NAB's better-late-than-never tech refresh

What gains have been made?

NAB’s technology team was restructured in November 2012 to ensure the transformation would hit its milestones.

Gavin Slater, the bank’s group technology executive, split the CIO role in two, appointing Bennett as executive general manager of enterprise transformation and McGee as CTO. The Australian Financial Review — without naming sources — suggests Slater may be overdue for a promotion into a new area of the bank.

Bennett’s team is accountable for mapping out the “optimal sequence” of the transformation — nsuring the bank’s various technology projects are scheduled for completion at the appropriate times.

Denis McGee is responsible for business-as-usual operations around everything from applications, mainframe, server, data centre and IT security. But just about every piece of kit or service he manages has implications for the transformation.

The first win for the bank was a network consolidation contract signed with Telstra some 18 months ago, which collapses ten networks into one. NAB will now pay for traffic on this network in more of a utility-style fashion and Telstra will be involved in the upkeep of the network assets.

“We are essentially contracting Telstra for an outcome,” Bennett told iTnews. “The capacity of that network must be met and by a network that is current.”

Bennett said the NAB has made savings of 30 percent on its telecommunication costs as a result.

The bank is taking a similar "outcomes-based" approach to its IT infrastructure. It has completed most of the groundwork for a build of a ‘private cloud’, which attempts to take advantage of cloud-like self-service provisioning and utility pricing, without sharing computing resources with other organisations.

“We have created an infrastructure-on-demand cloud, with a number of test and dev [programs] running in that environment to shake it down,” McGee said. “We are well advanced with building the patterns required for the production environment to move those applications across. We’re on track for late March or April to push the first production application across.”

The bank has, as mentioned previously, taken delivery of the new Deer Park data centre, and has completed the fitout of racks, cabling and most recently, firewalls and other physical security assets in recent weeks.

But the migration of new applications into this facility will take most of 2013.

By the fourth quarter, NAB expects most applications to be running in Deer Park — with a few notable exceptions — and will then begin decommissioning its racks in Telstra and IBM co-lo facilities and the small computer rooms dispersed elsewhere through the country. The bank is unlikely to find time to decommission the East Melbourne data centre prior to 2014.

McGee told iTnews the migration of applications into the new data centre is a "matter of scheduling" and will be more or less timed with any software updates that need to be applied.

“We are now going through the prioritisation of which apps move first into the data centre. We’re scheduling around code drops.

"We prefer to time the re-platform of any system into the new data centre rather than deploy it in East Melbourne and then do a physical lift and shift.”

Progress so far has been made on updating to the latest database engines, tuning the performance of those databases, and moving the bank’s data warehouse off Sun 8000 boxes onto the Oracle Exadata platform.

NAB’s core banking system will continue to run on IBM z11 and z10 mainframes in an existing facility until the NextGen migration is complete, which as stated, might take up to seven years.

NAB’s IT future

Like his counterparts at ANZ and Westpac, Gavin Slater, group technology executive at NAB envisions his future technology team as an “orchestrator of technology services” rather than a traditional IT shop.

Slater does not feel the NAB’s billion-dollar annual technology spend can compete with the combined $10 billion Oracle and IBM spend annually on R&D.

“We will need to be far better at orchestrating our services,” Bennett reiterated last week.

“That will change the skillsets of the people we need in our organisations. We will need in some cases less development work, but more orchestration and commercial management work.”

Consigning all software development to third parties requires a leap of faith. NAB’s future will be inextricably tied to the fortunes of Oracle, which will use the intellectual property it gleans from the NAB deployment to resell a financial package to banks across the globe.

“NextGen will not be left to age gracefully and become legacy,” Bennett said last week. “We do already have a clear upgrade and development path.

"Around the world there are probably 100 tier-one banks with a pent-up need to invest and replace their legacy systems. Many were getting prepared prior to the GFC, and while the GFC stopped that investment, the pent up demand has only grown over that four and five years.

"We see 100 Tier One banks Oracle has got its eye on to market that platform to. We think its unlikely they won’t continue to invest.”

Oracle — and its peer SAP — are known for raising the price of their licenses, restricting the use of existing licenses and threatening court action when customers don’t play ball on licensing. But Bennett said he is entering the Oracle partnership in the right spirit and with eyes wide open.

“You have to make the partnership work,” he said. “You need transparency and trust, clarity of objectives — they are the kind of things we’ve been building. You also need executive sponsorship in both organisations, which we have on both sides.

“Each partner needs to have the will and permission to say when they are happy and when they are annoyed. It's like a marriage of our organisations. The relationship with Oracle has to surpass any personality that happens to be in a role at any point in time. You want a win-win for both organisations.

“I firmly believe you can’t have these relationships if you go down that traditional path of hitting the vendor on the head when you aren’t happy — entering the partnership in that spirit will not work.”

Seeking discounts and savings often means your account won’t attract the technology company’s best people, he said.

That said, from an architecture perspective NAB is working to ensure — through the Open Data Center Alliance, for example — that it has options should any relationship sour.

“We are building towards packaged and standardised and trying to take out the customisations and bespoke nature of these things so that ultimately we’ll have options,” Bennett said. “And if we want to exercise those options in the future we can do so.”

Differentiation

With everything from the data centre, IT infrastructure and software off the bank’s books, NAB will only be able to differentiate itself from its peers in terms of what it does with its customer data.

The hope is that once the plumbing is managed by partners, the bank’s technologists can focus on keeping pace with the data analytics gains being made by peers such as the Commonwealth Bank.

“We need to provide real-time insights from a data analytics perspective,” Bennett said.

“Big data is a game changer. Our infrastructure transformation allows us to store and process more data. We already capture interactions with our customers every day, and we use it to tailor advice to people. We can already scrutinise and analyse that. We can make real-time decisions about the pricing of products."

Like CommBank's Michael Harte, Bennett is concerned at the onset of new financial services options in the digital world, none of which have the technology legacy of the big four.

“In a short period of time, technologies have disrupted the business of financial services across the globe - as it has with media and retail,” he said.

“There are plenty of examples of organisations that missed this — that didn’t get their strategy right — and paid a high price. It’s incumbent on all business leaders to invest in technology now to allow for rapid innovation and not leave the hard work for future management.

“We will keep pace with incremental growth in the volumes of data and transactions, and innovate in our market quickly. People want continuous change and innovation.

“It’s far too early to tell in these banking technology wars who is going to come out the winner,” Bennett said.