Banks mull two-speed IT

To enable third parties and cloud for certain functions.

The Australian finance sector is considering splitting its IT requirements into two categories to balance a need for rapid customer-facing innovation with trusted, business-critical systems.

Banks and insurers in recent years have struggled to reconcile the benefits of taking up cheaper, more innovative third-party services like cloud computing with internal or regulatory requirements.

Services like Salesforce.com’s cloud-based customer relationship management offering have proved popular with the Commonwealth Bank of Australia and the Bank of Queensland.

But the sector remains bound to regulator APRA’s November 2010 letter that described cloud computing as a new form of outsourcing or offshoring that required its approval.

Members of an FST conference panel suggested a two-tier approach to IT, under which “digital IT functions” could be outsourced while “industrial-strength” elements remained in-house.

Consulting group BCG recommended the “two-speed” approach in an August 2012 report about speed to market in the digital economy.

Suncorp Life chief information officer Fiona Floyd suggested that the model could allow it to tap into platform-as-a-service (PaaS) offerings.

Floyd said the cloud model was a “game-changer for us right now”, with PaaS giant Amazon Web Services set to launch a local data centre imminently.

ANZ Wealth chief information officer Greg Booker described infrastructure and security as “heavy tech” that was better suited for in-house teams.

But other elements like application development and testing may be better suited for third-party hosts, he noted.

“There is huge growth in Australia of small organisations that are able to innovate and drive cost-effective outcomes very, very rapidly,” he said.

“In order to innovate as big organisations, we need to leverage those small organisations in a controlled way.

“Instead of standing up a lot of internal infrastructure we can have that managed for us and drive a different model into our development regimes where we’re having people bidding for work.”

“If you look at where technology is going and where technology is needing to go, what you’re looking at is a completely segmented model.”

Business cases in a digital age

Representatives of Westpac, ANZ, Suncorp, NAB and Citi agreed that banking IT teams needed to innovate more quickly to meet customer demands.

ANZ Wealth’s Booker highlighted a need to balance speed and innovative outcomes with protecting the bank and its intellectual property.

“The market moves too rapidly these days to be running two-, three-year programs where there’s a large deliverable 18 months in and a second one in 12 months,” he said.

“We need to be looking at how we can enable the business more rapidly than that, with three-monthly, six-monthly deliverables.”

Floyd agreed that organisations needed to update how they handled business cases, having seen “a business case with so many signatures that you don’t know if it’s a business case or petition”.

“I think we need to consider as large organisations how we structure ourselves internally and whether or not we need to look at the construct of our IT function in a different way,” she said.

Earlier this year, ING Group’s international retail banking chief information officer said it had embarked on a series of sub-$300,000 projects to avoid lengthy governance processes and boost speed to market.

Westpac chief information officer Clive Whincup also has established an agile, ‘incubator’-style application development process within its team of 50 developers.

Floyd credited a 12-month-old restructure of Suncorp Life application development process for improving its ability to innovate.

“[The new approach has] allowed us to innovate but allowed us not to throw the baby out with the bathwater,” she said.

“We’ve still got security aspects we need to be concerned with; we need to be concerned with the quality of our data and the robustness of our applications.

“But it does allow us to innovate at the front and also to fail fast if we need to get out of something that’s not working.”