Commonwealth Bank of Australia today revealed its technology costs had continued to fall, down $30 million from the previous half-year to $380 million.
CommBank CIO Michael Harte
(Credit: Commonwealth Bank)
The bank's total IT expenditure reached $380 million for the half year ending 31 December 2008, according to financial documents released today, making up just over 10 per cent of its $3.5 billion operational expenses.
The $580 million core banking modernisation program had also played a crucial role in delivering today's lower total operational expenses for this half.
The bank had allocated a $77 million write down of its software assets, which were attributed to its core systems overhaul, to the last half's $4 billion operational expenses. The write-down was lumped together with $18 million in leasehold improvements, and $288 million in "other expenses" that were not included in this half's report.
The bank did manage to trim expenses directly related to its "IT services" costs for this half, which covered desktop PCs, communications, application maintenance and processing expenses.
The largest direct fall to its IT services costs came from its application maintenance expenses, which had dropped $41 million from $103 million in the last half to $62 million.
CommBank in late 2007 changed tack for its outsourced application maintenance work, ditching incumbent EDS in favour of a panel-style arrangement that included HCL, IBM and Tata Consultancy.
Its communications expenses also fell $13 million from $92 million to $79 million. IT costs that were up this half, included the bank's EDS-managed desktop expenses, up $10 million from $68 million in the last half, as well as its EDS-managed data processing costs, which were up $3 million to $98 million.
The bank had also written down the value of its technology hardware and software by $73 million through ammortisation and depreciation, which added to its IT services costs.
CommBank chief executive Ralph Norris today reiterated the importance of the core banking systems replacement and congratulated Harte and the core banking modernisation project's lead, Dave Curren, for making "excellent progress". "Core banking modernisation remains a key strategic priority — one that will give a clear and distinct advantage," Norris told investors this morning.
Norris said the project was "ahead of schedule" and that it was showing "significant promise".
I can't believe Norris slipped up and mentioned the manager of the core banking replacement project: Dave Curran. I would think Norris, the Commbank Board and Mr. Curran himself would want to keep the spotlight off Curran, Accenture and the massive fees Accenture is skimming from this project. Commbank IT costs are down, IT staff are out of work, SAP is losing money ... but Accenture is said to billing well about their orginal contract pricing, having put through countless variations. And what about the conflict of interest Mr. Curran and Commbank board member Jane Hemstritch have? As someone looking at this from inside the industry I can't believe what they got away with and that the regulators, the ASX or Wayne Swan isn't all over this. Accenture was selected with Curran leading the selection process and approved by the Board. Curran and Hemstritch are ex-Accenture partners who have tens of millions in Accenture shares. The Commbank sale has been publicised by Accenture all over the world. So Accenture profits from the PR and directly by running the project at at a huge profit margin and increasing the price tag with variations. Where does the profit go, well indirectly into a higher share price which benefits Curran and Hemstritch directly. If IBM were in such an obviously conflicted position at one of the big Aussie banks or teleco, for example, the press and regulators would be all over the place. Norris should really clean this up and make sure Curran and Hemstritch have divested all shares and any profit or proceeds since Accenture was selected forfeited, given to charity, etc.