HSBC has transformed its technology provision into a shared services company that sells IT to the group’s departments.The intention is to increase cost transparency and increase control over IT, Fergie Williams, head of technology services Europe,tells Dan Barnes.

HSBC, the self-styled “world’s local bank”, has carried out a major shift in its internal organisation this year. At the beginning of the year, Fergie Williams’ job changed from head of IT, corporate and investment banking to head of technology services Europe. It was more than a change of title: the job has moved with HSBC’s change in technology provision.

The blurring of the lines between supply of IT and financial services continues apace and the bank now bills departments for technology services. “We have established IT as a shared services company across the US, Hong Kong and the UK so far, and we will do the rest of the group in the next couple of years – it is a radical change,” says Mr Williams. “I used to be head of IT. I suppose I am now the CEO of an IT services company.”

The change required the development of billing systems and staff retraining to allow service provision to be given on a costed basis and departments invoiced for IT usage. Technology Services Europe now publishes prices for kit or services and departments pay for what they use.

Such a fundamentally different model is intended to give transparency to IT costs and give the business better control over its IT bill. But, as with any such programme, the business user has become a customer and must be educated in using the new system. Naturally, there is some resistance to the new method of charging, but Mr Williams has a quick response for those who complain that they are constantly paying for new technology where they used to plan and budget: “Welcome to my world.” The reality of providing technology to support the fifth largest bank in the world (by assets) has been brought directly to the business user.

Change in culture

The famously self-reliant bank has been increasingly working with third party vendors in recent times (to the relief of some in the IT industry) and Mr Williams believes this reflects the shift in culture from the bank’s origins in Hong Kong. “Although it is a very modern city, in terms of technical support and surrounding infrastructure, there is very little. The bank was by far the biggest technology player in the country,” he says.

The need to be self-sufficient changed as the bank grew out into the West and there is now a more balanced commercial view of purchasing and provision. “Commercial reality is now the driving force,” says Mr Williams.

There is still a measured approach to using external technology or services and it is rarely adopted in an area that might be considered a differentiator. When considering outsourcing, Mr Williams is frank: “We would have to be pretty useless for outsourcing to be a good option for most of our operations.” Nevertheless, he believes that there are areas for which it will be a viable option. Third-party suppliers must also be prepared for their product to fit the bank’s systems rather than vice versa, which some vendors will find challenging.

Mr Williams clearly runs a tight and well thought-out ship. He is not a big fan of the various jargon and acronyms thrown up in vendor marketing departments noting that CRM, BI and ERP “are really about managing data”. He is striving to prioritise the valuable areas to drive the service levels of the bank.

“If you think of the three things that we manage – data, function and technology – data is the most important, then function, then technology. Technology changes the quickest, then function, and data is the slowest to change. If you look at IT management, most of the time goes on technology, not much time goes on functionality and virtually zero goes on data,” he says.

By making data a priority, he has led the market whereas many are led by it. For example, in the case of customer relationship technology HSBC has created a central data repository that is not affiliated to any system. This has a massive influence on any potential purchase that the bank would make in the area.

Mr Williams proudly points out that IBM believes that the UK bank has the best customer data in the world – something HSBC took 15 years to ensure – and he is not going to adapt that for any external systems. “You have to change the package so that it will integrate with the database or the package doesn’t come into the organisation,” he says.

This discriminatory attitude has played its part in maturing the technology market so that suppliers build their technologies with integration in mind.

Risk awareness

All of this change has necessitated development in the skill sets that Technology Services Europe requires. The team has learnt to be risk aware rather than risk averse, occasionally learning lessons the hard way.

An example that Mr Williams gives occurred earlier this year. “In 2004, the core banking system worked every second, 24 hours a day, every day of the year – even when we upgraded it – which was great. On January 3 [2005] at 2pm a very obscure bug in the IBM mainframe operating system caught us and took out 15% of our capacity for eight or nine hours. You would have thought the world had ended. Even the BBC reported it. So we become much more aware of avoiding risk and taking risk. That will be an ever-growing reality of life.”

When deciding to develop or purchase a system, the same rules apply – if it is internal and will not affect customers, there is more freedom to discontinue a project or take greater risks, balancing out the factors that Mr Williams considers the basis of any project. “This is the eternal triangle of IT: you can either have it quick, you can have it cheap or you can have it reliable. Whichever one of those you focus on, the other two are going to suffer.”

Planning and prioritising

A major achievement has been realising the value of new technologies and gaining senior support for investment through this realisation. For all banks, IT spend is a significant chunk of capital but it is important to place this in context.

“Running day-to-day operations accounts for the bulk of our IT expenditure,” says Mr Williams. “Investment in new services is comparatively modest and could be increased substantially without a pro-rata rise in overall IT expense. The board will invest when it recovers the confidence that investment in IT will produce a return. I think we are going to see another IT boom in the next two to three years.”

Across the industry, many chief officers lost confidence in the IT world following the dotcom boom, while Y2K was regarded by some as a con created by the IT industry. To encourage growth in the area, Mr Williams has done his analysis and is confident that he is proving the value of his technology spend. “When you demonstrate that the investment is quite modest – particularly in comparison to the size of the bank – there is a confidence that if you put the right investment in, you get the right return.”

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