National Australia Bank Group chief executive John Stewart has instigated a sweeping strategic review of the institution's $900 million-a-year information technology operations to shift the focus from cost-intensive compliance projects to rebuilding its core business systems. Mr Stewart said the review, to be delivered by the end of the year, encompassed the group's future operational footing and would plan for how the group would function as far ahead as 2012.
"We have been looking for some months now at what the next stage is not only for IT . . . but also for everything that goes with it," Mr Stewart told The Australian Financial Review.
"We don't have to be in a hurry. [Our present systems] are serving us very well, we are making further economies, but what we are talking about is where we will be in four or five years."
The Big Four banks face pressure to make their services and payments products more web-friendly in the face of increased competition from online-only competitors, including RaboBank and ING Direct.
But Mr Stewart admitted NAB still did not have a forward-looking information technology strategy and was keeping its options open.
"We don't know [what the future IT strategy is]," he said.
"When I came here, IT was centralised; it had great strategies but it didn't work. So what I did was devolve IT into the businesses and it has been very successful. It is really important to get this one right."
One reason that NAB is keen to get things right is the constant challenge of how to value information technology, particularly software, on its balance sheet, to avoid repeating devastating write-downs.
These include the $409 million write-down in 2004 caused by impaired software projects, including $200 million for the Integrated Systems Implementation enterprise resource planning project.
ISI was intended to provide a single IT platform for NAB's global operations but was junked soon after the bank jettisoned chief executive Frank Cicutto in 2004.
A spokesman for NAB said the review was being led by the bank's UK chief information officer, John Crane, and its Australian CIO, Michelle Tredenick.
Sources familiar with the NAB's technology operations said the key issue for the bank was migrating off heavily customised legacy systems, for which maintenance costs were starting to escalate substantially. These include the bank's human resources system, built on SAP, a customer relationship management front-end built on Siebel (now owned by Oracle) as well as systems left over from NAB's Homeside period in the late 1990s.
Under its present management structure, NAB does not have a single head of technology across all its operations, but rather chief information officers for its individual business lines who report to their chief executives.
NAB's last CIO, Ian Crouch, this month sued his former employer for $15 million in damages. He alleged that he lost share options and income when he was stood down after Mr Cicutto's exit following the $3.6 million write-off of the bank's HomeSide overseas mortgage business and $360 million in losses from a foreign currency trading scandal.
A key claim in Mr Crouch's writ is that Mr Cicutto should not have promised him a six-year appointment in the light of the problems NAB was facing.
"As a result of the HomeSide and ISI matters, there was a risk that Cicutto would resign, or be forced to resign, or be dismissed from his position as managing director and CEO," Mr Crouch's writ said.
The legal claim, which was lodged the day before the release of NAB's full-year financial results, casts a shadow over any executive search the bank undertakes if it decides to appoint a new group CIO to streamline and standardise its operations.
NAB has declined to comment on the matter while it is before the courts.
© Fairfax Business Media
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