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A New Balance 2

A New Balance 2

It's been a busy and challenging three years for Richard Maes since he joined the Bank of Queensland as chief information officer. During that time he has been the architect and visionary behind the staged implementation of a completely new, three-tier open architecture that affects all areas of the bank and some 800 end users. He has also overseen a number of other IT initiatives.

Established 128 years ago, the Bank of Queensland has a network of 96 branches throughout the major coastal centres of Queensland. When Maes came on board, the bank was running a number of legacy applications on a Fujitsu mainframe. At the same time, the bank's chief executive, John Dawson, wanted to build a more vibrant core bank as well as extend the reach of the bank into new areas.

However, being a relatively small bank, the Bank of Queensland was not able through acquisitions to grow at the rate it needed to stay competitive. Consequently, Maes' task was to make IT more flexible and adaptable to enable the bank to look for new avenues, take on more business through alliances and joint ventures, and grow its customer base. "It was either run a bank or close a bank; but having worked in the financial industry for 30-odd years, I took a look at all the bad things that have happened to me and set about seeing if we could avoid them this time round," Maes reflects.

The first stage was to make the current IT set-up more robust. The bank consequently implemented middle- ware tools, namely BEA's Tuxedo and Staffware workflow technology. Accord-ing to Maes, Tuxedo improves connectivity as it allows the bank to pass information between applications, systems and graphical user interfaces. He also chose it because it was strictly a middleware tool and not something that extended into other areas. Workflow, he says, is used to enforce business rules.

At this point, the bank opted for a three-tier, plug-and-play approach because, as Maes puts it, it didn't want a complete solution from one vendor. "Either the vendor doesn't keep up with the market in the back end because they're too busy looking at the front end or the middle, or they're keeping up with the front end and they're not keeping up with the middle. There's always some part of it they're not good at. So we decided to take that out of their hands,' he explains.

The bank implemented Unisys' Finesse teller and transaction management application at the front end and used Tuxedo and Staffware to connect it to the Fujitsu mainframe. According to Maes, the choice of Finesse was based on its ease of use and its stage of life: it was neither bleeding edge nor past its use-by date.

The next stage of the bank's IT revamp involved replacing some 15 back-end legacy systems on the mainframe - such as accounts payable, leasing and treasury - with applications such as SAP Financials on new generation Unix and Windows NT open platforms. These have all been security-encrypted and are available to any of the bank's alliance partners that choose to use them.

"We're not cannibalising our internal customers. We have some major alliances with companies like MBF, which means we have access to [a whole raft] of new customers. And we now have the flexibility within the system to allow us to offer our alliance partners various packages of financial services without going through years of development and all the drama of the past," Maes says. "We're starting to address John [Dawson's] concern about adaptability and flexibility. It's no longer the traditional tail wagging the dog: you ask IT and wait three years. You ask IT now and you usually wait three days or maybe three weeks and that's acceptable," Maes says.

The Bank of Queensland now has only one legacy system remaining, its core banking application, which it wrote in-house in the late 1980s. The bank is soon to replace this with a modified version of Global Technology's Globas system, which is currently running in some 300 banks around the world. When the new system goes live on SP2 machines running under AIX and Oracle, the Bank of Queensland will decommission the Fujitsu mainframe.

Globas is being adapted for the Bank of Queensland' purposes by Temenos in London. As Maes puts it: "I don't want to be in development. Banks are not good at developing software and we've proved it." In fact, Maes is a strong believer in selective outsourcing while retaining strategic elements of IT in-house. The bank's IT revamp has also caused it to forge new relationships with several of its traditional suppliers in order for it to focus its efforts on core competencies and customer service.

For example, in late 1998 the bank outsourced its desktop and networking support to systems integrator Data#3, following a three-month evaluation from a shortlist that included IBM, Digital and Citec. The deal covers support of the bank's desktop infrastructure, including networking and phone services for the Brisbane head office and 95 branch offices. It also provides the bank with a service-level agreement committing to greater uptime of its desktop systems across the enterprise. Data#3's help desk software measures service delivery by monitoring calls to the help desk and pinpointing where problems are occurring.

"We wanted someone who would take a risk and come along with us rather than just hand in an invoice and not do anything proactively to help us," Maes explains. "We decided to see how it went, and it's working out well. Since phasing in the outsourcing agreement, service has continued to be delivered smoothly and the queue of people needing help from the help desk has reduced dramatically.

"The agreement also gives us access to specialist IT skills for one-off projects involving, for example, SAP R/3 and data warehousing. Data#3 also manages our relationship with IBM for us, which frees up a lot of my time."

Another key driver behind Maes' decision to outsource technical support was the difficulty he was having keeping good people on board and offering them a career path in a bank. As part of the outsourcing contract, 12 of the bank's technical services staff were invited to join Data#3.

While the culture change in the transfer created "HR opportunities", as Ray Merlano, Data#3's Bank of Queensland's account manager diplomatically puts it, Maes thinks the former bank staff gained a new lease of life on joining the specialist systems integrator. He claims that they are now being offered ongoing skills training and career development opportunities and at the same time the bank no longer has to carry the cost of them.

"Our human resources manager worked closely with Data#3's human resources manager" says Maes. "None of our staff was made redundant and they were consulted continuously as both parties developed the outsourcing agreement. We no longer have to worry about finding replacements for them when they're sick or on leave and we don't have to plan for the shortage in the IT skills marketplace any more."

The Bank of Queensland has more recently outsourced its computer operations to Citec. The primary driver here, according to Maes, was not cost savings but value-add - what could an external supplier do for the bank that it can't do for itself? In Citec's case, he says, the answer was AIX and Oracle support and a guaranteed 24x7 service-level agreement.

Again, Maes no longer has to worry about absent staff or having redundant people on board just in case something goes wrong. As in the Data#3 deal, Citec has recruited former bank staff, and Maes claims this has also been a smooth transition, seamless to the bank's end users, with issues addressed upfront and no resulting arguments with unions.

The Bank of Queensland's selective outsourcing approach has naturally led to a change in focus, numbers, roles and required skill sets of its internal IT effort. The number of permanent IT staff has reduced in the past three years from 65 to 28, although this is periodically supplemented by large numbers of contractors depending on the needs of specific projects. The permanent positions tend to be specialist roles these days, such as in infrastructure and security - in which Maes claims the bank has the leading edge - as well as in areas such as data warehousing and customer relationship management. Internal development and maintenance does take place but is limited to middleware and applications that "touch" the customer, such as graphical user interfaces.

"I keep all strategic roles tightly in-house as that's not something I'm willing to take a risk on. However, we've had to completely re-skill our IT people. We've moved away from the introvert coder and have had to go to the business to look for people who are business-trained rather than IT-trained because it's much easier to skill them in IT than vice versa. But having my people involved in the business has been a difficult transition culturally for the bank to make," says Maes, whose only advice on addressing such cultural challenges is to work hard.

When leading people into a new field he believes in keeping them comfortable and not over-challenged, while at the same time stimulating their thinking along the new lines. In hindsight, though, he thinks the revamp would have been easier if he had got middle management more proactively involved, as he says those are the people who can actually make things happen.

From here on, Maes says it's more of the same both for him and the bank generally. The bank is embarking on additional joint ventures in e-commerce and is forming additional alliances to allow consumers directly to access banking products. It is also replacing its fleet of 81 ATMs with Web-enabled, state-of-the-art touch screens and is implementing its own online procurement system.

"We're expanding, spreading our wings and seeing if we can leverage this technology. We must never forget that to compete in today's arena it is all about providing ‘service you wouldn't believe'," Maes concludes.

Testing Times at the Bank

According to Richard Maes, CIO of the Bank of Queensland, implementing a three-tier architecture turns testing upside down as it is much more complex and complicated to test than traditional IT environments. "You have to test in so many directions because every time you touch one thing it has a ripple effect on everything else," he says.

Consequently, and at a cost of several million dollars, the Bank of Queensland built a brand new test lab equipped with the tools to enable it to comprehensively load-test the system; check for CPU and channel usage and timings; and migrate applications through development, testing, integration and production environments. As Maes puts it: he and his team are becoming integration specialists rather than development specialists.

Systems that are in the customer's face can lead to loss of business if they fail and potentially have severe financial consequences. Maes finds that this further complicates testing.

"We concentrate on making items of functionality at the front end discrete so that if one element falls over the customer doesn't notice," he explains. "If an application is critical to the business we also have high availability. If one of our core packages goes down, neither the customer nor the teller knows it because we have what we call mirrored-disk background over optical fibre where the application doesn't even miss a transaction.

"However, if it's something internal to the bank like accounts payable and it goes down, we switch over manually. That might take five minutes or half an hour, but it doesn't affect the customer. It also doesn't cost us nearly as much to put in place. So we have to be very careful in what we consider critical to the business and what we can live with."

Nor is Maes completely happy with what's on the market when it comes to software tools. They now need to be multifunctional and work in multi-environments, he says and finds a lot of vendors are having a hard time achieving this. In addition, some of the products that are coming out of universities and research laboratories have never been used in the public domain.

"That bleeding edge hurts and we have to be careful in picking our technology, especially where we have customer interfaces. We have to balance the pretty snazzy things with the practical things," he says. - K PowerSo Near and Yet So Far On the other side of the continent, Perth-based BankWest is another relatively small, albeit full service bank. Terry Budge is BankWest's managing director and a member of the federal government's Financial Sector Advisory Council. He says that if a company's board and chief executive are not concerned about their information technology and how they're going to use IT in their business, they won't have a business in a few years.

Budge believes that the perception of IT at board level has fundamentally changed in recent years. Chief executives in particular, he says, have to spend more of their time these days on e-commerce, emerging technologies and new ways of doing business.

"A lot of the new ways of doing business are going to revolve around delivery channels and the way you communicate, and that's all to do with information technology. It's not something that just sits [in the corner], it's a very integral part and driver of your future business," Budge says.

He admits to being closely involved in BankWest's IT decision-making, as he is in most operations of the business. He believes this is the real advantage of being a smaller organisation. Being small also enables the bank to move faster than the bigger players, to use new IT to grow the business and, being based in Western Australia, to take geography out of the picture.

"The key thing is not to get caught up with the technology, but to think about how you can use it around your customers. They are your most valuable assets, so don't mess them around with technology that doesn't suit their needs," he says.

BankWest's primary IT platform is its Core Banking System (CBS) that it developed in the early 1990s to replace a number of different legacy systems. It has since on-sold CBS to its parent company, Bank of Scotland.

"BankWest is one of the few banks in the world that has actually been able to build its own system in recent years," Budge claims. "It's an online, real-time, customer-centric and focused system. There is no overnight batch processing. If you carry out a transaction at a BankWest branch, the records are updated then and there, whereas most banking systems still perform transactions against the previous night's records and then run a batch job overnight to update everything". - K Power

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More about Bank of QLDBankWest AustraliaBEACBS CorporationCitecData#3FujitsuIBM AustraliaING AustraliaIT PeopleMBF AustraliaOracleSAP AustraliaStaffwareUnisys Australia

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