It's economic Darwinism in action. Most businesses are convinced they have two options: either enter into the world of e-business by embracing the Internet and e-commerce, or be left behind in decidedly non-electronic dust. For some, the game is moving too fast, but not for ANZ's CIO David Boyles Like the other "three pillars" of the Australian financial system, the ANZ bank knows it has to use any and all means to defend its margins as the new economy circles the walls of its existing business. To counter the threat, ANZ chief John McFarlane has launched his enterprise on a five-year excursion towards e-transformation, specialisation and the creation of a portfolio of growth businesses - all designed to push the bank up the value chain.
But the success of the seismic strategy overhaul is likely to depend as much on the groundwork ANZ Bank global operations and technology head David Boyles has put in place over the last three years as on all the steps taken into the future.
The bank's new strategy is a radical one, eschewed by the ANZ's competitors but designed to transform the bank almost beyond recognition. With a reputation as an innovator with a keen understanding of IT and e-commerce, McFarlane sees globalisation and technology as the enablers for the new world order of banking. He says ANZ will be "very different" in three to five years. If it is, the work Boyles has done to make IT fully responsive to its customers should take much of the credit.
For Boyles, whose unplanned move into the position from the US three years ago has been the catalyst for dramatic and ongoing change, getting the IT shop humming to the businesses' tune has been all about revamping the bank's capabilities in people, processes, technology and tools. He's been working at top speed since his arrival, in order to position the bank for almost anything. Now he has a well-run, effective, responsive and efficient internal IT shop that can rapidly roll out new products and services with minimal technological change and minimal cost. Under Boyles' stewardship, IT has truly become the bank's most formidable competitive weapon.
It is likely to be under Boyles' continuing stewardship that technology will help transform the bank's existing business into specialist growth businesses in their own right. The irony is that Boyles came to Australia and joined the ANZ's executive team almost by accident.
When an executive recruiter approached Boyles to ask if he knew of anyone suitably qualified to head up the ANZ bank's IT operation in Australia, Boyles - knowing modesty was a luxury he couldn't afford under the circumstances - seized the opportunity to suggest himself. As US senior vice president of e-commerce at American Express, Boyles at that time was busily - and extremely effectively - producing e-commerce propositions across most of the company's business areas. When the call from the recruiter rang, Boyles knew that here was the chance of a lifetime for a man with his passion for our country.
"I think [the recruiter] was probably calling me to see if I knew someone else suitable who was already in this part of the world. He didn't realise I actually had a strong affinity for the country and its people and, in fact, had many times in my life thought about living here. We talked about other possible candidates and I think he could tell from the enthusiasm in my voice that I might possibly be interested," Boyles says.
And so almost three years ago, Boyles packed up his family and moved half a world away to become the ANZ's head of technology, e-commerce and payments. Since then he's slashed ANZ's technical staff turnover rates from 20 per cent for existing staff and 50 per cent for new hires to an average turnover rate today of just 5 or 6 per cent - winning great loyalty from staff along the way.
He's built an entirely different IT organisational structure, revolutionised the way IT speaks to its customers, implemented standardised project planning and tracking technology, and reduced average coding errors by 95 per cent. He's completely remade ANZ's IT infrastructure: to the extent that there's hardly a computer in the company today that was there 18 months ago. He's also put most core processes on a single platform, cut three core banking application systems down to one, and introduced a range of other projects aimed at providing the bank with greater customer flexibility and cost efficiencies.
And the e-commerce centre of excellence Boyles has put in place is cooking up a storm.
"What we did when we started our e-commerce centre of excellence was put in all new processes for them," Boyles says. "The outcome of putting in place best-practice processes around rapid application development and testing and the like is that - based on everything we can determine - our costs and our turnaround times are equivalent to the best dotcom companies you could find." As an example: it took just 10 weeks from when the New Zealand arm decided it needed Internet banking to go live with a system which has now, just months later, given ANZ arguably the highest number of Internet banking customers in NZ.
If you are tempted to believe the transformation of the ANZ's IT could only have been achieved by throwing huge swags of money at it, think again. Boyle's IT budget has gone down in each of the last three years. "That won't please some CIOs, but the first year that I came in here I was asked to cut my total budget substantially," Boyles says. "I came in on the 1997-98 budget year and we took out substantial IT costs. We took out another big chunk in the 1998-99 year and we've taken a bit out in the 1999-2000 year too.
"Much of the cost reduction we have done has been ploughed right back into neat new customer services or neat new products or neat new ways of doing things."
Now the bank wants to become what it calls an "e-bank with a human face", capable of providing bank customers with a personalised, multi-channel experience through seamless channel integration, Web enablement and CRM technology. Under the strategy, the bank plans to:
Run 21 specialist businesses, including three new customer businesses: wealth management, small business and general banking - as well as a global transaction services business - each with a strong customer focus.
Become an "e-bank with a human face" by embracing new technology which transforms the economics of the business and enables ANZ to provide its customers with a multi-channel, personalised experience.
Create a portfolio of valuable growth businesses built around e-commerce and other core capabilities able to be leveraged regionally or globally. Key priorities include e-procurement, e-payments and eAsia. Underpinning that development will be a robust and flexible infrastructure, strong e-commerce capabilities, and a technology capability that will allow automated, seamless straight-through processing to provide service at a lower cost.
It's a strategy Boyles has helped to shape as much as anyone else on the executive team, and true to his philosophy that the most senior technologist in the company must not only be part of the most senior executive team but also a keen agent for change. "I think the CIO needs to lead change by offering new solutions," Boyles says. "I think their organisation needs to be absolutely part of the strategic plans that business puts together. So the way we do planning around here now is that I or my people - depending on the level of planning that's going on, what level of the organisation it is - are actually part of developing the strategic plans and the business plans. And we drive our technology strategy from business strategies."
Does that automatically achieve alignment? It sure "helps a bunch", Boyles says.
Since he came on board, the ANZ's IT operation has undergone a number of organisational transformations. Today, while what most would view as a centralised IT shop still takes care of infrastructure, people, processes, training and career development for technologists, Boyles has seeded senior technologists into the executive teams at every level of the business. While remaining on Boyles' payroll, their job is to "absolutely deliver" to that business unit's strategic plans and business plans using the IT specialist solutions people under their management whose sole mission is to deliver to that business unit.
"While we've taken the idea that we're a big centre of excellence around technology, our efforts must match up to the strategies and business plans of the business units," Boyles says. "We should be provoking and leading change around new technologies, new ways of doing things - in some cases even new ways of dealing with people. But we must be in all cases completely aligned with and part of the business unit strategies and plans and actions."
The new structure was part of a three-year plan formulated by the IT group just after Boyles joined the bank, and subsequent to discussion about whether the bank needed to change its view of its leaders to meet its new vision.
"In other words, [previously] there'd been a lot of emphasis on people just having technical skills. We came to the conclusion that we really needed managers who had technical skills absolutely, but also had very good people skills. So we just kicked off a process at that point, including drafting a plan that focused on what we were going to do for our customers," Boyles says. "Not surprisingly, at the end of the meeting we came up with a three-year plan that had very specific actions around customers, people, processes and infrastructure (e-commerce was added later). And basically we've operated to that plan while modifying it to match up with the business unit strategies."
In the customer area, a quality program called One Team concentrates on identifying internal customer needs in terms of the services they provide, and on ways to deliver high-quality outcomes.
The team also spent a lot of time identifying how it should report to internal customers and putting in place metrics and ways of reporting them. It now produces a comprehensive monthly report that includes everything from statistics on the IT organisation's people through quality metrics to efficiency measures and financials. It also includes the results of monthly customer services.
In order to help IT act more like a commercial enterprise, Boyles put in place a comprehensive project management and project billing system. He can now provide reports to any of the businesses IT serves that detail the amount of money spent and what it was spent on, who worked on the project for how many hours, and just about "anything else" the business unit might want to know about the project.
"Out of all this, you might ask: so what?," Boyles says. "The so what is - and this is based on everything we've seen, including the customer surveys we do with the businesses we serve - that they're much happier with what we do, they have much more control over the projects that we do and the outcomes. And we just don't have any projects going off track, going over budget or going beyond the deadlines we promised to deliver them on."
Boyles started transforming life for his employees with a lot of work on leadership and employee development, as well as "gobs of initiatives around better communication at all levels". Every technician now has a comprehensive career development plan. From day one they know exactly what skills are needed at any level they enter on and the skills they will need to move to the next level. At quarterly reviews for each employee, managers not only review their performance but also go over their progress against the development plan.
There are also comprehensive training programs in place, including 500 courses that can be ordered and taken online. About 300 managers have undergone project management certification and 150 have completed leadership training. Under a new initiative, seven training kits will be offered yearly, to be delivered to the employee's home at their request, ranging from Microsoft's certification programs through to balancing home and work.
"Basically, if you're in my shop, we give you a lot of opportunities to improve your skills around the particular technical or payments or e-commerce job you hold," Boyles says. "But we're also working hard at giving people skills around managing work/life balance or managing their people, helping develop other people and so on."
As a result, Boyles routinely receives messages from employees expressing appreciation for the way ANZ is helping them build their skills and career, and turnover has plummeted. "The outcome of all this is that fewer projects get disrupted by turnover, and I spend less money recruiting because we're keeping our good people," he says.
On the process side, Boyles quickly realised development was being hampered by the inability of technical staff who managed projects to communicate across projects about what was working and what was not. In response he sent many managers to project management training, put a standardised project planning and tracking technology in place and started implementing CMM wholesale. In its first big rollout, in the international systems area, errors in code were reduced by 95 per cent.
Using the e-commerce area as an example, he started setting up more centres of excellence. "What we've done around e-commerce is to have a single technology centre of excellence serving the three businesses: Personal Financial Services (consumer), Corporate Financial Services, and International. [Staff] use the same methods, same tools, same testing regimes for all the businesses and therefore we believe we're able to turn around development faster than some of our competitors, who probably have multiple shops doing things in different ways.
"But the point I'm trying to make around process is that, if you pick best-in-class processes and you implement them consistently, everyone is able to talk to everyone else in a common language. You can share tools, you can share code libraries, and it all becomes quite transparent and quite readily available to everyone. We think we've got a huge quality boost and huge productivity boost out of putting in best-in-class processes and technology."
ANZ is well on the way to rolling out its internal Web infrastructure with Web-based IP networks in 25 countries, all key office locations and more than 100 branches in Australia. By the end of this year, every single location, even the smallest branch in the bush, will be on a high-capacity IP line.
"Our objective is to provide a single integrated network providing line-of-sight to each customer using Web-based technology to link our businesses, core systems and customers," Boyles says. "This will help provide a consistent level of services across all of our businesses, reduce costs and provide a better experience for customers."
He says all desktops are now on NT with the exception of pilots for the bank's Windows 2000 rollout. (Windows 2000 as a replacement for NT, and Office 2000 is now under way to 14,000 desktops.) The bank is also standardising its ERP and later this year will begin upgrading all its voucher-processing equipment to an image-based platform. It has announced it will be replacing its payment systems with a Windows 2000-based platform that will reduce 27 different payment systems to one. And it's also announced it will roll out a new branch sales and service platform. Three core banking application systems in Australia and NZ have been reduced to one, making it easier to roll out new products and services quickly.
ANZ expects to complete the rollout of the standardised platform for its Australian and New Zealand operations over the next 18 months.
The effectiveness of Boyle's philosophy and approach is seen nowhere more graphically than in the e-commerce area. Under his new structure, there's the previously mentioned technology centre of excellence, and business units that work with the centre and devise products, strategies and pricing. Boyles says a primary accomplishment for the bank is the way each e-commerce unit is building off the developments of the others.
"So if somebody in the small-business side of things, which is Personal Financial Services, comes up with a great idea, people in the corporate side are looking at that and saying: Wow, that's pretty neat, maybe we can make a few tweaks and roll it out across corporate'. A lot of good ideas are being moved around between the business units - in some cases via the e-commerce centre of excellence, and in other cases directly - that I think give us a real competitive edge."
E-commerce initiatives include a strong Internet banking package, a real-time loan-approval facility and an e-payments offering. The purchase in June of a 4 per cent stake in online stockbroker E*Trade Australia reportedly catapulted ANZ to second place in Internet banking. The bank has also selected the MRO.COM online procurement solution as the basis for developing its new business portal www.anzebiz.com, which will provide a Web-enabled e-procurement service to ANZ's business customers around the world. Boyles believes ANZ was the first of the big four to get an e-procurement pilot up and running.
But at the end of the day, e-commerce for Boyles is just commerce delivered slightly differently.
"We defined e-commerce here at some point and said it's the delivery of commerce via Web technology," he says. "It's just commerce. And the only reason why we even defined e-commerce as the delivery of commerce via Web technology' is so that we could set up some policies, procedures and processes around a technology that if you're not a bit careful with it has a lot of security issues and privacy issues.
"In my own opinion, many, many, many of the dotcoms are going to fail because they don't really have a sustainable business proposition. So I believe all the same thinking that one would apply to any commerce initiative needs to be applied to all e-commerce initiatives - and I'm a firm believer in that. If there's not a sustainable business proposition, if it's not a product that's desired by a set of customers, forget it. It's not going to work."
Meanwhile, an intranet called Max is delivering vast amounts of functionality, including knowledge management and training facilities, to each of ANZ's standardised desktops. Furthermore, for the first time the bank is fully leveraging its IT shop in Bangalore, India. Boyles says until he came on board, the shop was languishing somewhat and not being effectively used.
"Now we've started building up that shop," he says. "We've just expanded it and had to get more space in the building, and we've moved a lot of work [there]. There's a whole lot of demand around [new Web technology], and so we've been building up both locally and in Bangalore at favourable cost."
While Boyles is happy to send work overseas to his own site in Bangalore, he is determined to defy the trend by keeping IT in-house rather than outsource the business.
"It has to do with economic reality," Boyles says. "For instance, let's talk about development work. If one of the outsourcers hires development people in Australia, what price do they pay that's different from mine? What processes do they have access to that I don't? And what hardware or development tools do they have access to that I don't have access to?
"If you run your internal shop well, you're using all the same things [as an outsourcer] or you may even be more flexible in what you can use because I can make decisions with regard to what we do internally that an outsourcer cannot necessarily make. So economically speaking, if that's the case - and I am a cost recovery shop only - how can an outsourcer underbid me, because they've got to make a profit margin for shareholders?"
The problem is, as he willingly concedes, that unless the internal IT shop is well run, both productivity and quality may be poor. On that basis, he's agreed with the businesses that if at any point they think IT's quality, efficient or costs are not at least as good as the outsourcers, he'll make an arrangement to outsource.
That seems unlikely to happen, at least during the next five years of the bank's radical transformation.