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Westpac to move offshore

Westpac to move offshore

CEO Gail Kelly reopens the door to the prospect of Australia's second-largest retail institution sending a lot of technology work overseas.

The chief executive of Westpac Banking Corporation, Gail Kelly, has reopened the door to the prospect of Australia's second-largest retail institution sending a lot of technology work overseas. She says the bank would not otherwise be able to find suitable domestic labour. "With the very significant program of work that we have on our agenda over the next few years with regard to technology, we couldn't possibly source all the skill we need right here," she said at Westpac's full-year results briefing on November 4.

Her comments recant Westpac's previous unilateral commitment, made during the first half of its full-year reporting period, that it would not send technology jobs overseas. This was made against a backdrop of job losses during the financial crisis. But Kelly has refused to be drawn on when the bank might start to take on foreign suppliers.

"We haven't had a conversation since then about when we're likely to resume, or in what form," she said at the briefing. "We just haven't had that conversation."

Brokerage analysts have questioned whether Westpac's new technology strategy, led by chief information officer Bob McKinnon, will allow the bank to keep a competitive pace with rivals who have embarked on core systems modernisation.

A key element of Westpac's strategy is based on picking the best technology systems from the recent merger between Westpac and St George, then integrating them so they not only work across the merged operation but improve customer satisfaction. The process includes the installation of common internet banking platforms, teller platforms, customer relationship management software and ledger and payroll applications.

The substantial turnover of technology is reflected in Westpac's software capitalisation. The bank closed the year ending November 2009 with $628 million in deferred expenses, down from $656 million the previous year. Investments of $306 million in new software matched by $334 million in write-offs accounted for the modest reduction.

A further shake-up of Westpac's technology operations is expected in coming months, when it will be forced to recast its sometimes strained, decade-long $4.3 billion technology outsourcing contract with IBM, which expires next year.

Kelly says that Westpac is likely to break the technology services and infrastructure mega-contract into smaller and more manageable pieces. "Ten years ago, there were a number of large institutions that went for that all-in outsourcing arrangement.

"One is much more likely now to look at the elements and make sure you have the right partner for different elements - desktop might be a different solution to the mainframe, for example."

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