Tag Westpac CIO Loran Fite as forthright, focused and feisty and you'd almost be spot on - feisty might be a bit too tameWestpac CIO Loran Fite is a man who is not afraid to state his opinion and confront issues head on. His first week with the bank - some four years ago - began with a lively debate over credit cards and ended with a frank exchange of views over spreads and margins.
Some of those caught in the crossfire were shocked, amazed the IT specialist had the temerity to opine on matters so obviously outside his field. But Fite was well pleased with the results of his first week's work. After all, the controversy meant "the credit people and the finance people and the marketing people and the operations people" all knew he had some strong ideas of his own about the business of banking.
Establishing his business credentials in such a dramatic and highly visible way was a valuable start to making a difference in a bank in the midst of a major recovery program across all facets of its business.
In addition, the earlier cancellation of some major IT projects had left IT's reputation battered, and bred an atmosphere of suspicion and deep-seated scepticism. Although his predecessor had made significant progress and built a strong team, IT was still seriously misaligned with parts of the business and the mistrust between IT and business management was a cause for concern.
Fite knew from the start he had plenty of bridges to build. "Ideally neither business nor IT should dominate," he says. "I think Westpac had come out of a time when IT was a bit more dominant and driving new projects, new exotic things, with all its good intent but without a lot of business input. And I think there was a backlash to that. It went the other way and business didn't want any input from IT at all.
"I knew I had to try to get us all on the same page," Fite says. And in that aim, most would agree, Fite has succeeded brilliantly. A veteran of the Bank of Montreal and the Wells Fargo Bank, Fite helped his team (he fired no one and brought no one in, defying all expectations) cut $12 million out of Westpac's IT budget within three weeks of his arrival. That year the IT group met their financial plan and also dramatically exceeded performance objectives.
Despite the reduced budget, within that year the IT team worked with business teams to largely remove backoffice functions and paper processing from branches. It introduced a world-class telephone banking system and was two-thirds of the way through a new credit card project, the first customer service site was up and running and work was in full swing on a new ATM system.
Since then progress has been equally impressive. The bank has completed the new credit card and ATM systems, added numerous customer service centres, a new mortgage system, a new asset/liability management system, a new general ledger, a new data warehouse and a new branch service platform. Those initiatives helped improve service, enhance product offerings, reduce operating expenses and increase operational control, as well as position Westpac strategically for the future.
Oh - and its PC LAN technology is so efficient Gartner Group acknowledges it as substantially exceeding world's best practice and - according to Fite - Microsoft is amazed at what they've achieved. "You read about network PCs - we didn't think to call them that four years ago. We called it a 'media-less PC'.
We didn't want to have a place where a virus can live. We didn't want to have to download into 20,000 terminals in a thousand branches," Fite says.
"Now we've got 15,000 of these media-less PCs. We did the first on OS/2 and then swapped it to NT. When Gartner looked at us they were just amazed. We have close to 1500 in our Mortgage Centre and we've now got six people supporting 1500 units. The media-less PCs are now out in all our branches, customer service centres and telephone banking centres.
"We debated it a lot here before we went that route. But we have been tremendously successful and now Microsoft has accepted us as a strategic partner."With credentials like that behind him, Fite might be forgiven for possessing a degree of arrogance. Yet there's a compelling modesty to the man who attributes Westpac's IT success to the hundreds of IT people who actually produce the results. Indeed, Fite says his team is comprised of "phenomenal people". He also insists leadership is evidenced by every team member, rather than being driven from the top. He says he'd gladly match his team against any IT group in the world.
And like every good team member, he well understands the importance of having shared goals. While other CIOs battle with CFOs intent on putting the reigns on IT spending, Fite says his relationship with Westpac's Chief Financial Officer Pat Handley is harmonious and based on mutual understanding. "When I was at the Bank of Montreal - and especially at Wells Fargo - we were intensely driven on expense control and cutting costs. We looked very hard and long at any investment. 'Does it make sense?' 'Can you really justify this?'"The stereotype is that the CIO wants to spend money and the CFO doesn't," says Fite. "In fact Pat and I have been working closely together for four years and we've been on the same wavelength since he's been here, because we both look very long and hard at any investment."Fite works equally closely with other Westpac executives, and says he's found that as long as he is prepared to listen to them, they will always take time to listen to him, even when IT offers no solution to the problem at hand. Indeed to listen to Fite is to believe his approach can often be as much about eliminating the need for IT, where appropriate, as it is about introducing IT as a business solution. It's a process he calls "getting rid of the uglies".
"If you've got something ugly, and you automate it, all you have is automated ugly. If you've got a bad golf swing, the more you practice with your bad swing the better you are going to get at having this bad swing. You become very consistent at having a bad swing," Fite says. "I think it's the same with automation. If you don't clean it up and you automate it you are going to get very good and very efficient at something that's automated ugly."So Westpac now lives by Fite's rules. Rule number one: first consider abandoning the process under consideration. If you can't abandon it, cut it down to size and make it faster, easier and more efficient. Then, and only then, look to automate. "You don't automate something ugly. You don't automate as the first answer, you automate as the last answer."To achieve this, Fite believes in getting involved in every project early and in talking about "the what".
"You see, there's 'the what' and 'the how'," he says. "How you do something is to consider whether you eliminate it, do it differently, do it faster, outsource it, automate it or whatever.
"But what we concentrate on is 'the what'. What is the problem? It's like someone who says: 'I need a cab to get me to such and such a place.' Do they need a cab? No. What they need is to be transported from here to there. But they've decided already that they need a cab. Well, that's a how. Now you might get someone to carry you on their back, you might find it easier to walk, or to take a train - they are all hows.
"But worse, they'll tell you: 'I really need a limousine.' They just want to get across town but they want a limo. And of course you have people in the IT world who like to build limos. But if you do, you get out of control. It takes longer. It costs too much. So Pat Handley and I would be aligned because we both know there's very limited resources, and we've got to be very careful how we deploy them. If you waste resource on automating something ugly, you've lost a great opportunity. These issues are almost never about technology. They are always about What, and Ugly, and Priorities," Fite says.
"You have to run it like you own it. If you were running your own business and you wanted to get to North Sydney in a hurry, and the trains were running every 10 minutes downstairs, you wouldn't take a limo, and depending on whether it was raining, you might not take the cab." So, for instance, the bank might outsource, but only by design, rather than by default, and always selectively. Again it's a question of 'the how' versus 'the what'. "When I joined [the bank] the big thing was outsourcing right and left," Fite says. "I'm not for it or against it, I just don't see it as a 'what'. I see it as a 'how'.
"We had early discussions and my boss said: 'Should we outsource?' and I said 'Why? Are you trying to save money, improve service, speed delivery to market? What's the problem you're trying to solve? What's the 'what'? "There are several myths about outsourcing," says Fite. "One is you save money - and that's rarely true. Another is that you don't have to manage it - and that is never true. Now if you were to outsource your kidney, wouldn't you worry about it? Wouldn't you want to make sure it worked? The third myth is that you'll be quicker to market - and that's almost never true."Fite says Westpac outsourced PC LAN support to help it manage limited resources and achieve better leverage. While he's happy with the level of support the bank receives, he says the bank could have done it cheaper internally and the vendor struggled for almost a year to bring service levels up to standard.
"So we outsource selectively. We bought our core mortgage-processing piece from EDS and built all the interfaces around it: all the technology on the PC LAN and the interface back to the host and the big operations. We wrote all that because we could frankly do it a lot less expensively than if we'd outsourced it.
"I never question anyone else's decision to outsource, because we always do what's right for us. We never outsource because we have a very simple rule: we'll compete with anybody. We'll take on IBM GSA, EDS or Andersen Consulting with a piece of work and say let's all bid. And it would be extremely rare - in fact I doubt it would ever happen - that they underbid us."That's no idle statement. Westpac watches every dollar spent and can back up its claims on efficiency and outsourcing with measurements to prove them. In fact Westpac probably spends more time tracking performance than many other organisations spend promoting it. To ensure the bank gets value for its money, the team constantly benchmarks and the finance group continually tracks the benefits of every project on a net present value (NPV) basis. On average, Fite says, Westpac gets 80 cents on the dollar NPV on each IT project.
And if that figure sounds rather low, he says, it's because most organisations don't track NPV, and those that do often get a very unpleasant shock. "We track them pretty hard. We did one recently where on a large set of large projects we should have got $148 million NPV but only got $145 million. Now to deliver this set of things we should have spent $128 million but only spent $123 million. So we under-spent by $5 million and underachieved by $5 million.
"I would find it remarkable if any other bank could match this. We don't kid ourselves. We measure," Fite says. "The other thing we do is to consider how much of what we are doing goes into new development versus maintenance. You can play games all you want, but we try not to kid ourselves. By industry standards we can't find anybody as good as we are." The first year Fite was with the bank, the team measured every aspect of operations, from how many reports were delivered on time to how many phone calls were made. Westpac is now, as far as Fite knows, the only bank in Australia and one of only two in the world that is industry certified for quality ISO 9003.
"People can talk about it all they want, but we are the only ones who have it," he says. "Having done that in my first year here, in my second year, I did a very simple thing, as any manager does, and said: 'Okay, I'm going to raise the bar.' So we sat down and we took each of the major things we measure - and there's a large number of them - and we took the best month of the previous year and made that the minimum standard.
"We tracked that for about two years and we're up around the very good 80 or 90 per cent of the time. We didn't fall below minimum once. And now the bar is two levels above what it was three years ago," he says.
The next priority is to develop a fully integrated customer system. Westpac has already developed the backbone of the system - comprising an integrated, up-to-date, centralised general ledger and data warehouse. "All the ugly part is behind us and it hums," Fite says. "We have, as far as I know, one of the very few if not the only single, integrated financial suite of any financial institution. And all that was done in-house using Oracle and Unix."The bank has also successfully overcome the hurdles posed by last year's Challenge Bank merger. Fite says from a technology point of view, the conversion "went superbly" without a single issue remaining to be resolved.
Much of the key to the spectacular turnaround to Westpac's IT fortune can be attributed to communication, Fite says. "The business has to be as involved in the IT as IT is involved in the business. We understand we've got to know the business and understand the business in order to help. But equally, the business understands they've got to know a lot about us.
"So when we have a major project we take the project manager and report them to the business. Their bonus, their salary, is paid by the business. Their success isn't based on what I say about them, it's based on what the business says about them."Steering committees oversee major projects, and there are a lot of casual meetings with team leaders. Equally important are the three or four occasions a year when 200-plus managers get together in a hotel or other venue for award ceremonies and presentations on issues like architecture or strategy. According to Fite, everyone in the bank is committed to success. "We all understand this is ours. This is our business, and we all succeed or we all fail. There is no in between," he says.
"We also have fortnightly team meetings in different locations. But we all work at communications. I work with my direct reports, they work with theirs, and there's a lot of project teams. When I'm looking at architecture, security, strategy, or anything of that sort, there will be people involved from all levels," he explains. "There has to be some structure, but other than normal courtesy I don't respect any structure of the bank above me or around me and I don't expect my people to respect it either."Fite is engagingly open about many of the technology issues facing the bank, and scornful of the secrecy other banks adopt about their technological directions. Only when we come to discuss the bank's Year 2000 liability and approach does he become somewhat reticent - not about what the bank is doing, but about how it is doing it.
"We had a project going two years ago on Year 2000. We did it quietly and low key and put it on the side and said while we're doing all these other things and Challenge Bank there is no way we can do Year 2000 as well," Fite says.
"But we said we'd do it this year. We're going to do all the other things we're doing, and the Bank of Melbourne merger, and the Year 2000. Our planned expenditure on Y2K is $56.1 million," he says.
"So this year we're going to do another merger, deliver a few client services, hit the Internet, hit the customer information file, raise the bar on a bunch of things and deliver a lot of other normal things. At the same time we're going to do Year 2000 and we're going to do the Bank of Melbourne merger.""We're working right on schedule. Our approach and costs have been presented to the board for a year and we're tracking it. People ask if there have been any surprises and I answer that yes there have been, but fortunately every one of them has been a good one," he says.
So far, Fite says, the Year 2000 work is running right on plan. He says he seriously doubts any other bank will do it as cheaply as Westpac intends to, but when it comes to detailing the Westpac approach, Fite suddenly clams up.
"Our secret? I don't share it. We've had security analysts talking to us and they advise us not to tell anyone. It is a competitive edge. I would say most banks our size will spend double what we're spending."And will their Y2K efforts succeed? "The proof will be in the pudding," he says. "At our annual meeting we will say what it costs and the next year we will all know." And if the bank's recent track record is anything to go by, it will succeed. Fite and his team will make sure of it.
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