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Asia is core for ANZ

Asia is core for ANZ

ANZ's CIO has quietly gone about the business of building up the bank's technology leadership team to underpin its broader super regional aspirations.

Given that she sits in one of the hottest chief information officer seats in the country, Australia and New Zealand Banking Group's Anne Weatherston has succeeded in keeping a remarkably low profile since she arrived in Australia 18 months ago. While her peers at Commonwealth Bank, Westpac Banking Corp and National Australia Bank have been frequent ­subjects of newspaper articles about ­mammoth core system replacement ­initiatives, the former Bank of Ireland CIO has quietly gone about the business of building up her technology leadership team and laying the groundwork for the bank's crucial IT ­strategy.

In late July, ANZ finally bowed to media and analyst pressure to hold a public show and tell, where Weatherston could reveal how the bank was planning to spend its annual $1.5 billion technology budget, and it showed a markedly different approach to its big four rivals.

While listed companies have never been required to divulge their technology strategies, the investment community had become nervous about ANZ's protracted silence. Interest mounted against a backdrop of frequent market updates on ­big-money IT plays at the bank's rivals.

Pressure points

In contrast to the large-scale programs going on elsewhere, Weatherston's presentation revealed that ANZ will not be investing billions of dollars in upgrading its core technology systems. It decided that its older platforms are more flexible than those of rival banks and that funds can be better spent on investing in IT ­systems to support its Asian super­ regional banking aspirations.

In the context of the local market, it was a big call to make, as alongside CBA's ambitious $1.1 billion program to replace its ageing core banking systems, NAB has also commenced a core systems overhaul known as NextGen, and Westpac is undergoing a $2 billion systems renewal project.

However, Weatherston says the bank's well-publicised aim of refocusing its business to the extent that between 25 per cent and 30 per cent of its group profit will be derived outside Australia and New Zealand by 2017, justifies the decision to retain an older core.

"The problem of a major core transformation is that you effectively have to stop doing everything else," Weatherston says. "For ANZ, that is not an option because we are trying to grow a very big bank in Asia."

"My take on core is quite simple. At the end of the day it is really just the accounting engine of the bank, and that hasn't actually changed. So therefore the technology doesn't necessarily need to change."

She says the bank's decision to upgrade its Hogan-based platform in the 1990s means it can avoid the upset of a major transformation.

The bank has had enough flexibility in the layer of technology sitting above its core systems to allow it to add new global markets and payments platforms without touching the core systems.

Reactions to the news were mixed with well-respected CLSA analyst Brian ­Johnson saying that ANZ's existing core systems are indeed better than that of any of the other big four banks.

However, he also believes that CBA in particular is about to start harvesting ­benefits from its new systems that will be significantly better again.

"I think CBA has built something that is really transformational, and every time the other banks come out and dismiss it they must celebrate," Johnson says.

"The duration of its competitive advantage is simply how long it takes everyone else to catch up."

Level of anticipation

Taking time to recall the steps that led to the new strategy, Weatherston admits to MIS that she has been surprised by the level of anticipation that built up around her public bow, saying the media elsewhere in the world pays less of a regard to CIOs than Australia's press pack.

However the pressure of public scrutiny was nothing compared with the pressure she faced on taking the role, under a demanding chief executive.

Weatherston describes ANZ chief executive Mike Smith as one of the "most compelling bankers" she has ever encountered. She says his decision to give up his gig as the Asian head of global giant HSBC and move to ANZ was a strong factor in convincing her to emigrate around the world to take her role.

"Mike's sell to me was that he views technology as a key enabler of the bank, and he is one of the few banking CEOs that would genuinely say that and mean it," Weatherston says.

"I think he saw IT as the last area of ANZ that needed to be sorted, in the sense that he had set this aspiration around becoming a super-regional bank yet felt ANZ's IT was still locally aligned. As a result my role here has never been about 'slightly fix and maintain', it has all been about radical transformation."

As any seasoned CIO can attest, coming in to an organisation with a mandate to make changes is one thing, but being able to push them through is another. Large banks' IT departments are vast and tend to have mini-fiefdoms that need to be ­broken up.

Aside from that, Weatherston says the existing IT structure did not have the confidence of the CEO, and there was a sense of cynicism permeating the IT department. Her early concerns were about ­convincing ANZ's management board and the staff that she was the right person to run IT, while concurrently building up her senior leadership team.

"Every time when you go in to a new role you have to start all over again," she says. "Just because you have got the job does not mean to say that everyone will value your contribution, you have got to win credibility.

"It has been a nightmare because, to be honest, I didn't have a lot of resources last year. When I arrived Mike [Smith] was quite brutal about the leadership team that I inherited, but I had to point out to him that half the roles were empty."

She says Smith's desire to rapidly grow the bank meant she was never going to be afforded the luxury of time to draw up her plans while she hired new staff. Instead she ploughed ahead with what she had in order to keep the bank's momentum rolling. "I don't think he realised just how ­barren it was, but Mike is an impatient guy, and there is no way he was going to wait a year while I got the right people in, so a lot of the change that we embarked on in the middle of last year was done with limited resources," she says.

Team ANZ

To tackle the problem, Weatherston engaged executive recruitment firm Heidrick & Struggles to find six or seven new direct reports. She says she has since pulled together a crack team including CIOs with notable international experience, and has just one slot left to fill.

The roll call of new names includes former British National Health Service CIO, Sarah Harland, who joined in March and is focused on the investment banking division, Patrick Maes who moved from HCL Technologies to run Weatherston's strategy and architecture team as chief technology officer, and Ian Rae, the former CIO of global banking and markets technology in Asia-Pacific for the Royal Bank of Scotland.

As Weatherston has moved to reshape ANZ's technology divisions she says she has only used in-house resources as she wanted staff to feel like they were embarking on a journey together.

She says the bank "jumped off a cliff" with its new structure in September last year in what amounted to a leap of faith, and is now well along the path to completing a significant transformation.

"I have heard from people in the ­market that our operating model is the one that CBA seeks to get to, and hasn't managed to get there yet," Weatherston explains. "It is an industry standard operating model for IT in a global organisation. In effect we have got business partly aligned by region, but behind that we have global execution teams.

"It has been root and branch change, so with that in mind I warned Mike early last year that the one performance target I would fail on would be employee engagement, because I was going through so much change I knew I would lose staff. However, our engagement scores have actually soared.

"When you talk to the guys on the shop floor they are not stupid, they know what is wrong and that things need to be fixed and they were willing to come on the ­journey."

Despite all the talk of improved internal decision-making processes and expansion plans, the big message many interested watchers took away from Weatherston's recent public briefing was related to the retention of its legacy ­systems.

While she is keen to avoid talking too much about ANZ's direct competitors, she is clearly riled by the perception that she is  eating the dust of CBA's CIO Michael Harte.

She says she is unconvinced about CBA's supposed lead over the other banks, after it decided to go early with its ­systems modernisation.

"If people are talking about a jump-start in the Australian consumer market then we will have to wait and see, because at the moment ANZ still leads on customer satisfaction – and our lead over CBA is growing not weakening," Weatherston says.

"I think [CBA's project] is a big gamble, you put all your eggs into one basket. We prefer not to gamble everything on a ­single IT strategy. Our corporate and ­institutional business is as important as developing out the consumer business."

She reasons that many UK and US-based banks are still running successfully on top of 1960s core platforms, and believes it is the configuration of the ­systems sitting on top of the core that really matters.

"If you look at where we are from a business perspective, we have a mature bank in Australia, but we have also built an Asian bank in the last three years, so it is a fundamentally different proposition to the CBA, where they are concentrating on the domestic market," Weatherston says.

ANZ's technology plan – dubbed "towards 2017" – refers to Mike Smith's super-regional strategy targets, which are set for completion that year. As well as the restructure and refocusing of its 6000-strong IT workforce it will also include upgrading internet banking systems, more ATMs and the deployment of a new integrated cash management system called ANZ Transactive.

ANZ has already deployed a new banking platform in Asia based on Infosys' Finacle software.

Prior to Weatherston's arrival it had been considered for deployment across the entire bank, but this is now off the table under the new strategy. Bucking a trend for organisations worldwide to outsource to predominantly Indian-based IT firms, ANZ has retained a captive centre in Bangalore since 1989 when Index Computing was established to run technology for ANZ Grindlays in India.

Weatherston says the bank currently has 1500 IT employees in Bangalore, and she has big plans for their deployment.

"I think we have been guilty of using it in recent years a bit like a body shop, so as part of our new operating model we want to use Bangalore as a provider of key ­services," she says.

Here and there

The bank is currently re-evaluating the strengths of its operations and is defining which services it wants to supply from Australia, versus Bangalore. Once this is set in stone Weatherston says it will build up centres of capability in those hubs.

ANZ has also recently invested in two new operational hubs. One in Manila and a Chinese-language operations centre in Chengdu to support its business growth in the region.

When it was first announced ANZ said the Chengdu operations hub would provide Chinese language call centre and back-office capabilities to the bank, as it was expected to employ approximately 300 people by the end of 2013.

"We will be looking at what IT capabilities exist in those markets, which may help us augment the lack of skills and resources in the Melbourne market," Weatherston says.

"We also want to use the Bangalore captive to leverage the Indian vendor ­market better."

Weatherston says she has already been over to the Indian operations on numerous occasions, and has hired Royal Bank of Scotland's former regional director of India and Asia, Frank McGrath to improve the way ANZ leverages its centres. In 2009 ANZ acquired selected RBS businesses in Asia including the RBS retail, wealth and commercial businesses in Taiwan, Singapore, Indonesia and Hong Kong, and the institutional businesses in Taiwan, the Philippines and Vietnam.

Weatherston says the bank has now begun consolidating more services into Bangalore from across Asia on the back of the acquisitions.

In recent months it has consolidated three of its "in-country" IT helpdesks into a single Bangalore desk. This, she says, will evolve to provide a much more ­co-ordinated user service provision across its Asian operations.

With work going on across such a large geographic span, Weatherston says she is not concerned about resources being spread too thin. She says that, even in the absence of a huge rip and replace core ­systems program, the success – or otherwise – of her efforts will be clear to all within ANZ, as it will change almost all aspects of life within the institution.

Weatherston is confident that the roadmap she is putting in place will become well regarded as a solid foundation for regional expansion, and says the value of her work is well recognised at the very top layers of the bank. "There are actually very few banks where IT actually sits at the management board level, it does here, and I think that IT is such a core part of banking strategy," she says. "We are about 99 per cent of what a bank is.

"To get great technology you have to be able to influence the way in which the business thinks. Unless you are doing a transformation of the business itself, then no transformational technology project is going to work. You can create all the glossy screens you like, but you will always just be covering up the cracks." MIS Australia

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