Say goodbye to the IT crowd

The whole concept of internal software development within banks and other financial institutions could soon be replaced by small ad hoc teams constructing applications using off-the-shelf apps or downloadable modules.

The versatility of such an approach, and the cost savings likely to be achieved, make this almost inevitable, according to Michael Harte, group executive, Enterprise Services, and chief information officer at Commonwealth Bank of Australia.

One of the highest profile CIOs in the banking world, Harte leads the technology and banking operations teams for the bank, which he joined in April 2006 as CIO to lead a new enterprise-wide technology function and implement a new IT strategy. The group formed Enterprise Services in October 2008 to enable an end-to-end service and process focus and accelerate the delivery of customer solutions.

The world of software development is changing very rapidly, Harte told an audience of developers at the recently opened Polaris 8012 development labs in Chennai, India, where he was guest of honour at its inauguration .

“People inside banking and financial services organisations can see apps before the guys in IT have thought about it, and that will lead to the disintermediation of IT,” he said. “IT used to involve billions of dollars of investment in R&D with a binary outcome: success or failure. IT today is a few dollars of investment with a suck it and see if it works outcome.”

The shortening of development times and the use of off-the shelf modular applications are driving change, and IT professionals must change with them to survive, and to operate efficiently for the good of their organisations. “Today, the tools to design creative banking are fast and cheap, so the organisation needs to adapt to be fast to change and cheap to adapt,” he said. “In fact, a group of engaged, energetic and creative people, working collaboratively to rapidly develop new tools that can be tested, tested and tested on a continuum of design and improve, rapidly at low cost, is the surefire way to develop the future bank.”

In Harte’s view, this rapid prototyping and constant iteration is fundamentally different to the Rapid Application Development disciplines of the 1990s. “Back then, you were looking at months or years and thousands or millions of dollars to try things out, with significant reputational risk associated with it. Today, it’s days and weeks with hundreds or a few thousand dollars to try things out.”

Beyond the changes to the role of IT development within a financial services firm, Harte says that the business has to change to recognise the changing nature of consumers and their relationships with banks.

“There is a fundamental design shift away from thinking of the customer as an account number to thinking about the lifestyles they lead,” he said. “There is a shift from an old product focus to customer relationship [which] is extraordinarily complex and made more complex because we are all humans.”

“Organisations get too introspective, and this results in a lack of customer focus. By being introspective, organisations design systems and processes for the organisation rather than for the customer. You therefore have this old world organisation that is introspective and internalised, fighting with new technologies and new customer relationship needs. That’s why systems need changing.”

What this means for technologists is that that they have to get “out of the systems thinking that we get trained in as engineers and into the new world of mobile,” he said. “Most forward-thinking organisations are getting out.”

Even more invidious are the different tribes within organisations and the boundaries between them. “The business as usual – BAU – types generally want IT to be aligned along product and business lines, in the same give-me-more but live-with-less times we are living with,” he said. “I like the idea of self-organising networks based on outcome. Hierarchies cause weird behaviour: we are in a world of hyper-specialism – hierarchy only works in a command-and-control environment.”

Another group that acts as a brake on innovation are “gatekeepers” who seek to protect the status quo. “There are gatekeepers everywhere – there are gatekeepers in Google and Apple – there are gatekeepers in any human organisation of more than two people,” he said.

Harte describes the interaction between these groups as a struggle: “The BAU force will fight any change, as they created what is there today. It is almost like going to the BAU and saying: we are here to kill your children, he said. “You cannot have the BAU destroying the existing organisation.  That is why you need a freedom force to challenge all aspects of the BAU and work out how to regenerate the organisation.”

The role of this “freedom force” is to concentrate on outcomes, rather than building on existing systems. “There is very little free cash to bring to bear, and the danger is that we build a lot of new infrastructure on top of the old. [We are] moving towards more complexity and if you go further, you’ll go into chaos. We are pretty close to that, and need to simplify things,” he said.

Importantly, he says, the freedom group must be a separate force to work out the best way to interact with the customer. “This group has to be separated from the existing organisation, as the existing organisation wants to keep the business as it is.”

Focusing on the outcomes means, says Harte, looking at things from the customer perspective. “What are the key outcomes for the customer? What does the customer want from the bank? How do they see the bank? How do they want to deal with the bank?” he said. “Work out what the outcomes are by focusing upon what the customer is doing, how they want to interact, and then build and evolve the bank on a continuum for the relationship you want to have with those customers through those interactions.”

Design, particularly human-centred design, is another factor in success, in Harte’s philosophy, but he cautions against trying to design perfection. “If you focus on perfection, you will fail – you will never get there,” he said. “That is why you need a rapidly evolving, flexible firm that can fail fast at low cost. You need to live with failure, but fail fast at low cost. That is the beauty of today’s technology capabilities, we have the ability to fail fast at low cost: you can design, test and fail, modify, redesign, retest and succeed. You can have hundreds of mini failures to gain maximum success. Multiple fast failures at low cost are how we work today.”

It is also important to know when to stop: “Design-centred thinking is to get input from as many people as possible, but it has diminishing returns, so you have to stop it pretty quickly – you have to be conclusive and control it, he said.

But the rewards can be enormous: “Design thinking is a clear articulation of the problem statement from the point of view of the user; agility is the iteration of the solving that problem. There is no limit to the amount of problems you can apply this to.”

A final piece of advice comes from not refusing to think that things can’t be done, which Harte said is manifesting itself in the way many institutions and individuals are responding to regulation.

“What you can do with the regulators is go and talk to them when you’re doing something new, he said. “I reckon that nine times out of 10 we miss the opportunity of talking to them in advance, but when we moved to the cloud, the regulators were more helpful than my CFO.”