Technology Horizons in Financial Services ANZ

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Technology Horizons in Financial ServicesANZs
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

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Agenda

• Technology is changing its focus
• ANZs strategies
• Outsource or Excellence?
• ANZs current focus - improving our IT efficiency
• Outcomes to date
• The next wave of IT productivity improvements
• Conclusion

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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?

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ANZs Strategy
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ANZs 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

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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.

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People Skilled committed
Management tertiary qualifications policy
Breakout cultural transformation workshop

• pcs_at_home heavily subsidised packages for staff
  to acquire PCs

Online training courses
Half yearly staff survey with action teams to
address issues raised
Casual dress policy instituted
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Customers Commitment to focus technology on
business unit objectives
Customer survey/ feedback process on 6 monthly
basis. Linked to individuals performance
measures.
Electronic timesheet capture for IT project
tracking, reporting billing
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Process Commitment to improve execution
capability

• Capability Maturity Model
• Significant productivity quality improvements
• CMM level 2 certification 1st Australian Bank
• Bangalore, India - level 4 certification

• Project management training
• Generic training courses tailored with ANZ
  specific content latest Project in a Box tools

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Infrastructure Commitment to rationalisation
standardisation
Core Systems
IP network
1998 6 major systems
1998 Multiple data networks

• Single IP Network provides universal connectivity

• Simpler systems platforms reduce cycle times

Servers Desktops
Platforms
1998 8 major platforms
2002
1998
2002
W2K
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

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Outsourcing An important consideration in
achieving IT effectiveness
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Core context has been suggested as a basis
for outsourcing decisions
Objectives
Execution Control
CORE Any process that contributes directly to
competitive advantage in target markets

• 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

• Internal
• In-house
• Strategic joint venture
• External
• Outsource
• New venture

CONTEXT All other processes required to fulfill
commitments made to one or more stakeholders in
the enterprise
Source Geoffrey Moore, The Chasm Group
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Three other considerations when making an
outsourcing decision
Cost
Innovation
Teamwork, collaboration service levels

• How will outsourcing achieve competitive
  advantage?
• What will be the impact on the ability to create
  innovative IT solutions?
• How will open architectures new technologies be
  funded deployed?

• 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?

• Are there impacts on alignment with BU customers
  ?
• Will collaboration teamwork improve?
• Will service levels decline or improve?

GST 10
Illustrative
Return on Investment 15-20
Margin you pay away
Sales Marketing 5-8
Outsource providers cost to serve
Cost of outsourced IT
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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

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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

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Agenda

• Technology is changing its focus
• ANZs strategies
• Outsource or Excellence?
• ANZs current focus - improving our IT efficiency
• Outcomes to date
• The next wave of IT productivity improvements
• Conclusion

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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

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Improving our IT efficiency

• Attained CMM level 4 certification from the
  Software EngineeringInstitute (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 Teamin Melbourne, placing
  it in the top quartile of softwareorganisations
  worldwide
• To achieve this, we displayed a very high
  standard of processdiscipline in all areas of
  software development, includingthe rigorous use
  of metrics for tracking of quality of outcomesat
  all stages

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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

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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

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Outcomes to date - business improvements
Cost savings
Improved system robustness
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Outcomes to date - business improvements
Operations, Technology Shared Services staff
satisfaction
Staff satisfaction
Customersatisfaction
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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

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Next wave productivity improvements
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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

• Now focusing on next wave of productivity
  improvements for technology
• Continuous improvement
• Technology componentisation and reuse
• Re-engineering and straight through processing

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Copy of presentation available on www.anz.com
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The material in this presentation is general
background information about the Banks
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 [phone] e-mail
gentryp_at_anz.com