The vice-managing director for IT at Industrial and Commercial Bank of China's headquarters, Zhang Ying, explains the bank's plans to move more of its IT functions in house and discusses the technological challenges of a firm boasting 259 million individual customers.

If there is one characteristic that defines the Chinese banking sector, it is undoubtedly sheer scale. The country's largest players deal with customer numbers, geographical distances and even staff and branch networks of a size rarely, if ever, seen among Western institutions.

The challenges and opportunities involved in operating within such a large environment quickly become apparent in a conversation with Zhang Ying, vice-managing director for IT at Industrial and Commercial Bank of China's (ICBC's) headquarters. As the largest of China’s big four state-owned commercial banks, ICBC provides products and services to more than 259 million individual customers (more than the number of inhabitants in the world’s fourth most populous nation, Indonesia), and 4.12 million business clients, served by a grand total of 397,339 employees.

The technology demands of a service-based organisation with enough staff to populate a good-sized city are gargantuan, and meeting them requires an IT department as vast as one might expect. Today, ICBC has about 16,000 IT personnel – 5000 based in the IT department of its headquarters and the rest distributed across its provincial departments and global subsidiaries. This already sizeable number has been steadily increasing by as much as 1000 a year, says Mr Zhang, who is at pains to stress the importance of technology to the firm’s overall operations. The bank’s IT operations are certainly not sidelined from day-to-day business; its IT governance committee is headed by ICBC chairman and chief executive Jiang Jianqing.

Self sufficiency

The importance of technology is, of course, growing across the banking landscape. In other respects, however, ICBC’s technology philosophy differs drastically from many of its global peers. With cost cutting and efficiency the order of the day in many Western institutions, cash-strapped IT departments are beginning to increase their use of third-party software providers to free up resources and budget elsewhere. By contrast, ICBC has been gradually reducing its reliance on external IT firms and moving more and more functions in house. The bank’s software division alone is now 3800-strong and, Mr Zhang says, develops 90% of its software applications.

“We felt that using third-party technology hindered our ability to innovate and develop to support the business, so we now use in-house technology to enhance innovation capabilities,” says Mr Zhang. “This centralised development is a unique feature of ICBC’s IT functions, and it’s one of the key tenets of our operations."

We felt that using third-party technology hindered our ability to innovate and develop to support the business, so we now use in-house technology to enhance innovation capabilities

Zhang Ying

ICBC’s credit card system, for example, was outsourced from 2002 to 2007, but has since been brought back in house, with favourable results, according to Mr Zhang. “Since then, the system has developed rapidly and supports the business a lot more.” Similarly, the bank’s capital markets operations originally relied on third-party, off-the-shelf technology, but these have since been replaced with proprietary systems.

It is a trend that Mr Zhang expects to continue. “We’re actually considering making things even more centralised in the future. In China there are two possible approaches to banking technology; in house or via software developers. For ICBC, the reason we can support such fast growth is in-house development. Our platform approach gives us much more control in development… by using it we can innovate a lot better and a lot quicker.”

Growing pains

ICBC's growth since its 1984 establishment has certainly been swift. As of the beginning of 2011, the bank boasted 16,227 outlets across China, 203 overseas subsidiaries and a global network of more than 1562 correspondent banks. This expansion has been mostly organic, however, Mr Zhang says, and as a result has avoided many of the issues with fragmented systems and legacy technology faced by ICBC’s Western peers.

Of course growth on that scale requires major IT investment to keep pace with increased demands, one of the most prominent of which is a colossal datacentre consolidation project, which has seen operations move from 40 separate locations into a single 15,000-square-metre-capacity premises in Shanghai. The technology used as part of this installation has boosted ICBC virtualisation capabilities leading to a significant boost in efficiency, though for Mr Zhang, the technology is not a new one. “From my perspective, virtualisation is a very mature technology, server virtualisation in particular. In our IT command centre we’re building the foundation of cloud network in the future.”

He adds that from ICBC’s point of view, the concepts behind cloud computing are not new ones. “The core virtualisation technology we deployed consolidating our datacentres parallels today’s concept of private cloud.” But Mr Zhang believes moving to a hosted cloud is a different matter altogether. "It is inconceivable, and there is no consideration of putting customer data of key ICBC assets on a hosted cloud."

Looking forward

The efficiencies gained by this free up time and money to work on new technologies. And ICBC’s priorities here are similar to just about every global bank. Demand for online and other electronic banking services is growing, for example. And coping with this is not easy; an average of 100,000 customers conduct transactions with ICBC every minute (peak capacity can be as much as three times higher), says Mr Zhang, and 50% of these are conducted via an e-banking channel. Mobile banking services are also on the agenda. Thirty-four million of ICBC’s customers are already taking advantage of its mobile offerings. “Just as 10 years ago, physical banking was moving online, now online is moving to mobile,” says Mr Zhang.

Catering for the bank’s business customers is another increasingly high priority for the bank. “ICBC is taking care of banks, corporate and business customers, so we want to develop global cash management systems to really support cross-country clearing, across multiple banks,” adds Mr Zhang. "We want to be a one-stop shop for corporate customers."

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