Westpac to replace core banking system

Westpac to replace core banking system

Will adopt St George's platform and merge transactions across both banks.

Westpac Banking Corp has followed rivals and will replace its core banking system with an upgraded version of St George Bank's "Hogan" platform to merge transactions and deposit operations across both banks. The upgrade, revealed during an analyst briefing on the progress of a transformation project to merge both banks, paves the way for Westpac and St George to cut operating costs by sending their merged application development and support work to cheaper destinations such as India.

The move to standardise on Hogan comes less than a month after rival institution Australia and New Zealand Banking Group, which is also a Hogan customer and has operations in India, announced it had appointed a new group executive to oversee the modernisation of its technology platforms.

The decision to stick with a revamped version of St George's core systems platform comes as Westpac continues to negotiate with suppliers over how it will break up its decade-long $10 billion outsourcing contract with IBM that is due to expire next year.

Westpac recently released a tender for outsourced applications support to the market with a view to significantly lowering its software costs, work many analysts believe is will head to India.

The bank yesterday confirmed it expects to have a panel of suppliers finalised within two or three weeks.

The institution had originally slated about $350 million over two years to integrate its technology operations with St George under initial merger plans, but projects spelled out under the transformation update suggest longer term costs could increase after the cost of big ticket items is finalised.

The bank indicated yesterday it expected this year's technology spending levels of about $146 million to be maintained during its five-year strategic plan headed by chief information officer Bob McKinnon.

A Westpac spokeswoman said the bank was looking at reducing the number of data centres from about 10 down to two or three, capital investments that have typically cost other institutions hundreds of millions of dollars.

Further projects flagged yesterday include the replacement of internet banking systems and a data centre consolidation that would allow the bank much greater flexibility in terms of pushing its products into popular new consumer channels, especially internet equipped mobile devices such as Apple's iPhone.

The lack of clarity on Westpac's intentions in mobile banking has seen analysts question whether it's ageing technology platforms could erode its competitive advantage because it was not able to launch innovative products as fast as its rivals.

Westpac's technology strategy was vehemently defended by chief executive Gail Kelly during this year's annual results on the basis that the institution first wanted to fix its "customer facing" systems such as branch teller platforms and merchant acquiring services.

That position was reiterated yesterday by Mrs Kelly and the head of Westpac's retail bank, Peter Hanlon, who stressed the importance of the branch services and giving local managers a bigger say over day to day customer decisions.

Both Westpac and St George will transition to a single services oriented architecture, dubbed the "enterprise services bus", to allow it to create transactions that can be reused across both institutions, the Westpac spokeswoman said.

Key points:

• Westpac will follow rivals and replace its core banking system. • The upgrade will let Westpac and St George cut operating costs. • Work can be sent to India.

Fairfax Business Media

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