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Changing the game: Making the transition to open systems CIO 2003 Conference – 12 February David Boyles Chief Operations Officer Australia and New Zealand.

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Presentation on theme: "Changing the game: Making the transition to open systems CIO 2003 Conference – 12 February David Boyles Chief Operations Officer Australia and New Zealand."— Presentation transcript:

1 Changing the game: Making the transition to open systems CIO 2003 Conference – 12 February David Boyles Chief Operations Officer Australia and New Zealand Banking Group Limited

2 Page 2 Agenda ANZs strategic direction ANZs technology program and directions ANZs progress in migrating to open systems - case studies ERP/Common standardised administration systems Item processing Next generation switching project International payments clearing Conclusion

3 Page 3 ANZs strategic direction Organic out-performance Portfolio reshaping Transformational moves Extend specialisation Grow customer numbers Increase share of wallet Drive productivity Revenue growth materially higher than expense growth Take business units to sustainable leadership positions Build a range of strategic options Our targets Invest in high growth areas Build specialist capabilities Exit weak positions Risk reduction Step changes in positioning Creating new growth options Proactively shaping industry

4 Page 4 Delivering performance NPAT % ROE Cost Income RatioEPS & Dividends 21.6% 46% DPSEPS Note: 2002 figures exclude significant transactions % Cents $M

5 Page 5 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, benchmarking, increasing straight-through processing, simplifying and automating administrative functions Provide low-risk, high-efficiency and state-of-the-art payment capabilities

6 Page 6 Initial technology strategy (1998) provided focus to move to next level Little BU focus Poor understanding of business drivers Service levels poorly understood Leadership weaknesses High staff turnover: 18% Many cultures Poor disaster recovery Inconsistent architectures Poor project management and methodology Billing of services incomplete and inaccurate Inflexible, high cost technology 15 data networks 6 core systems Many different platforms Explicit business partnership High customer satisfaction 7.7 (Sep 02) Service level agreements Customer survey/ feedback process $75m in benefits from our continuous improvement program Improved staff satisfaction to 83% IT staff turnover below 3% Training on-line Leadership development program Performance culture Full DRP in all critical processes 900+ staff through Project mgt program New processes - PiaB, One Team, CMM, Niku, RAD, Phased funding, Outcome management Technology costs defined and regularly reported Technology governance, standards and policies Detailed billing Tandem, Unix & AS400 rationalisation 2 core systems Single IP Network Standard Win2000 desktop across Australia Intranet to all but 800 Intl staff Established strategy for standardisation and re-use 2003: Customer focused, positive culture, improving process, simpler infrastructure 1998: Inward focused, low satisfaction, weak process, complex infrastructure InfrastructureProcessPeopleCustomers (BU)

7 Page 7 People - skilled and committed heavily subsidised packages for staff to acquire PCs Online training courses Half yearly staff survey with action teams to address issues raised Breakout cultural transformation workshop eVouchers provided free to staff to choose reading materials Management tertiary qualifications policy

8 Page 8 Customers - commitment to focus technology on business unit objectives Electronic timesheet capture for IT project tracking, reporting and billing Detailed billing to Business Units for IT services Customer survey/ feedback process on 6 monthly basis. Linked to individuals performance measures. Service level agreements in place for each Business Unit Average SLA for major systems Average Average Average Clear alignment between Technology and Business Units

9 Page 9 Capability Maturity Model Significant productivity and quality improvements CMM level 2 certification – 1 st Australian Bank Bangalore, India - level 5 certification Project in a Box Best of breed project management tools Central repository for all project reporting Open access to all users Process - commitment to improve execution capability Project management training Generic training courses tailored with ANZ specific content and latest Project in a Box tools Reengineering in a Box Standard tools, templates and process for re-design of business processes Continuous improvement programme Driving real cultural change Series of workshops for all staff Resulted in $75m benefits to date

10 Page 10 Infrastructure - commitment to rationalisation and standardisation 1998: 6 major systems CBS Hogan 2001 Core systems Provide all staff with best tools possible -Low cost of ownership through standard solution OS/2 Win 3.1 Win NT DOS Servers and desktops 1998 Multiple data networks 2000 IP network -Single IP network provides universal connectivity Platform focus Eg,W2K, UNIX, MVS major platforms Platforms Greater ability to leverage new technologies -Lower hardware, software licence fees and support costs -Simpler systems and platforms reduce cycle times

11 Page 11 Take out costsImprove project delivery Leverage Group assets Simplify platforms Leverage existing technology through re-use and componentisation Capability upgrade of project process, business/ IT alignment Next level tools and methods Next level agility and adaptability, quick ability to up or downscale Continued drive to simplify the platforms Robust operating model Technology Transformation strategy Movement to open systems – key factors Support re-use and components High levels of integration - plug and play Customer access through web enablement High availability of skills Good breadth of vendor support Standard commoditised technologies Efficient development environment High agility Vast breadth of tools and technology Open systems environment (eg, Wintel) Scale out model Ongoing enhancement to security capabilities

12 Page 12 ANZs move to open systems From Traditional core applications based on proprietary systems –Single vendor with limited scale to innovate Proprietary systems have limited interoperability/ integration Relatively expensive to run - often long lead times to upgrade system capacity To Standards-based modular building blocks Benefits: Cost - efficiency and skills availability Flexibility - speed, scalable, modern infrastructure Connectedness - plug and play, ease to innovate

13 Page 13 ERP/Common standardised administration systems Item processing Next generation switching project International payments clearing ANZs progress in migrating to open systems - case studies

14 Page 14 ERP/Common administration system - background Our ERP systems were fragmented and outdated General ledger was no longer supported Payroll system was old, heavily customised and costly to support Very limited HR MIS

15 Page 15 ERP/Common administration system - challenges Need for a common, standardised administration system –PeopleSoft met our mandatory selection criteria –HR functionality was tailored to Australian regulatory environment –General ledger structure is a good fit to our operations –Technology fits well with our architectural standards ANZs PeopleSoft implementation is the largest on MS Windows 2000 and MS SQL 2000 in the world Implementation approach critical to success, trade off between package customisation and our current processes

16 Page 16 ERP/Common administration system - solution/approach We adopted a vanilla implementation, thus our processes were changed to fit the software Focused on people impact – change management and training Staged approach to deploy major modules: - Procurement and Accounts Payable -Human Resources -Fixed Assets - Finance (General Ledger) -Payroll Pushing the time/cost boundaries

17 Page 17 ERP/Common administration system - solution/approach

18 Page 18 ERP/Common administration system - outcomes –Reduction in finance administration and procurement expenditure and greater control of fixed assets –Reduction in HR expenditure in progress following recent payroll implementation –Faster, easier and more cost effective way of working –Straight-through automation –Easier capture and use of business information –Consistent business platform across ANZ –Delivery of web-based information anytime, anywhere, any place –Transformation of culture –Reduction in operational risk Cost Flexible Connected

19 Page 19 Item processing - background ANZ used the same equipment to process cheques for almost 18 years at five state-based Transaction Processing Centres Large logistics exercise to achieve same-day value processing of all cheques/deposits across 900 Australian branches This process had a number of disadvantages Aged Proof of Deposit platform and 5 major voucher processing sites Costly and inefficient physical storage, access and retrieval of cheques from paper archive warehouses for 7 years Geographic dependency on paper Day-2 functions (eg exceptions, returns) all required paper handling and records management actions In NZ we had an equally old system on different equipment in three centres using different software and interfaces

20 Page 20 To develop a best practice document processing environment to enable efficient and timely capture of customer and internal paper based financial transactions. The strategy comprised five parts: 1.Implement an Image POD System to further increase productivity and reduce the cost/item of processing in a standard system across both Australia and NZ 2.Utilize the more efficient/flexible Image POD System to integrate with the aging Retail Lock-box System 3.Create an Image Archive over 7 years to replace paper storage and provide rapid access across the enterprise 4.Image enable back office processes and centralize those functions which would result in major FTE savings 5.Interface into the Banks Internet System to provide self-service archive access to ANZ customers Item processing - challenge

21 Page 21 Item processing - solution 2 Pass Proof of Deposit One Pass Image Proof of Deposit Systems LAST EXCHANGE CASH LETTERS IMAGE CAPTURE IN - CLEARINGS Receive Work by Courier from Branches BATCH PREP AMOUNT KEY MICR/OCR READ MICR REPAIR AUDIT PRINT ENDORSE MICR ENCODE IMAGE CAPTURE SORT ONE-PASS TRANSPORTS 1 OPERATOR PER MACHINE One Pass Capture, Key, Balance, Encode, Image Capture and Sort System ONE-PASS TRANSPORTS 1 OPERATOR PER 3 MACHINES Conventional Solution ANZ Solution Receive WORK PREP HIGH SPEED CHECK CAPTURE PASS CAR/ ICR IMAGE DATA ENTRY IMAGE BALANCE PAPER REJECT RE-ENTRY PAPER BALANCE HIGH SPEED CHECK ENCODE PASS & SORT PASS ONE PASS TWO MICR REPAIR SPECIALISED FUNCTIONS RE- HANDLE PASSES LAST EXCHANGE CASH LETTERS CAPTURE IN - CLEARINGS POST DDA Two Pass Capture, Balance and Encode POST DDA

22 Page 22 Item processing - outcomes –Streamlined processes in both Australia/NZ –Lowest unit costs from one pass data and image capture –Efficient and timely capture of customer and internal paper based financial transactions –Improved customer service through faster retrieval or self service –A platform that can grow or contract with our imaging requirements –Increased scalability and ease of integration –In-sourcing opportunities - such as credit card services or white labelling –Sales potential to off-shore banks Cost Flexible Connected

23 Page 23 Next generation switching project Replacement of existing ATM and EFTPOS switching functionality (approx 1,500 ATMs and 50,000 plus POS terminals) Current environment based on proprietary hardware/platform and software Solution: Migrate to Windows 2000 and OpeN/2 (from S2) Outcomes Cost Flexible Connected After full implementation, expected to be 50% of previous environment Equivalent functionality can be developed much faster Lower development costs, can upscale quickly Allows integration with existing web channels and CRM Eliminates requirement for proprietary architecture Lowers overall diversity of platforms Reuse with telling platform

24 Page 24 International payments clearing Inherent risks due to complex and disparate payment systems/processes High complexity within a proprietary environment Solution: Single platform that processes international and domestic high-value electronic payments Outcomes Cost Flexible Connected Reduced resources in both Aust/NZ Reduced hardware maintenance/support costs Increased STP rate for MT100/103/200 message types from 30% to 60+%. At same time business volumes have increased. High availability and standardised platform in Aust/NZ Increased revenue streams and enhanced product devp Improved operating risk management and tools Real time counterparty risk management

25 Page 25 Conclusion Historically, financial institutions have built a myriad of fragmented proprietary point solutions that are difficult to integrate ANZ is focussed on moving to open systems to simplify its environment, enabling: –componentisation and re-use of solutions –lower costs –improved cycle times and business functionality But, this is not easy - it requires clear vision, unrelenting drive and constant innovation

26 Page 26 Copy of presentation available on

27 Page 27 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 or contact Philip Gentry Head of Investor Relations ph: (613) fax: (613)


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