Technology Horizons in Financial Services
ANZ’s path to IT effectiveness
Presentation to INSTO eScape Technology Conference
22 October 2002
Peter Dalton
Chief Technologist, Consumer & Business Technologies
Australia and New Zealand Banking Group Limited
Agenda
• Technology is changing its focus
• ANZ’s strategies
• Outsource or Excellence?
• ANZ’s current focus - improving our IT efficiency
• Outcomes to date
• The next wave of IT productivity improvements
• Conclusion
Page 2
Technology is changing its focus
• IT in general has had a number of years of high
investment and big projects.
• Focus has been on Customer Relationship Management,
new systems and new infrastructure.
• Different companies took different paths in achieving their
outcomes - outsource or in-house with a focus on
operational excellence.
• The world has now changed - IT is being asked to contain
or even reduce spend. Project money is harder and
harder to come by – return on investment is key.
• The new word is: efficiency. How well can you reduce
costs and not lose quality outcomes? What kind of
productivity improvements can you get?
Page 3
ANZ’s Strategy
Specialise
eTransform
• Building a portfolio of stand-out businesses with
distinctive business leadership and a sustainable
top 3 position that work as one ANZ
• Embracing technology to drive radical change, boost
productivity, accelerate innovation and dramatically
improve service and value
Perform
• Ensuring “best in class” performance for
shareholders, customers, staff and the community
Grow
• Demonstrating strong growth momentum in core
businesses and positioning ourselves in attractive
new high growth categories
Breakout
• Being bold and different, a high performance culture
with a human face, technological leadership and a
strong domestic and regional strategic position
Page 4
ANZ’s Technology Focus
Putting technology to work to:
• Provide our customers with a personalised, consistent
experience
• Empower our customers and our people with real time
information access and online applications via web-based
technology, anywhere and anytime
• Ensure our technology is robust, flexible and cost effective
• Aggressively reduce costs, improving productivity,
increasing ‘straight-through’ processing, simplifying and
automating administrative functions
• Provide low-risk, high-efficiency & state-of-the-art payment
capabilities
Page 5
Four years ago, we established the
foundations for technology and IT excellence
1998: Low satisfaction, inward focused, weak process,
complex infrastructure (compared with best practice)
Starting in 1998 we made and delivered some key commitments
involving People, Customers, Process and Infrastructure
• People: Alignment, collaboration & team work. Environment
where individuals can excel. Retain critical individuals.
• Customers: Customer feedback processes & accountability,
meaningful service levels, align with BU, implement TQM.
• Process: Consistent project management standards, strict
criteria for new investment in applications, rationalise &
standardise operational processes.
• Infrastructure: Reduce costs, rationalise, consolidate &
automate networks & platforms. Position for the future.
Reposition ‘back-end’ product functions behind integrated
service ‘front-end’.
Page 6
People: Skilled & committed
Management
tertiary
qualifications
policy
Breakout cultural
transformation
workshop
Online training
courses
Half yearly staff
survey with action
teams to address
issues raised
Casual dress
policy
instituted
Page 7
pcs@home:
heavily
subsidised
packages for
staff to acquire
PC’s
Fixed pay
increases no
longer the main
strategy
Customers: Commitment to focus
technology on business unit objectives
Average SLA for major systems
Average - 1999
Average - 2000
Average - 2001
Service level
agreements in
place for each
Business Unit
Detailed billing
to Business
Units for IT
services
Partnership model between
Technology & Business Units
Customer survey/ feedback
process on 6 monthly basis.
Linked to individuals’ performance
measures.
Electronic timesheet capture for IT
project tracking, reporting & billing
Page 8
Process – Commitment to improve
execution capability
Project in a Box
• ‘Best of breed’ project
management tools
Capability Maturity Model
• Central repository for all project
reporting
• Significant productivity &
quality improvements
• Open access to all users
• CMM level 2 certification – 1st
Australian Bank
Project management training
• Bangalore, India - level 4
certification
• Generic training courses tailored with
ANZ specific content & latest Project in a
Box tools
Continuous improvement
programme
• Driving real culture change
• Series of workshops for all staff
• Resulted in $53m benefits
Page 9
Reengineering in a
Box
• Standard tools,
templates & process for
re-design of business
processes
Infrastructure: Commitment to
rationalisation & standardisation
Core Systems
1998:
6 major
systems
IP network
2001
1998
Hogan
Multiple data
networks
CBS
- Single IP Network
provides universal
connectivity
- Simpler systems & platforms
reduce cycle times
Platforms
1998:
8+ major
platforms
2000
Servers & Desktops
2002
W2K
1998
2002
UNIX
MVS
- Greater ability to leverage new
technologies
- Lower hardware, software
licence fees & support costs
- Provide all staff with best
tools possible
- Low cost of ownership
through standard solution
Page 10
Outsourcing
An important consideration in
achieving IT effectiveness
Page 11
Core & context* has been suggested
as a basis for outsourcing decisions
Objectives
CORE
Any process that
contributes directly to
competitive advantage
in target markets
CONTEXT
All other processes
required to fulfill
commitments made to
one or more
stakeholders in the
enterprise
• Extend or create
competitive
advantage
– Existing markets
– New opportunities
• Minimise
disadvantage
– Find someone
else to do it for
you
• Look to create new
opportunities &
advantages
– Make a context
process core
*Source: Geoffrey Moore, The Chasm Group
Page 12
Execution Control
• Internal
– In-house
– Strategic
joint venture
• External
– Outsource
– New venture
Three other considerations when
making an outsourcing decision
Cost:
• Can you achieve at
or near world class
best practice?
• Can you achieve
efficient & reliable
services?
• Are you willing to
pay away a margin
to an outsource
vendor?
Illustrative
Return on
Investment
15-20%
Sales &
Marketing
Outsource
5-8%
provider’s
cost to
serve
Teamwork,
Innovation:
collaboration &
• How will outsourcing
service levels:
achieve competitive
• Are there impacts on advantage?
alignment with BU
• What will be the
customers ?
impact on the ability
• Will collaboration &
to create innovative
teamwork improve?
IT solutions?
• Will service levels
• How will open
decline or improve?
architectures & new
technologies be
GST 10%
funded & deployed?
Margin you
pay away
Cost of
outsourced
IT
Page 13
Our outsourcing experience
What we have we outsourced
• Property management
• Components of procurement
• Components of telecommunications
• Desktop support/help services
• Training & development support
• Components of legal services
Majority of functions are not outsourced, but are under
periodic review:
• Major operations
• Data centres and IT operations
• IT development
• Cheque processing
• Cards back office
Page 14
Outsource or excellence?
• To date, no compelling opportunities have been
identified for outsourcing a significant amount of our
technology functions
• But, we continue to actively benchmark our operations
to best practice to ensure continued IT effectiveness &
review potential selective outsourcing opportunities
Page 15
Agenda
• Technology is changing its focus
• ANZ’s strategies
• Outsource or Excellence?
• ANZ’s current focus - improving our IT
efficiency
• Outcomes to date
• The next wave of IT productivity improvements
• Conclusion
Page 16
Improving our IT efficiency
Findings from a recent independent benchmarking
study* on our server environments:
• Current environment is very efficient by Industry
Standards
• ANZ staff efficiency (staff numbers compared with
number of servers) is very good to excellent in MVS,
Unix and Wintel
• Server utilisation is very high in mainframe and at, or
above, industry levels in Unix and Wintel
* Study conducted by IBM
Page 17
Improving our IT efficiency
Capability Maturity Model
• Attained CMM level 4 certification from the Software Engineering
Institute (USA) for our India Software Development centre –
placing it in the top 1% of software organisations in the world
• First Australian Bank to attain CMM level 2 certification –
this was achieved by the International Systems Team
in Melbourne, placing it in the top quartile of software
organisations worldwide
• To achieve this, we displayed a very high standard of process
discipline in all areas of software development, including
the rigorous use of metrics for tracking of quality of outcomes
at all stages
Page 18
Improving our IT efficiency – some examples
from our continuous improvement program
• Bar-coding at Output Services – Increased productivity and
cost savings, and reduction in operating costs.
• Renegotiation of Optus inbound costs – cost saving.
• ANZ Common Disk Platform Review – reduction on total
cost of ownership.
• Decommission the ANZPAC Service in Australia – cost
saving.
• Mortgage Origination System (MOS) Navigator Support
Tool – One-off and ongoing savings.
• Efficient, cost effective processing of Telstra 2
Instalments
Page 19
Outcomes to date
• Focusing on people, customers, process & infrastructure,
we achieved:
– Better IT outcomes for our Business Unit customers
– High IT staff satisfaction rate
– High quality, more productive staff
– Simpler infrastructure - robust processes supported
by a continuous improvement focus
Page 20
Outcomes to date - business
improvements
Total Mainframe Unit Cost
4500
4000
Cost savings
3500
inc GST
$ / MIPS
2500
2000
1500
1000
500
0
94/95
95/96
96/97
97/98
98/99
Number of MIPS at Year End
Average SLA for major systems
99/00
00/01
01/02
Total Cost/MIPS
100.0%
Improved system
robustness
97.0%
Average - 1999
Average - 2000
Average - 2001 Average – 200 (YTD)
Page 21
MIPS
3000
$/MIPS
Outcomes to date - business improvements
Operations, Technology & Shared
Services staff satisfaction
85%
80%
Staff satisfaction
75%
70%
65%
60%
Internal Customer Satisfaction
(out of possible 10)
8
55%
50%
1999
2000
2001
Customer
satisfaction
2002
6
4
Mar-99
Sep-99
Page 22
Mar-00
Sep-00
Mar-01
Sep-01
Mar-02
Sep-02
Next Steps: Cost leadership provides
capacity to reinvest in growth
Cost leadership…
next wave productivity
improvements:
• Continuous improvement
• Componentisation and reuse
of Technology
• Straight Through Processing –
through reengineering and
simplification
Page 23
Next wave productivity improvements:
CONTINUOUS
IMPROVEMENT
• Develop ANZ groupwide & continuous
improvement mindset
• Rewards based on
outcomes not ideas
• Standard set of quality
measures
• Large number of small
wins
COMPONENTISATION
& REUSE
STRAIGHT
THROUGH
PROCESSING
• Similar processes across
Business Units can use
same infrastructure &
software components
• Improve customer
experience by
automating manual
processes
• Components assembled
rather than built
• Standardise processes
across Business Units
– such as product
origination
• Shortened delivery time
at lower overall cost
• Flexible customer-centric
solutions
• Leverage “best class”
processes through
organisational
learning
• Technology driven
solutions to eliminate
re-entry of
information
Page 24
Conclusion
• Good progress to date on
improving our IT efficiency
through innovation,
renegotiation, cost savings
and new tools
• Successfully rationalised and
simplified infrastructure
• Strong improvement in staff
satisfaction
• Improved and more
consistent customer service
• Increased robustness in
systems
• Lower costs
Page 25
• Now focusing on next
wave of productivity
improvements for
technology
– Continuous
improvement
– Technology
componentisation
and reuse
– Re-engineering and
straight through
processing
Copy of presentation
available on
www.anz.com
Page 26
The material in this presentation is general background information about the Bank’s
activities current at the date of the presentation. It is information given in summary
form and does not purport to be complete. It is not intended to be relied upon as
advice to investors or potential investors and does not take into account the
investment objectives, financial situation or needs of any particular investor. These
should be considered, with or without professional advice when deciding if an
investment is appropriate.
For further information visit
www.anz.com
or contact
Philip Gentry
Head of Investor Relations
ph: (613) 9273 4185
fax: (613) 9273 4091
Page 27
e-mail: gentryp@anz.com