CBA granularly costs every one of its 2200 applications

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CBA granularly costs every one of its 2200 applications

To help its technology simplification project team slim the portfolio.

CBA has costed all 2200 of the enterprise applications it uses to understand what to keep, digitise or cull as part of a technology simplification program of work.

The bank has spoken at a high level about the work several times this year, with CEO Matt Comyn telling its full-year results briefing the work is about “simplifying and modernising our technology estate”.

The mechanics of how CBA is going through its technology estate on an application by application basis was revealed at TBM Council's '21 conference this week.

TBM - technology business management - is used to cost the running of IT systems and to measure the value these systems create.

CBA revealed it first tried to implement a “bespoke” and “highly-customised” TBM model to improve IT cost transparency back in 2018, but ran into “data-related issues within IT and finance” - and ultimately had to “start over”, financial services program delivery general manager Richard Spalding told the conference.

When the bank came under margin pressure during the pandemic, it then didn’t have the information in front of it to reduce wastage from its technology costs.

“We weren’t really in a strong position last year as margin pressure started to impact the industry to be able to respond to provide the level of transparency on the scale that we needed to provide it on to support the bank’s technology simplification and digitisation strategies,” Spalding said.

“We found ourselves really having to look hard in the mirror and say, ‘We need to start over. We need to get the data model and the solution architecture right so we have a solution in place that can meet our current and future needs and deliver sustainable value’.”

In redoing TBM, the bank this time kept things standard and out-of-the-box. In doing so, it managed to have a system in place in nine months instead of the usual 18 months minimum, going live in July this year.

Spalding said that CBA decided to “emphasise pace over perfection”.

“How can we deliver the right level of transparency at pace to enable our business and IT leaders themselves to execute digitisation strategies and application rationalisation [or] modernisation at pace?” he said.

“To enable them to execute at pace, we had to execute at pace. 

“If you have a strategy that’s trying to save hundreds of millions of dollars over a couple of years, every month that you take to deliver the transparency to enable [teams] to execute, we’re pushing out probably close to $5-10 million a month of benefits.

“I would challenge anybody to say customising and taking an extra three months is worth trading out those benefits you get from pace.”

The major early use case for TBM is supporting CBA’s technology simplification strategy.

“Our technology simplification program is going after both the size of the application estate as well as how we’ve engineered the application stack,” Spalding said.

“The role that TBM plays ... is we’re now providing the technology simplification program team with full transparency into the cost of each app, across both run and change, right the way down across the development org as well as the infrastructure org. 

“The team can see exactly how each app costs, where it costs, and if they then decommission or modernise that app, they can see the value capture.”

Spalding said transparency was about both rationalising the number of applications and any over-provisioned underlying infrastructure.

“Our technology simplification strategy is a recognition that 60 percent of your IT cost base, sometimes more depending on your industry, is driven by application assets, so if you want to manage your expense base, you need to manage your application assets,” he said.

“You need to rationalise the number of applications because each application has a TCO [total cost of ownership] of support, licensing and infrastructure hosting etc.

“So for us, technology simplification is looking at our portfolio of application assets, rationalising the ones we feel are end-of-life, not fit for purpose or not suitable to migrate to the technology we want to run them on so that’s one piece. 

“There’s also another component around optimising the application. You may have an application that’s fit for purpose but the utilisation of the asset or the underlying assets is not very good because of the way it’s been architected or configured.

“Often developers, for example, will ask for infrastructure capacity without thinking of asset utilisation. They want to make sure the capacity is there for that application as they’re developing it and so it performs well once it goes live. 

“But that can often result in excess capacity at a portfolio level.”

Spalding said TBM - and the Apptio software used to implement it - would allow the technology simplification team to act and execute “with a much higher level of precision”.

“Obviously, costs dont walk out the door just because you decommission an app. You often have to cancel contracts or realign your workforce,” Spalding said.

“We’ve now got that transparency to execute on that with a much higher level of precision than before. 

“If you dont have that transparency, how do you know which apps to go after? How do you know how much we’re going to save if we decommission or modernise an app? How do we know which contracts to cancel or which workforce to realign?” 

Spalding said that a future use of TBM would see the bank allocate technology costs to every part of the execution of key transactional processes, such as a home loan approval process.

“We need to link the cost of the IT servers and assets with the business product channels and business processes,” he said.

“By mapping the transparency that we get from TBM to the business profitability model through what we call a cost-to-serve lens, we can then understand ... the tech and ops cost of writing a home loan, how that correlates with the non-tech costs ... and the overall value prop and competitiveness of that product offering. 

“Most of all, we can see where and why it costs - being able to segment that [technology] cost across the stages of the home loan process but also having the depth of transparency to be able to understand not only what IT services and assets are supporting each stage, we can see the cost of the underlying technology stack. 

“So in some cases it may be we should be spending less on technology for a certain phase because we havent optimised it very well.

“In other cases it may identify we’re spending too little on technology because you can see it’s relatively low for that stage of the home loan process relative to the human layer spent by operations to process mortgage documents.

“That’s the next frontier for us.”

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