BNP Paribas CIO Hervé Gouëzel tells Dan Barnes how he is working towards a strong centralised IT operations function, using partnership and outsourcing where necessary.
Hervé Gouëzel, chief information officer and executive committee member at BNP Paribas, is striving to strike a balance: “There are three [IT] models. The first is the very centralised model, highly organised and with a global strategy. In the second model, there are these local baronies (fiefdoms) with everything decentralised. Between these two levels is the BNP Paribas model.”
In 2003, the bank said that it wanted to “make technology a major lever for competitive differentiation and advantage”, and Mr Gouëzel intends to make this happen.
He has set his sights on 2007, by which time he aims to complete the nine IT vision projects under way. The projects cover IT strategy, management processes, security, quality, sourcing policy, skill centres, development methods, master plan architecture and technology, and production and infrastructures.
Clear-cut targets
BNP Paribas has clear-cut targets for development, benchmarked against other European banks. “We have a centralised IT strategy function carrying out policy setting and standardisation; many European banks have a strong centralised IT strategy function driving IT architecture and strategy. We need to move and want to adopt such a strong centralised model.”
In some areas of operation, achieving the vision has required partnering with third parties, notably the joint venture with IBM announced in December 2003. In a press release at the time, BNP Paribas announced that the partnership was intended to create an “on-demand infrastructure” that should achieve cost savings and performance improvements while retaining the firm’s technical staff.
“For IT operations, BNP Paribas is currently [on a par with other European banks – see diagram]. We have decided to have centralised IT and operations with an operations service provider,” says Mr Gouëzel. “The joint venture with IBM was created to drive our operations. We want to have a global, centralised IT operation for all the lines of business in all the countries. But for software development and maintenance, applications will be decentralised within the lines of business.”
While the majority of the IT strategy is focused on centralisation, Mr Gouëzel’s aim is to have an application development team within each line of business, where possible. “For IT operations, the main words are quality, security and reduction of cost. This means industrialisation. For software development, the main words are reactivity and competitiveness. I have to get the best of these two halves,” he says.
Third party services
Partnering is not limited to the centralised areas, but BNP Paribas is careful in the route it takes when employing the services of a third party. “It is not possible for us to say ‘no outsourcing of software development’ because we have to reduce our costs, and we have to see what our competitors are doing and we have to benchmark [against them],” says Mr Gouëzel.
“Development teams are in the line of business. But for each project, we want to outsource the part that is not strategic. And we must use current techniques. Our role is not to outsource the team but to outsource part of the project. So project-by-project we determine which part is concerned and we could, for example, give it to an Indian or Moroccan company to reduce our costs.”
IT and business operations
For Mr Gouëzel, separating IT and business for outsourcing does not make sense. As he observes in the cancellation of the JPMorgan Chase/IBM outsourcing agreement last year: “Their problem is not an IT problem, it is an operations problem – they outsource operations and business operations, and their IT is with their operations. If HSBC decides to install 4000 people in India to create a company, this includes the IT.
“As I said initially, an IT team has to be within the business. So if a company decides to develop a business in India, for example, it also has to outsource the IT. In the case of BNP Paribas, our capital markets business is part in London and part in Paris. We don’t think it would be judicious to go to India or Morocco just for the IT team.”
BNP Paribas’ current outsourcing to these countries is not on a large scale, he says. “In a few months, we will have about 100 IT people employed in India and 200 people employed in Morocco just to help us to reduce our costs. But all of our project managers will be within the line of business either in the UK or in France.”
Exception to the rule
This is not an absolute, says Mr Gouëzel. “We have an exception to this rule. For the shared métier (core business) developments, our systems are used by many lines of business, so it is not possible to place the IT team that is in charge of these developments into one line of business. So these teams are under my responsibility and they are working for two or three lines of business.
“An example is our application for our international commercial banking… we are using ATLAS for commercial banking in 80 countries (including Singapore, the US and Morocco) and many lines of business are using this software.”
To put these projects into context: Mr Gouëzel is managing 10,000 IT staff globally, 4000 of which are contractors. His global IT budget for 2004 was €1.9bn and “in 2005, I predict it will be €2.1bn”. IT made up 17% of total operational costs in 2004; in 2003 the ratio was 16%, in 2002 it was 15% and in 2001 it was 14%. As CIO, Mr Gouëzel regards limiting this ratio as his challenge: “Our problem is to stop this trend: we want the ratio to be between 17% and 18% in 2007.”
Merger discipline
Challenges aside, BNP Paribas has come a long way since the merger between its two parts was announced in 2000. “BNP Paribas’ IT organisation, with new services and products, was created at the merger of BNP and Paribas, says Mr Gouëzel. “The two institutions had two very different organisations with very different systems. We had to merge them – it was a fantastic discipline.
“We had 250 choices of software. For example, three lines of business on the fixed income, each with the front, middle and back office. These three lines mean nine systems from BNP and from Paribas [totalling 18], which have to be changed into one new system.”
Mr Gouëzel says that the combination gave him the opportunity to create best-of-breed technologies when fitting the two sides together. “I don’t know that it was easy, but it was successful. It was successful because in some parts the group Paribas was better, and in some parts BNP was better. And so, combined, we have been able to create the best system, a very efficient system – but I need to have €2.1bn each year to make it work!”
