Lessons Every IT Pro Can Learn From Commonwealth Bank

Commonwealth Bank made an $8.3 billion profit last financial year, and its IT systems are generally held to be the best of any major Australian bank. You might not have $1.38 billion to spend on technology, but you can still adopt some of the approaches CommBank uses.

Picture: Getty Images

Last year, the bank finished a long-running project to upgrade and modernise its core banking platform, a shift which means it has been able to roll out new technologies more quickly. Examples have included its cardless cash project, support for Tap and Pay from Samsung Galaxy S5 phones. The bank's annual report highlights several of its technology initiatives — we've picked through them for some broader lessons about maintaining IT and rolling out new projects.

Focus on new project development as much as you can

Many IT budgets have a large "keep the lights on" element. While that certainly isn't absent from the CommBank approach, expenditure on new development is strong:

Category Expenditure ($m)
Application maintenance and development 412
Data processing 218
Desktop 101
Communications 189
Amortisation of software assets 328
Software write-offs 70
IT equipment depreciation 62
Total IT services 1380

While the lack of separation between app maintenance and development means we can't be sure exactly how much investment covers new work, $412 million for both is still a significant chunk of the budget — well above the 10 per cent or less often seen in large enterprises.

Keep a sense of perspective on expenses

$1.38 billion is a massive IT budget, but it's not the biggest expense at the bank. Total operating expenses for the year were just under $9.5 billion — so tech isn't the only area where costs can be cut. You need to see your own IT expenses through a similar business-wide prism.

Not all costs are productive

The biggest influence on IT spend rising by 6 per cent during the year was "expenses due to increased amortisation and software write-offs". Those expenses are unavoidable when preparing financial statements, but they're not a reflection of current IT activity, so don't let them dominate the conversation.

Concentrate on reducing outages

One area of focus for the bank has been in cutting down system outages. Modernising its core banking platform has undoubtedly helped. System incidents remain an issue, but have reduced steadily over the last seven years:

Rate tech platforms by value, not just usage

Online and electronic banking are big business for the bank, but their importance can be measured in different ways. This chart showing transaction volumes and values suggests that while branches are now a relatively minor source of business in customer volume terms, they handle much bigger transactions:

Both perspectives are useful. EFTPOS is essential for capturing everyday transactions, but branches remain important for larger dollar amounts. That said, Internet banking also has a big share of that space, and you'd assume that will continue to grow. The lesson for other businesses? Understand the relative importance of all your channels — it's rarely an all-or-nothing scenario.

Concentrate on reducing contract costs

CommBank's BankWest subsidiary BankWest reduced its operating costs by 3 per cent, a saving the bank attributed to "information technology savings, particularly from supplier contracts". Keeping a close eye on contractor costs and renegotiating when feasible can reap big benefits.


    Angus, you really need to proof read your articles before publishing them. Opening paragraph and others.

    'are generally held said to be the of any major Australian bank'

    you done goofed.

    "its IT systems are generally held to be the" best/worst/tastiest/?

    Last edited 13/08/14 1:48 pm

    The biggest influence on IT spend rising by 6 per cent during the year was “expenses due to increased amortisation and software write-offs”. Those expenses are unavoidable when preparing financial statements, but they’re not a reflection of current IT activity, so don’t let them dominate the conversation.

    This statement makes me sad, because it displays a lack of understanding of IT investment and expenditure. Amortisation occurs when you spread out the cost of investment in an asset (e.g. the cost of creating new IT software) over the expected useful life of that asset. Write-offs occur when you realise that the asset you created isn't as valuable as you first thought. Thus, if your IT expenses are rising faster than revenue, and that rise is driven by amortisation and write-offs, then it likely shows that past IT projects failed to generate positive returns. It shows that, in the past, you probably allocated your money to projects that don't make more money than they cost. Thus, management would rightly question your ability to properly evaluate current and future projects.

    Last edited 13/08/14 2:06 pm

      Some IT systems are not designed to make money. There are many systems that do nothing but maintain compliance with industry standards. PCI compliance, call recording, and security assets are a few examples.

    I worked for the bank between 2008 -> 2013.

    You are correct that Amortisation is spreading out the cost of intangible (software) assets over their lifetime. However it does not indicate a failure. Typically in the projects i worked on the software costs were written off over 3 or 5 year periods with the expectation that in 3 or 5 years an upgrade would be needed and therefore that software cost would be end of life.

    It does not mean that the software didnt realise enough value to continue its life.

    The bank had a very smart CIO at the time, Mike Harte.

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