Barclays CIO David Weymouth talks to Dan Barnes about how unsustainable business models sparked a restructuring at the bank, why these changes included partnering and why handing certain services to third parties should not mean “outsourcing a mess”.

Barclays’ David Weymouth may sound like he’s trying to talk himself out of a job (he is due to change roles this year) but the question is a serious one: “You don’t have anybody who manages heat, light and water. Why isn’t IT more like that?” asks the bank’s chief information officer.

Mr Weymouth’s vision is focused on the huge changes in structure driven by the company’s ambition to become “one of the most admired financial services organisations in the world”. He and his peers saw the company’s previous business models as unsustainable for the future, and they are in the process of restructuring the organisation. “One of the things you have to have is flexibility to allow the organisation to change without complete breakage,” he says.

Change must be managed

To instigate such change involves strong management of vendor relations, explaining change to both staff and customers and managing the IT – the last is the painful point.

The organisation has taken a long-term view in order to get the remodelling right. It involved close analysis of existing architectures to eliminate duplicated processes and to ensure needed systems were in place.

“History is fairly clear,” says Mr Weymouth. “Pre-1999 we had become massively fragmented. If you took all of these components you would have found the same thing going on in different places and some things possibly not being done. You would have found most of it done in-house.”

This became a more consolidated model with shared services and rigorous governance put in place. The current strategy is allowing Mr Weymouth to review this architecture further and to concentrate on playing to the bank’s strengths.

“You will have seen in Barclays a completely devolved model, then a very consolidated model, and we are now working towards a more carefully devolved model, with perhaps clearer disciplines around what we do. Five years on, with some very big changes in the structure of the business and some big changes in how technology operates, we will redistribute those components and, I hope, retain the benefit,” he says.

Changes last year included partnering: with ABN AMRO for operational processing of trade-services business; with Deutsche Bank to give Barclays’ major corporate customers access to the German bank’s cross-border cash-management services; with Accenture for application development and management of its UK commercial and retail banking systems; and with Teradata to pull existing disparate databases across the enterprise onto a single platform.

Technology ideal to aim for

Barclays’ current four-year improvement strategy notes operational excellence as one of the key factors that the company is addressing in the medium term. Mr Weymouth explains how the group is practically applying this ideal in the IT area: “[We are] putting more application development closer to business, giving greater ownership, greater focus on the end consumer, [while] retaining in the centre core infrastructure, rigorous governance and strong architecture [so that] you will prevent the proliferation of infrastructures and architectures that happened.”

He is realistic about the use of outsourcing as part of this structure. “Whatever model you have got would involve some third parties – the managed service part of it.”

Complexity must be reduced

The starting point in this great turn-around was to find out what was already in place, to reduce the complexity of both the systems and the transition. Mr Weymouth is critical of those who try to “outsource a mess”, thereby compounding a problem when it could be simplified. Essentially, he notes, IT can cause frustration because it requires a substantial degree of management despite having existed as a recognisable industry for almost 60 years.

He believes that Nicholas Carr’s article “IT Doesn’t Matter” in Harvard Business Review demonstrates some of this frustration. “I think if you strip away some of the Harvard Business School rhetoric, what he’s got at is the right issue – which is, on the face of it, that many businesses have made huge investments in technology and believe they have not seen a return. The message is that you do not have anybody who manages heat, light and water – why isn’t IT more like that? Why does it still feel like that, after 60 years – everything still feels like it requires so much management, so much intervention? That’s the question.”

The major vendors in the marketplace are attempting to assist in this process, he says. “What I think you’re hearing from the major suppliers [that are] pushing on demand and grid and utility (see The Banker, November 2003) is almost their response to customers asking ‘who will rid me of this turbulent IT?’”

But the process is only just beginning, he adds. “The question is, can you change this to the situation where people take, as a given, that the application side of it is value added and the infrastructure is like heat, light and water? Some of that is beginning to happen – networks are getting there.”

Mr Weymouth gives the example of one of the first changes he instigated at Barclays: “Not all that long ago we would have had 250 people managing the networks between our branches. Now it’s all run by BT. And we don’t know how many people [are running it] – that’s the point.”

Such an achievement is just a starting point for more work, he says. “You’ve got your network very reliable and very low cost but that’s because it’s a public network. So you’re seeing more issues around security. And you can’t necessarily make these networks more secure because you’ve got to make the applications secure, the devices secure and so on. There’s an element that every time you find the lodestone in IT, another issue occurs.”

Shifting the skill set

The IT function is shifting form and focus, and third parties that work with Barclays need to understand this change. “You have to have the capability to manage these suppliers and services. And you slightly shift the skill set within the organisation from doing it yourself to managing a service,” Mr Weymouth notes.

The vendors are not always responsive to the bank’s needs, he says. “To be frank, the big issue for me at the moment is getting value out of all the technology we’ve got.

“If you look out in the market place, everybody’s still trying to sell you feature and function, whether it is Siebel or Oracle or someone else. We’ve got plenty of feature and function – we just want it deployed and run to scale. And that would be what I would say to Microsoft, and what I would say to IBM and everybody else.

“Are people seeking really exciting new operating systems? No, I don’t think so; they would like the ones they already have to deliver effectively. The challenge for most CIOs is how to optimise [a platform], not how to choose one.”

This message is hitting home with IT and service providers, he says. “You’re beginning to see vendors recognise that if they don’t help with the transition, the economics will not work. You’ve got something that generally works, it’s just old and a little bit unfashionable.”

This considered approach is necessary to drive innovation that succeeds. As exciting as innovation can be, it is easy to get carried away. “There’s a danger that technology almost becomes a hobby because it’s interesting. Sad but true.”

He says that there is a long way to go in development before some of the current trends that are being marketed become feasible. “If you really want to get the benefit of clustering or grid, you have got to have a much better handle on future consumption, and of which type of unit? It isn’t like switching on the light because if you get it wrong you pay penalties, because you have the responsibility. If you believe there is something in grid, utility, on demand, you need to focus on your major platforms.”

Slow pace is necessary

A tolerance of this necessarily slow pace of change will see returns on the current technology spend. Understanding the route to returns has been a failing noted in the financial services industry that Mr Weymouth acknowledges. “Part of the answer is that you never get a return purely out of technology. You have to change your process, you have to change your people.” Understanding this interconnectivity gives Barclays great potential in its restructuring.

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