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.
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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:
|Application maintenance and development||412|
|Amortisation of software assets||328|
|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.