Thorough planning and active IT management are behind the smooth running of ABN AMRO’s latest outsourcing deal, chief information officer Lars Gustavsson tells Dan Barnes.

ABN AMRO’s CIO Lars Gustavsson sounds cautiously optimistic. He says that the €1.8bn outsourcing deal signed in 2005 with five vendors (IBM, Accenture, Infosys Technologies, Tata Consultancy Services [TCS] and Patni Computer Systems) is running smoothly.

However, certain aspects of the project have surprised Mr Gustavsson. “The funny thing is that we are delivering roughly along the milestones and categories that we originally intended,” he says. “That, for me personally, is quite a new experience, because most of the projects that I have been involved in – although successful – have been modified much more than in this instance. That tells me our planning part of the exercise was much more thorough, much more realistic and maybe even more business-aligned than previously was the case.”

The deal reflects one of the greatest challenges that CIOs face today: how to provision IT in the extended enterprise. Acknowledging this, Mr Gustavsson says the tough economic climate of recent years has driven the art of managing technology. “Information technology is about 40 years old so the governance model is relatively immature. Built into the mainframe technology was a governance model – you had disciplined cost containment and change containment in there but this didn’t develop alongside the IT.” As business pressures increased following the dotcom crash, people looked more closely at the economics of IT, he says.

“Many companies are now starting to manage technology as a production factor, with capital and people. Technology, capital and people are the three main production factors in financial services. This has created a much more rational way of managing technology. You have more of a medium to long-term vision of where you want to go with your technology.”

Reusing funds

The bank had reached a point at which it had to cut costs and the decision was made to take advantage of improved IT management, says Mr Gustavsson. “We made the decision to take out costs and reuse those funds. We call the programme ‘Fuel for growth’, which means a significant amount of money will be reinvested in growth and new business ventures, some of it outside of technology and operations into services in general, some of it invested into the services function. So you could say we have a much higher ‘churn’ of capital from old activities into new activities. The programme is really a funding programme; we are reusing capital.”

The project led to significant restructuring as the management of supplier relationships and service provision replaced the direct construction of technology. While effecting change, the bank ensured it communicated how and why it was doing so. “We got all of the business units together so they were the governance along with operations. In doing this, we made those most affected by change the agents for change, and so minimised resistance. We had a high level of buy-in at the senior level that really strengthened the project and we encouraged transparency in decision-making. It made it more straightforward as errors or unrealistic targets were easily identified,” Mr Gustavsson explains.

In an unusual arrangement, the management of the IT infrastructure was outsourced to IBM as the ‘guardian vendor’, to manage the other vendors and the project end-to-end. “I’m sure IBM is now taking this model to market. In the future, I can envisage boutique suppliers that specialise in the management role of projects like these,” he says.

There were job losses, with a reported 1800 out of 5000 staff affected staying on in a new environment. “Somewhere between 20%-30% of the original staff were retained in architecture, relationship account management, business analysis and other areas. They now liaise with the vendors specifying requirements rather than building systems. On the infrastructure side, we no longer do engineering. We have engineering opinions, we have second opinions, but we don’t do engineering. We state business requirements, not technological requirements.”

Understanding business

Mr Gustavsson has had to ensure that the project is understood by the rest of the business and that has involved a degree of retraining. “The really new capability that we are bringing in is around service management and vendor management so that the business understands the way in which service provision occurs,” he says.

Looking forward, ABN AMRO is hoping to deepen its understanding of relationships between areas of the bank, says its CIO.

“We are developing two particular areas – one is a quality management framework with which we can actually correlate what is happening in the back office with the customer impact. The other is aligning the services organisation more closely with the business, to potentially make our cost base much more flexible and much more aligned to the share price than it has been in the past,” he adds.

CAREER HISTORY

2001 CIO, ABN AMRO, London

2000 CIO, ING Barings London

1995 CIO, SEB Merchant Banking, Stockholm

1991 Chief dealer, Asia-Pacific, SEB Singapore

1989 Trader, Stora Finance, Brussels

1987 Trader, Central Bank of Sweden

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