Westpac has established an in-house team of commerce, legal and finance experts to support its move toward shorter deals with a greater number of outsourcers.
During the past nine months, the bank established a commercial pricing team to take on contract negotiation tasks that were previously handled by external consultants.
Westpac’s general manager of commercial and technology Elizabeth Henderson told a vendor management panel discussion yesterday that it strived to develop “soft skills” within the team.
“Back in the 90s, [companies] signed big, whole-of-outsourcing deals that were ten years long, hired a team of advisors who would all leave when you put the contract in the drawer, set up a skeleton staff, and it was all meant to take care of itself,” she said.
“The megadeal is not in favour anymore ... Once you have shorter deals, you have more of them. You can’t really rely on external consultants to just come in and go.”
Henderson said Westpac and its global peers were trending towards three- to five-year-long deals with best-of-breed technology vendors.
Last December, the bank renewed a decade-long infrastructure outsourcing contract with IBM that technology executive Bob McKinnon had previously found “dysfunctional”.
Under the new five-year agreement, the bank planned to take "greater accountability in the design and management of IT services", using other suppliers or solutions where appropriate.
“When we first outsourced, we outsourced everything to IBM, including telecommunications. Five years into the deal, that all changed,” Henderson explained.
“What we’re not seeing anymore is organisations handling all of their IT over to a vendor.
“The new relationship we have with IBM is very much functional and very important to us ... We are signing with other partners and IBM is in many cases a part of that.”
Henderson said Westpac had spent two years “moving on” from issues with transparency and accountability in the IBM contract. That process concluded 18 months ago.
The bank was now focused on developing “more strategic engagement” with key vendors, she said.
Panellists urged attendees to establish joint goals and “innovation KPIs” [key performance indicators] with vendors, ensure a cultural fit, and use structured processes to strike new deals and “sweat” existing ones.
Deloitte partner Warren Green said vendor relationships required “a lot more ... than procurement”, and organisations should engage with outsourcers in the same way as they would an internal team.
“If you want the vendor’s A-team, then put your A-team on it,” he said.
Henderson said Westpac had a “very strong executive buy-in” to technology projects and had established a multi-skilled A-team in commercial and vendor management by hiring people with commerce, legal and finance backgrounds.
Technology was now the “assembly line” of banking products, she said, and effective vendor management was the “holy grail” of delivery.
“If you think about a five-year contract, you may spend the first six to twelve months transitioning in, the last two years to 18 months getting to the end, and you only have a bit of time in the middle,” she said.
“The vendor management team are really important in working a deal; a lot of that comes down to how that team is skilled up.”
Henderson said her team needed to understand Westpac, vendor organisations, and “people: what makes them tick, what makes them care about things and what their priorities are”.
Vendor management staff had to be able to influence and persuade people, and possess “a bit of intuition – that’s where you go from vendor management to relationship management,” she said.
“Most importantly, a lot of these new hires have come from non-technology backgrounds,” she noted. “They’re bringing a skill mix that is not so common within the technology community into our technology area.”