With massive cost overruns plaguing its core integrated systems implementation (ISI) project and the HomeSide debacle still all too fresh in investors' minds, the National Australia Bank's credibility was looking decidedly shaky earlier this year.
The NAB's profits were down 36 per cent after the disastrous $2.2 billion purchase of US mortgage business HomeSide that soaked up $3.6 billion before it could be written down. And negative press raged about the massive cost and implementation overruns dogging its $400 million ISI project, of which HomeSide's technology activities were to have formed one part. The management system project - an international implementation of SAP ERP - was reportedly almost $200 million over budget when the NAB terminated its contract with Deloitte in response to a review by McKinsey and Company and PricewaterhouseCoopers and decided to implement ISI internally. The whole sorry project had been a public relations nightmare.
But if every dark cloud has a silver lining, the NAB believes that its silver lining lies in the Positioning for Growth strategy. Announced in January, the strategy is designed to help the bank capture new growth opportunities, maintain earnings momentum and revive its technology credibility. The bank is counting on technology as a strong platform to transform its business, with the initiatives underpinning the NAB's growth forecast of better than 12 per cent cash earnings per share growth in 2003 and 2004. Positioning for Growth outlines plans to better harness that technology to drive the business.
Developed by McKinsey, and forced to early fruition by the HomeSide debacle, Positioning for Growth foreshadows: substantial new investments; significant process re-engineering and streamlining on the back of substantial redundancies made possible by those investments, particularly in administration and back office areas; and other strategic initiatives including considerable restructuring of the group. It has also driven the creation of a separate information division under new CIO Ian Crouch. Appointed in April, Crouch reports directly to CEO and managing director Frank Cicutto. He is the first NAB CIO to win a place on the executive team and IT governance is the big winner. Crouch says under Positioning for Growth governance will come right from the top.
"In some ways HomeSide became a wake-up call because it really forced Frank [Cicutto] to take the initiative and restructure the bank, and in the course of that restructuring finally really get his head around where technology should report and how the governance should work, and that's the model that we're implementing today," Crouch says. "I've had conversations with Frank at various times prior to joining the bank [NAB], and Frank had always been trying to get his head around ways to maximise what you can get out of technology. We're moving at a pretty fast rate here at the bank, and no doubt being part of the team and having some of those connections helps."voice at the tableThe elevation of IT to the executive table is recognition of the key role technology plays in any financial institution, and its strategic importance, Crouch says. Under the old structure technology was not necessarily getting the voice at the table both Crouch and Cicutto recognise as desirable, and Crouch believes there were signs of "an under-optimisation of some of the investment".
Not that predecessor Glenn Mescher had done a bad job, Crouch says - quite the contrary. With previous employment in Telstra and a focus on data centres and infrastructure, Mescher oversaw many initiatives Crouch is happy to endorse. But with a very different background and a long history of focusing his efforts on aligning IT with business strategy, Crouch says under his guidance strategic considerations will gain much higher priority. "I think the difference between Glenn and myself is that my background was more from the other end - from the alignment with the business strategy. So a lot more of my focus will be in the strategic areas: strategic alignment through to delivering applications against that agenda."
Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.