Commonwealth Bank of Australia has become the first of the Big Four retail institutions to announce an overhaul of its massive core banking system, opting for a $580 million combined services and software contract over four years with Accenture and SAP. The move has significantly accelerated CBA's previously stated position of moving to a technology footing that would allow it to quickly enter new markets including Asia with so-called "white-label" financial services products, either by partnering with or acquiring other institutions.
A growing number of international financial institutions, including Spain's Santander and the Royal Bank of Scotland, have successfully harnessed similar core banking technology transformations to aggressively drive their acquisitions strategies.
But the price of CBA's deal has come in substantially lower than initially expected, after the bank revealed it would continue to draw heavily on its recently bolstered internal applications development capability to deliver the project on its own terms rather than that of suppliers.
The total capital investment component of the new project - Core Banking Modernisation - will be booked at $450 million, with the remaining $130 million allocated to areas including support costs such as training.
The bank's internal IT division has assumed the role of project lead, with Accenture and SAP serving as contractors. The contract structure differs substantially from similar projects such as the Australian Taxation Office's $700 million Change Program, where systems integrators usually take the lead role in delivery.
CBA chief information officer Michael Harte and other bank executives yesterday refused to specify how much SAP or Accenture might make from the deal, instead emphasising the flexible nature of the contracts.
Additional management muscle and experience have been added to the core systems overhaul through an operational management reshuffle at the bank.
Former CBA retail banking executive Dave Curran will run the day-to-day delivery of the project. Leslie Martin, who previously headed cards and payments for the CBA's Premium Banking Services division, has been installed as executive general manager.
Both now report to Mr Harte, with the entire project subject to board-level reviews each quarter.
Vintage 1960s core banking technology had become the main impediment to reducing the time taken to deliver new products to customers.
Mr Harte said the aim was to shift this time from several months to just days.
CBA has moved first to secure skills for the project against the ambitions of its competitors. Accenture and SAP had been selected out of four possible products from companies including Oracle, Infosys and Tata Consultancy Services.
"We have locked up the winners," Mr Harte said.
One tactic employed by CBA in developing its own applications has been the retention of much of the intellectual property on projects rather than allowing suppliers to resell the same capability to local competitors.
Accenture's Australian chief executive, Doug Snedden, yesterday conceded the combination of SAP and Accenture's product, sold as a tightly coupled unit, was unlikely to be rolled out at institutions that competed with CBA.
"Other banks wouldn't come to us," Mr Snedden said.
One of those "other banks" might potentially be National Australia Bank, which announced earlier this year that it was evaluating a core banking upgrade similar to CBA's as part of a wider strategy review of its operations.
In terms of technology, CBA has opted for web services technology allowing applications to be coded, tested and deployed faster because it can reuse code based on common standards.
This will include the deployment of SAP's NetWeaver application development platform that allows customers to transfer business rules from existing products to newer web-based technology.
CBA undertook a similar project using Microsoft's .Net platform to develop its largely successful $250 million CommSee customer service application that enables staff to obtain a single view of a customer's dealings with the bank across multiple accounts and products.
Fairfax Business Media
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