CIO

Change in Perspective

Back in 1996 each AMP business unit had its own application development function headed up by an IT manager who reported to the unit's general manager. The IT managers also had a dotted line relationship to John Allen, the then general manager, group information technology, AMP. Allen's group was responsible for worldwide standards and policies. Then in December 1996, AMP and Andersen Consulting formed AMPlus, a joint venture business unit responsible for the application development function previously carried out by AMP's separate business units in Australia and New Zealand (see "Inside and Out", CIO, May 1997). The new unit combined some 700 of AMP's business and technology people with 100 specialist Andersen Consulting professionals. AMPlus was initially headed by Andersen Consulting's worldwide insurance industry managing partner, Dave Hoffman, who relocated from Chicago to Sydney to take up his new role. The IT heads of the business units subsequently reported to Hoffman, who in turn reported to AMP's then managing director, George Trumbull.

At the time, Allen, who was instrumental in establishing AMPlus, said the main impetus behind it was a lack of synergy between AMP's business units in regard to IT. However, there was another driving force. AMP had recently announced plans to demutualise in 1997 and publicly list in 1998, subject to a vote by members. Trumbull proclaimed that AMPlus would help strategically position the company in the fast changing financial services marketplace. AMPlus had been due to run until 2001, but was wound up a year earlier than the due date. Barnett says this was because it was simply a logical point for the contract to conclude. "Prior to demutualisation, it was essential for AMP to undertake several major change programs, including Y2K, simultaneously and in a very compressed period of time. It was an incredibly aggressive agenda that touched nearly every part of the business," she says. "We had to look at how we could drive down some of the business's basic costs in order to free up funds for these large change programs and there are very few organisations that could undertake such an agenda without help. But as it was, we completed it early and our requirements for the following two years did not involve anywhere near the same degree of change."

According to Barnett, AMP's current IT model, which it has globally branded as IT@AMP, is still a centralised shared service function, just without Accenture's involvement, and, she says, is one that suits AMP well, given where the business is at.

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AMP's London-based CIO, Warwick Foster, heads up IT@AMP. Foster, previously Group Chief Information Officer at Colonial Limited, was appointed in August last year. Reporting to Foster are Barnett and the IT directors for Asia, UK/Europe, Henderson Global Investors and Cogent, plus three corporate functions: Global IT Business Strategy, Technology Strategy and Operations. Barnett's Australia and New Zealand group is still the largest in IT@AMP and also provides support to some of the other groups. "We're looking to globalise and standardise some processes, architectures and aspects of infrastructure," Barnett explains. "Also, given the cost differential between Australia and the UK, if there are any applications that we want to deploy globally, such as in e-commerce, we're looking at developing and supporting them here. You couldn't truly call us a global company yet as we don't have a substantial presence in the US, but we're definitely becoming more international and are looking to better leverage our skills base and be more efficient through this shared services model."

In March 2001, AMP announced that it had extended its relationship with CSC for it to provide IT infrastructure services for AMP's UK operations in a five-year deal worth $550 million. This was similar in size and scope to the new agreement AMP struck with CSC last year for its Australian and New Zealand operations, and some 220 AMP employees in the UK transferred to CSC in the process. According to Barnett, it was a competitive process; but as CSC had the best bid, the opportunities created by having one global provider were also attractive. In Australia, AMP also outsources the running of its AS/400s and set of corporate superannuation products to Kaz Computers. As in the UK, development generally takes place internally at AMP in Australia and New Zealand. However, Barnett says that the company's applications strategy is one of global reuse first, if practical. If it can't reuse, then it buys, and only as a last resort does it build.

"We've moved very much more towards being systems integrators rather than builders," she says. "For some time our policy has been that we should outsource infrastructure. Beyond that, I'm quite happy to look at outsourcing applications for platforms I consider to be non-strategic or if I can make a business case for it. It comes down to the commercial: if somebody can do it better and cheaper, I'm happy to do that." Barnett also believes in establishing partnerships with boutique vendors with specialist skill sets and services, which, she says, is more effective on certain projects than just "buying more bodies". In addition, her [internal] clients determine what they are going to spend on IT and Barnett then looks to resource that appropriately. To this end, she likes to maintain about a 25 per cent to 75 per cent mix of contractors versus permanent IT staff, which she can juggle depending on requirements. Then if the requirements do peak, she can look to the marketplace to buy in skills to support the demands of the business and not constrain it.

Barnett agrees with the prevailing wisdom that organisations should not outsource just for cost. As is the case with CSC, she also thinks it is of real benefit for companies with an overseas presence to work with a global provider, not least because it enables them to enter new markets faster. And while most companies would see the ability to manage partnerships and alliances as a key competency these days, Barnett does not think it comes easily or naturally for most Australian or British organisations, which like to maintain firm boundaries around themselves and jealously guard what is theirs. "In the heat of negotiations, it's also easy to cut off your nose to spite your face. If you're a tough negotiator, you can negotiate something to the point where you might appear to have secured a fantastic deal, but the reality is that the other party is never going to be able to deliver on it. "I think that happens a lot now and then, of course, you have a real expectation problem. The worse thing is to start off a relationship in a situation where you're both doomed to failure and, at the end of the day, it is both of you," she says.

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Barnett started out in IT, or data processing as it was more commonly known then, 25 years ago as the Australian Guarantee Corporation's first trainee programmer. After subsequent stints with Lend Lease and DMR Consulting, among others, she joined AMP in 1996 where she initially worked in John Allen's corporate team establishing AMPlus and became head of planning and architecture. From there, she was sent over to the UK to take up an IT strategy role, which she held for two years before returning to Australia to assume her current position. Barnett describes herself as driven and very results-oriented and also considers herself, direct, open and approachable. According to one of her colleagues, she knows where she's going and what she has to do get there and has great emotional intelligence that is reflected in her ability to recognise her own shortcomings. "I am fairly self-critical," Barnett says, "but after a few years in a leadership role of this size you have the chance to work on a number of your deficiencies. For example, I used to be uncomfortable with public speaking and presentations. However, due to the nature of this job, I have to do quite a lot of that, so I've had the opportunity to improve those skills. Working on things you like to avoid was part of the advice Paul Batchelor [AMP's chief executive] gave me when he appointed me to the position last year.

"AMP is not necessarily the sort of company people would think of in terms of a career in IT. However, I've been here five years, which is the longest I've worked anywhere. It's an interesting company and one that provides tremendous opportunities. I like the variety of my role and there's a still a lot for me to do and contribute." vFirst to Mark IT At the time of its launch, John Allen described the AMPlus model as the first of its kind in the world and very innovative. Both he and Dave Hoffman admitted that the arrangement was a showcase for Andersen Consulting and predicted that others would follow suit. Accenture seems unclear as to how many actually have, but according to its Web site, in October 1997 it teamed with Prudential Assurance in the UK to form PruTech, a new IT organisation comprising Prudential's 800 IT staff and some 150 Andersen professionals. According to Accenture, Prudential had taken stock of its technology organisation and found it wanting. In particular, its key operational systems were inadequate to support the company's business objectives and needed substantial upgrading. After evaluating the options, it decided that an in-house change program would not free up enough internal resources or inject the additional capabilities needed for implementing business unit change programs. At the same time, outsourcing was incompatible with Prudential's culture and would result in a significant value-added tax cost.

According to Hoffman, AMP also looked at outsourcing along with a continued use of a consulting model, but decided only the AMPlus co-sourcing or partnership model could deliver the kinds of changes AMP needed in the required timeframe.

Writing in Andersen Consulting's Financial Services - Ideas magazine in 1998, Robert Pitt, a partner in the company's Financial Services Technology practice, said that in deciding which IT transformation model is right for it, an organisation needs to answer the following questions:

Is the desired IT capability a strategic asset?

Who is best positioned to bear the risk of delivering the needed change?

To what extent does the existing organisation need to be replaced?

Who is best able to take service management responsibility in the long term? "The decision also depends on cultural considerations and even political and regulatory issues," Pitt wrote. "In such countries as Japan and Germany, for example, it would be difficult to use anything but the consultancy or partnership transformation model. In all three cases [outsourcing, consultancy, partnership], however, companies cannot succeed if they try to separate technology challenges from their strategy, people and processes. They must take an integrated approach."

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Announced in 1996, AMPlus, the IT alliance between AMP and then Andersen Consulting, was hailed as an "engine of transformation" by then CEO George Trumbull. Today, AMP is minus the "plus" and going it alone - welcome to IT@AMPThe road travelled by financial services giant AMP in recent years was not without its bumps, potholes and the occasional roadblock.

In particular, 2000 was a year of great change, both for the company in general and its IT organisation in particular. AMP's hostile take-over of GIO was a major event in itself and, admits Lee Barnett, director of IT, AMP, Australia and New Zealand, many of GIO's IT people were not happy about joining AMP. The cultures of the two organisations were quite different and in addition, GIO was offering a very attractive retrenchment package.

Consequently, the uptake by GIO personnel of IT positions in AMP's primary outsourcing partner, CSC, was low. AMP also renegotiated its contract with CSC last year. Since late 1993, when AMP sold its local IT subsidiary, CSA, to CSC, it has outsourced the support and maintenance of its IT infrastructure to CSC. However, perhaps the biggest upheaval of all, although taken before Barnett's arrival in her current position in May last year, was AMP's decision to restructure its IT model and terminate AMPlus, its "co-sourcing" relationship with Andersen Consulting (now Accenture).

"Last year was tough, and I think most of the businesses would agree that they made it tough on themselves. There was a lot of change going on simultaneously, and it was a difficult period to manage. But we came through and things are now improving, and at a pace. At the end of the day, a successful acquisition comes down to cultural fit and AMP works in a very different way to how GIO worked. So moving to the AMP model from where they were was quite challenging [for the GIO people]," Barnett reflects.