The Commonwealth Bank has credited its vendor multi-sourcing strategy and continued push towards cloud computing for cutting its IT infrastructure costs by $100 million a year.
According to chief information officer Michael Harte, infrastructure accounted for about half of CommBank’s $800 million annual IT spend five years ago, under a $5 billion, ten-year arrangement with HP EDS.
That agreement was restructured in 2006 as the bank moved towards “multi-sourcing”.
“Half our spending went to the cost of doing business and conferred no strategic advantage,” Harte told investors and media at a technology briefing this week.
“Today, the ratio of IT expenditure on business service versus infrastructure is 74 to 26 percent. We know that it’s world leading.”
Harte told iTnews that the bank had adopted an “as-a-service” approach to infrastructure for some 25 functions, including storage, hosting and application development platforms.
Each service was offered by “two or three” CommBank suppliers to promote competition.
Workloads could be deployed on two virtualised, in-house data centres, or on Fujitsu, Datacom and Amazon Web Services infrastructure through CommBank’s ServiceMesh Agility orchestration platform.
“The first step was to virtualise and standardise those services, and the next step was to mobilise them, so we had competition in infrastructure provision,” Harte explained.
“You can send new or existing work in either minutes, hours, days or weeks to competitors. That’s significantly improved the standard and reduced the cost of infrastructure services.”
Harte said cloud and on-demand service delivery was a “key driver of advantage”, allowing CommBank to source more “efficient, modular, secure and reliable” services than it could in the past.
CommBank used Salesforce.com’s cloud platform for its December 2011 IdeaBank campaign. Its website also featured LivePerson’s online customer interaction product, hosted out of Singapore.
Chief marketing and online officer Andy Lark said the bank was “expanding its footprint with Salesforce.com”, deploying the cloud vendor’s Chatter social networking platform for staff and external parties.
Financial services regulator APRA has previously called for caution over cloud computing, urging institutions to view the cloud as a new form of outsourcing or offshoring that required its approval.
“I make no apology for applying technology from other parts of the world in order to deliver convenient and low-cost services,” Harte said this week.
“We’ve got an increasing number of international clients and they don’t mind where they’re served from. They want to get hold of the richest content at the lowest price point.”
Spending IT savings
Harte said the bank had reallocated the $100 million in savings from IT infrastructure to technology investments like its $1.1 billion, five-year core banking modernisation project.
He said CommBank typically spent about a quarter of its $1 billion total annual investment budget on core banking compliance, a quarter on compliance activities and a quarter on “strategic business and customer investments for information and application services”.
The bank expected to reallocate its core banking modernisation funds to a range of technology projects – including big data, mobile channels and real-time applications – after the project concluded next year.
Core banking modernisation program director Dave Curran said the program had established teams, process improvements and efficiencies that would be applied to any new projects.
Those improvements included the introduction of 105 interoperable “Lego blocks” with which to deliver products and capabilities to business units and customers.
“We had 16 sales products [and] 870 product combinations on the marketplace,” he added. “We’ve reduced those products to nine, and brought that down to 100 pricing options on SAP.
“This has greatly enabled to standardise our terms and conditions and more importantly simplify the interactions between our staff and our customers, and also what we have on the marketplace.”