week reminds me of is CommBank CIO Michael Harte’s audacious statement that his bank was years ahead of its rivals when it comes to technology. I’m not sure Harte could make that claim when it comes to Westpac, as I’m sure Bob McKinnon and Sarv Girn have matters well in hand. Nor would I believe it of Suncorp.

However, when it comes to NAB, it seems likely Harte’s fighting words may have indeed been correct. CommBank has already completed projects over the past few years in many of the areas which NAB discussed this week. Well … being philosophical about it, at least NAB is trying to catch up. I’m not sure the same thing can be said of poor old ANZ ;)

Image credit: Delimiter