Transcript BAI Presentation

Changing the game:
Moving to open systems
Case Study Presentation to 2002 BAI Retail Delivery
Conference and Expo - 7 November 2002
David Boyles
Chief Operations Officer
Australia and New Zealand Banking Group Limited
Agenda
About ANZ
ANZ’s Technology program and directions
ANZ’s progress to open systems migration - case studies
• Next generation switching project
• ERP/Common standardised administration systems
• Item processing
• Payments clearing
• Core Banking outside Australia
Conclusion
Page 2
About ANZ
• ANZ is a leading banking and financial
services organisation with about 22,500 FTE
employed in 29 countries around the world.
• With total assets of USD 100 billion* and
market capitalisation of USD 15 billion*,
ANZ is also one of the world’s 100 largest
banks.
• Our overriding philosophy in our interactions
with our customers, our shareholders, the
community and with each other is that ANZ
is the “bank with a human face”.
• ANZ is represented in its primary markets of
Australia and New Zealand as well as in
Asia, the Pacific, Europe and the United
States.
Exchange Rate 0.55 USD (to AUD)
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* As at 09.30.02
Delivering performance
$USD m
NPAT
1400
1200
1000
800
600
400
200
0
24
21.6%
22
20
18
16
14
12
1997 1998 1999 2000 2001 2002
67
ROE
%
1997 1998 1999 2000 2001 2002
Cost Income Ratio
$US Cents
80
70
60
50
40
30
20
10
0
62
57
52
46%
47
42
EPS & Dividends
1997 1998 1999 2000 2001 2002
1997 1998 1999 2000 2001 2002
EPS
Exchange Rate USD 0.55
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DPS
We have a diversified portfolio of
businesses
2002 NPAT
USDm
Change from
2001
Personal Customers
315
26
9%
Corporate Businesses
290
34
13%
ANZ Investment Bank
171
13
8%
Mortgages
135
6
4%
Small Med Business
86
15
21%
Consumer Finance
82
28
51%
Asset Finance
56
6
11%
27
65%
Group Treasury
68
Exchange Rate USD 0.55
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2002 NPAT $USDm
2002 NPAT increase
2001 NPAT
ANZ’s Strategy
Organic
out-performance
•
•
•
•
Extend specialisation
Grow customer numbers
Increase share of wallet
Drive productivity
Portfolio
reshaping
•
•
•
•
Invest in high growth areas
Build specialist capabilities
Exit weak positions
Risk reduction
Transformational
moves
• Step changes in positioning
• Creating new growth options
• Proactively shaping industry
Page 6
Our targets
• Revenue growth
materially
higher than
expense growth
• Take business
units to
sustainable
leadership
positions
• Build a range of
strategic options
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,
benchmarking, increasing ‘straight-through’ processing,
simplifying and automating administrative functions
• Provide low-risk, high-efficiency & state-of-the-art payment
capabilities
Page 7
Initial Strategy (1998) provided focus
to move to next level
Customers (BU)
People
Process
Infrastructure
1998: Inward focused, low satisfaction, weak process, complex infrastructure
• 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 &
methodology
• Billing of services
incomplete and
inaccurate
• Inflexible, high cost
technology
• 15 data networks
• 6 core systems
• Many different
platforms
2002: Customer focused, positive culture, improving process, simpler infrastructure
• Explicit business
partnership
• High Customer
satisfaction 7.7 (Sep
02)
• Service Level
Agreements
• Customer Survey/
feedback process
• $40m (USD) in
benefits from our
continuous
improvement program
• Improved Staff
satisfaction to 83%
• IT staff turnover below
4%
• Training on-line
• Leadership
Development program
• Performance culture
• Full DRP in all critical
processes
• 854 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 & policies
• Detailed billing
Page 8
• Tandem, Unix &
AS400 rationalisation
• 2 core systems
• Single IP Network
• Standard Win2000
desktop across
Australia
• Intranet to all but
800 Int’l staff
• Established strategy
for standardisation
and re-use
People - Skilled & committed
Management
tertiary
qualifications
policy
Breakout cultural
transformation
workshop
Online training
courses
pcs@home:
heavily subsidised
packages for staff
to acquire PC’s
Half yearly staff
survey with action
teams to address
issues raised
eVouchers
provided free to
staff to choose
reading
materials
Page 9
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
Clear alignment 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 10
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 USD $40m benefits
to date
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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
2001
IP network
1998
Hogan
CBS
Multiple data
networks
- Single IP Network
provides universal
connectivity
- Simpler systems & platforms
reduce cycle times
Servers & Desktops
1998
2000
Platforms
1998
2002
8+ major
platforms
2002
Platform Focus
Eg,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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Technology Transformation strategy
2002-05
Simplify
Platforms
Continued drive
to simplify the
platforms
Improve
Robust
Takeout Costs
Project Delivery Operating Model
Capability
upgrade of
project process,
business/ IT
alignment
Next level agility Next level tools
and adaptability, and methods
quick ability to up
or downscale
Leverage
Group Assets
Leverage existing
technology
through re-use
and
componentisation
Movement to open systems – Key Factors
• Open systems
environment
(eg, Wintel)
• High
availability of
skills
• Scale out
model
• Good breadth
of vendor
support
• Ongoing
enhancement
to security
capabilities
• High agility
• Vast breadth
of tools and
technology
Page 13
• Standard
• Support re-use &
commoditised
components
technologies
• High levels of
• Efficient
integration development
‘plug and play’
environment
• Customer access
through Web
enablement
ANZ’s move to open systems
From
To
• Traditional Core
applications based on
proprietary systems
• Standards-based modular
building blocks
• Benefits:
– Single vendor with
limited scale to
innovate
• Cost - efficiency & skills
availability
• Flexibility – speed,
scalable, modern
infrastructure
• Proprietary systems have
limited interoperability/
integration
• Connectedness – ‘plug
& play’, ‘ease to
innovate’
• Relatively expensive to run
- often long lead times to
upgrade system capacity
Page 14
ANZ’s progress in migrating to open
systems - Case studies
Implemented or underway:
•
Next generation switching project
•
ERP/Common standardised administration systems
•
Item processing
•
Payments clearing
•
Branch sales and service platform
Next Phase:
•
Core Banking outside Australia
•
Telling
Page 15
Next generation switching project Background
• Replacement of existing ATM & EFTPOS Switching
functionality
• ANZ has approximately 1,500 ATMS and in excess of 30,000
MultiPOS terminals
• Current environment based on proprietary hardware/platform
and software since the early 1980s
– Integration with open computing platforms is difficult
– Long lead time to upgrade capacity
– Necessary support skills/knowledge getting more difficult
to source
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Next generation switching project Open Systems Challenges
• Meet or exceed service levels of existing proprietary
solution
• No loss of committed data under any circumstances
• 24x365 availability
• Disaster Recovery
– No loss of committed data, failover ~ 1 minute
• Performance, throughput and linear scalability
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Next generation switching project - Solution
• Migrate to Windows2000 & OpeN/2 (from S2)
– Currently running in-house pilot for ATM’s
– Soon to commence migration of customer ATM’s
– POS to migrate mid 2003
Active
Front-end
Processor
Dell 2-way Servers
Win2000 Server
OpeN2
Comms
Comms
Comms
Servers
Servers
Servers
Auth
Comms
Comms
Servers
Servers
Servers
Data Centre 1
Dell 8-way servers EMC Connectrix Quantum ATL
Win2000 Datacenter ED-64M
EMC Symmetrix
Server
8730
SQL 2000
EMC SRDF
EMC Resource PaK
EMC GeoSpan
Tape
Database
Comms
Servers
Servers
Storage
Area
Network
Active DB
Data Centre 2
Front-end
Processor
Fail-over
Comms
Comms
Comms
Servers
Servers
Servers
Auth
Comms
Comms
Servers
Servers
Servers
Database
Comms
Servers
Servers
Fail-over DB
 4 Node MS Cluster
Storage
Area
Network
Library
Storage
Sub
System
Storage
Sub
System
Tape
Library
Win2000 Datacenter Server Environment
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Next generation switching project Outcomes
Cost
Flexible
– After full implementation operating costs are
estimated at 50% of previous environment
– Trials have demonstrated that equivalent
functionality can be developed in half the time
– Lower annual development cost
– Ability to quickly upscale capacity
– OpeN2 (S2) allows ATMs and EFTPOS to be
integrated with existing web channels and CRM
– Eliminates the requirement for proprietary
architectures and associated skills
Connected
– Lowers the overall diversity of platforms, with
longer term cost reductions
– Reuse with telling platform
Page 19
ERP/Common administration
system - Background
• Our ERP systems were fragmented and outdated
• General Ledger was no longer supported
• Payroll system was old and inflexible
• Very limited HR MIS
Page 20
ERP/Common administration system Challenges
• Need for a common, standardised administration system
– PeopleSoft met all 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
• ANZ’s 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
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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 & training
• Staged approach to deploy major modules:
- Procurement & Accounts Payable
- Human Resources
- Fixed Assets
- Finance (General Ledger)
- Payroll
• Pushing the time / cost boundaries
Page 22
ERP/Common administration system Solution/Approach
Page 23
ERP/Common administration system Outcomes
Cost
– Reduction in HR, finance administration and
procurement expenditure and greater control of
fixed assets
– Faster, easier and more cost effective way of
working
– Straight-through automation
Flexible
– Easier capture and use of business information
– Consistent business platform across ANZ
– Delivery of web-based information anytime,
anywhere, any place
Connected
– Transformation of culture – delivery of web-based
information anytime, anywhere, any place
– Reduction in operational risk
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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 & inefficient physical storage, access & 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
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Item processing - Challenge
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
2. Utilize the more efficient and 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 bank’s Internet System to provide
‘self-service’ archive access to ANZ customers
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Item processing - Solution
Two Pass Capture, Balance and Encode
Conventional
Solution
2 Pass Proof of
Deposit
PASS ONE
PASS TWO
Receive
WORK
PREP
HIGH
SPEED
CHECK
CAPTURE
PASS
CAR/
ICR
PAPER
REJECT
RE-ENTRY
MICR
IMAGE
REPAIR BALANCE
IMAGE
PAPER
DATA BALANCE
ENTRY
HIGH
SPEED
CHECK
ENCODE
PASS &
SORT
CASH
LETTERS
REHANDLE
PASSES
CAPTURE
IN POST
CLEARINGS DDA
LAST
EXCHANGE
SPECIALISED FUNCTIONS
One Pass Capture, Key, Balance, Encode,
Image Capture and Sort System
ANZ
Solution
One Pass Image
Proof of Deposit
Systems
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
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CASH
LETTERS
IMAGE CAPTURE
IN - CLEARINGS
LAST
EXCHANGE
ONE-PASS TRANSPORTS
1 OPERATOR PER 3 MACHINES
POST
DDA
Item processing - Outcomes
Cost
Flexible
–
Streamlined processes
–
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
Connected
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International Payments Clearing Background
Inherent risks due to complex & disparate payment systems/processes

Fragmented systems and interfaces

Batch operations moving to real time

Significant levels of operating risk

High processing costs

Difficulty in providing support and
development
Non-standard processes and product
sets across the network

High Complexity within a proprietary environment
ANZ High Value
Payment and
Messaging Systems
Telex
Branches
Corporate
Customers
ANZ NZ
Corporate
Customers
(as of July 1999)
Accounts
Manual Re-Keying
Automated Interface
AVP/SCP
KITS
Branches
Treasury
Treasury
ANZ India
(CBS)
Treasury
Asian
Branches
Accounts(only)
Telex
NZD
Accounts
Trade
Trade
Operations
Corporate
Customers
ANZ London Office
Telex
RTGS
Telex
Trade
Treasury
Vostro
Limits
Branches
Treasury
Fedwire
Corporate
Customers
CHIPS
ANZ Aust
ANZ NY Office
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Vostro/Nostro
AUD Accounts
Correspondent
Database
Nostro Rec
International Payments Clearing Challenge
• Multiple delivery channels to customers
• High visibility of system to customers/regulators
– ANZ highest market share in Correspondent & Corporate/
Institutional Banking in Australia
• ANZ ranked 50th bank in global SWIFT traffic volumes
• Multiple functions - inward/outward payment processing,
reconciliations clearing & settlement systems
• High availability requirements especially for high value RTGS
clearances and CLS requirements
• Interlinking batch-processing legacy systems with real-time
web-based customer systems
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International Payments Clearing Solution
• Single platform that processes international and domestic highvalue electronic payments
• Redundant hardware and software, with cross-site data
replication (recovery within 30 minutes)
• Farms of servers, load balanced across multiple sites
• Hardened server and network environment with Intrusion
monitoring
• COM+ business logic tier
• IBM MQ series used for integration to all external systems
• Thin browser client or full function rich client
Page 31
International Payments Clearing Outcomes
Cost
–
Reduced staff in operations area
–
Reduced technical staff in platform support and
development
–
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
–
Standardised platform in Aust/NZ
–
Increased revenue streams and enhanced product
development
–
Improved operating risk management and better
risk management tools
–
Real time counterparty risk management
Flexible
Connected
Page 32
Next Project - Core Banking System
outside Australia
• Currently support seven off-shore sites in Pacific & Asia on core
system. All support and services provided from Melbourne
/India team
• A further three countries will be added to the core platform,
increasing scale and lowering unit costs across all countries.
• Opportunities for improved cost effectiveness
• Completed proof of concept to migrate banking platform to
Intel/W2000 with SQL Server database
Indicative Benefits
• W2K platform more cost effective – lower annual maintenance
costs – about 30% savings; 40% reduction in hardware costs
• Faster processing – giving bigger support or online window
• The W2000 / SQL server skills are easier to resource within ANZ
Page 33
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
Page 34
Copy of presentation
available on
www.anz.com
Page 35
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
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e-mail: [email protected]