Changing of the guard: ANZ Bank

When it comes to its technology operations, Australia and New Zealand Banking Group's philosophy appears to match its corporate slogan: "Being different". The bank has no plans to rush after its rivals and rip 'n' replace its core banking systems. Instead, it's advocating a course of simplification and spending its technology dollars on new projects that bring in more profits.

"Overall, our approach is to direct most of our investments into the channels where we feel the greatest customer and revenue benefits are," Kieran Griffiths, ANZ's deputy chief information and general manager of technology service and infrastructure management says. Griffiths has interim joint charge of the bank's technology following the shift in role of CIO Peter Dalton in December 2008.

"Like most other banks, we constantly monitor our ratio of run-the-bank to grow-the-bank spend and have made good progress in this during the past few years investing a greater proportion of our spend in the latter," Griffiths says.

The direction of those projects is a no-brainer, according to Griffiths — the internet and mobile phones. In Asia, these have specific importance because many customers have never had a traditional bank account. But even in Australia, technically-savvy banking is the word of the day, the executive believes.

He points out that ANZ was one of the first banks to offer mobile banking in Australia. Now over 120,000 customers log on each month. In contrast, mobile banking attracts 60,000 users per month for Commonwealth Bank of Australia, according to that bank when it spoke on its new face-lifted NetBank in May.

"The aim is to improve these offerings, and deploy the services across the Asia-Pacific region too," Griffiths says.

The bank's focus isn't about everyday banking via a different medium, according to Griffiths. Instead it's about coming up with new services made possible by the technology, such as SmartyPig, an initiative that allows family and friends to contribute to a person's savings via Facebook and MySpace. SmartyPig won a Canstar Cannex Innovation Excellence Award.

CIO wanted

It was to follow this new direction that Dalton left his role, and in December became the general manager for innovation at the bank, adding a reporting line to Margaret Payn, group managing director of strategy and marketing, but continuing to also work under David Cartwright, group managing director of operations, technology and shared services.

Dalton's move was an unusual one that had Australia's banking IT industry collectively scratching its head. Was the CIO demoted, or was he bored of keeping the lights on in ANZ's technology operation? If you listen to the bank's chief executive Mike Smith on the topic, it seems unlikely to have been a demotion.

"ANZ recognises that to become a super regional bank of global quality, we must make strategic investments to developing 'best of breed' technology, systems and products ... we need to continue to lift our game — to bring real focus to innovation and the role it will play in our future growth," Smith wrote in an article for an FST Media magazine earlier this year.

"That is why we have established a dedicated innovation team at ANZ led by a senior executive [Peter Dalton] with a clear mandate." Dalton has been at ANZ for over a decade. When the former CIO Mark Willis left in July 2006, Dalton became shared acting CIO and was officially appointed to the role in September 2006.

Given how enthusiastic the CIO was about the more unusual parts of IT, such as greening the bank's operations or giving his workers vendor sabbaticals, it seems likely the former CIO will rise to his new innovation challenge with relish.

And he'll likely have the support of those he reports to. Appointed early 2007, Smith's first annual general meeting placed great significance on technology, as he named it as one of the four core capabilities to bring the bank growth. He put forward a vision of technology which wasn't a constraint, but instead a "core source of advantage".

In the same FST Media article from earlier this year, the CEO placed further emphasis on the importance of Dalton's new position. "Experience shows bureaucratic and hierarchical workplace cultures are the enemy of innovation, whereas innovation is supported when new ideas are valued and failure is accepted as part of the learning process," he said. "And in reality, new ideas are often fragile in large organisations because they challenge old ideas — and revenue streams."

Yet without someone to guide the bank's everyday needs for IT as well as innovation, the bank's technology vision is unlikely to go far. It has not yet found a replacement to carry out Dalton's old role, despite having conducted a global search for months. "This is an important senior role within the bank and it is important that the next CIO is the best fit for our super regional strategy," a spokesperson for the bank says. Until it does, Cartwright and Griffiths are jointly responsible for the job.

Perhaps, with Dalton taking the interesting bits away, it isn't so palatable.

Becoming super regional

The bank's super regional strategy, announced at the same annual general meeting in 2007, is at the centre of everything the bank does, not just the hiring of a new CIO. To ANZ, super regional means becoming the "global" bank for the Asia Pacific pond, making mergers and acquisitions in Asia to derive 20 per cent of its earning from that region.

The strategy was key recently in the appointment of Singtel and its subsidiary Optus as the bank's managed network services provider in a $500 million, five-year contract. The bank's Singaporean choice — just weeks after rival Commonwealth Bank of Australia chose Australian stalwart Telstra — seemed to make its regional focus clear.

Together, Singtel and its subsidiary Oputs will provide network services to the bank in Australia and 30 other countries in the Asia-Pacific region, including the company's operations centre in Bangalore, India. "This consolidated approach to telecommunications will support our growth strategy across the Asia Pacific region," Griffiths says.

The bank's transferring of technology jobs to India also plays the tune of a regional bank. In another FST Media interview in May last year, Dalton said that around one third of the bank's technology staff resided in Australia, just under one third in New Zealand and the other third in Bangalore. The Bangalore staff manage software development and technology support for many ANZ systems, and in some cases ANZ's operational functions, according to Griffiths.

Next: Core banking and the future.

Dalton said at the time that the bank thought it had found the right mix, however, since then the bank flagged that it would transfer 500 more positions. The total headcount in Bangalore now sits at around 3500. And the transfer of expertise isn't over. Griffiths says the bank will continue to look at areas for offshoring on a case by case and business by business basis.

Yet the bank hasn't completely forgotten its duty to staff. It began an initiative recently where it improved its internal processes for redeployment, formed a $10 million fund for new training and also developed a past employee care fund for those former workers suffering financial hardship.

Employees aren't just moving out of the country. Those in Melbourne are also being shifted around to ANZ's centre at 833 Collins Street, where it has spent money on new technologies such as smartcards, wireless connectivity and power-saving telephones, in an effort to increase productivity and energy efficiency.

Of course, with the global workforce, the bank has been installing 40 Cisco telepresence units in Melbourne, Sydney, Auckland, Wellington, Singapore, Hong Kong and India in an attempt to save money on travel costs and increase efficiency.

Core banking

While Commonwealth Bank of Australia and National Australia Bank gear up to rip their insides out, ANZ has again turned to its super regional vision to provide a guide as to how it should overhaul its core banking platform.

ANZ runs CSC's Hogan solution in its core. Westpac has also been rumoured to be considering Hogan for its internals because it is already in place at new subsidiary St George.

Yet ANZ also has Infosys' Finacle in the wings. It has already implemented Infosys' internet banking system in one area in a project rolled out in Australia in 2006, followed by enhancements and regionalisation in 2007.

The implementation, dubbed "Project Tiger" and led by then group head of retail banking in Australia Brian Hartzer, replaced a system called Edify which the bank felt had come to the end of its life, according to a case study published by Infosys. ANZ wanted the banking platform to be implemented not only in Australia and New Zealand, but also across its banking units in Asia.

ANZ decided not to build its new system in-house, but instead to buy and customise a packaged system which it hoped to make as close as possible in functionality to the Edify system and the bank's strategy for the future. Other key considerations were adaptability, operating cost, scalability and time to market.

Infosys quoted Hartzer as saying that the bank "looked at vendors across all five dimensions, but a lot of them were ruled out because of cost and time to market considerations". The implementation was swift; three million customers moved in 12 migrations over 12 weekends. "We moved people without them knowing it. That was our primary driver. We did not want the customer to see an impact," Hartzer said.

Yet despite this success, ANZ hasn't been jumping to roll-out Finacle more widely in Australia. It's been happy to remain true to its super regional strategy, focusing on Asia. The coming years will see the new core banking engine rolled out across 12 countries throughout that region.

Finacle went live in Laos in early June 2008 and then in Indonesia in November 2008, according to Griffiths. He considers Indonesia to be a coup since ANZ is aiming to be a top four domestic bank in the country by 2012.

China is next on the cards. "We're gearing up for this now, followed by planning for Singapore," Griffiths says. Australia isn't on the horizon. "Our core systems in both Australia and NZ are amongst the youngest and most stable of the major banks," the IT executive explains.

Instead of changing one system for another, the bank will simplify its current systems to have less technologies doing more. "This will then mean less risk when it comes to eventually replacing core systems," he says. "Right now our focus is on Asia. The idea is that we'll start small, learn as we go."

This strategy, being different in its core banking and regional outlook has put ANZ on a different time scale to the other banks in an Australian sense. It has been able to use Asia as a guinea pig for a future Australian core banking replacement, while buying itself time and money in home markets to spend on new applications that will give it a path to its customers' wallets.

This could mean gaining a first mover advantage on a whole host of technologies while its colleagues are fighting an internal battle, either with core systems or a merger, in the case of Westpac. However, like 400m runners in the outside lane, Dalton and the yet to be appointed CIO will need to use their head start wisely, or risk finding Commonwealth Bank of Australia CIO Michael Harte and National Australia CIO Bank Adam Bennett powering down the centre lanes with their newly transplanted hearts.