Westpac has put the planned redevelopment of its core banking systems on hold.
The bank had been looking for a packaged solution, to reduce the time required to bring new products to market and to move away from its current mainframe infrastructure, in what was supposed to be a trial project for the bank regionally.
Computerworld understands Westpac had selected the Finacle package, from Infosys, but, belatedly, the business case didn’t stack up, blowing out by some tens of millions of dollars.
The bank’s new CEO, Brad Cooper, has reportedly told IT to put the project on hold until at least 2010.
This is good news for Unisys, which is about to sign a contract with Westpac for its Teller system, which is regarded as part of the bank’s core systems, not to mention the bank’s major supplier, IBM, with whom Westpac is about to enter into year eight of a 10-year outsourcing deal. This seems to coincide nicely with the delay to 2010.
The outsourcing contract was last reconfigured in 2005 to reflect technology and pricing changes.
A Westpac spokesman wouldn’t comment, saying IT investment was strategic and commercially sensitive.
New Zealand and Australian banks, generally, are looking to update their core systems.
For example, Infosys is understood to be talking to the BNZ.
Another bank that is under some platform pressure is Kiwibank, which has almost become a victim of its own success. When the bank was launched a few years ago, it bought a banking system from an Australian building society for less than $20 million.
Kiwibank has since attracted so many new customers — and also has a need to provide more services — that it now finds it must replace this building society system.
The Australian Financial Review reported last month that the Australian parent banks that own most of our banks are preparing to replace their expensive central technology platforms.
“A lot of the banks are looking at this area, and I would imagine in the next six months we’re actually going to begin to see some pretty significant activity,” said Ian Ball, who is the managing partner of IBM’s business consulting services division across the ditch.
The engine room of most large banks is what technologists describe as a “core banking system” — back-office transaction processing platforms that in many cases have remained largely unchanged for a decade or more.
Much of the software running such systems was developed in the 1970s. Banks have been reluctant to replace the dated systems because of the cost and the risk. The foundation systems sit at the heart of spiderwebs of associated systems that are all interdependent. Unravelling these could take years, and banks can’t just shut off their systems and start again. The technology still needs to service customers during the process.
“It’s very expensive, it can be quite risky, and it takes an awful lot of time in preparation,” Ball said.
Ball said the rise of service-oriented architecture, means problematic segments of banking systems could be cordoned off and left functioning while others are gradually replaced.
— Additional reporting by Renai LeMay, Australian Financial Review