31 July 2014

How not to do a core platform renewal project - lessons from the Co-op debacle

30 April 2014  |  6605 views  |  3 The Coop bank branch signage

An independent report into events surrounding the near collapse of the UK's Co-operative Bank offers a cautionary tale for banks contemplating a core systems renewal programme.

The independent review by Sir Christopher Kelly was commissioned by the bank in an attempt to learn the lessons from a catastrophic series of management blunders and poor decision-making that left the bank with a £1.5 billion hole in its balance sheet.

The review offers an analysis of strategic decision making, management structures, culture, governance and accounting practices and aspects of the role of the bank auditors. It also includes an eye-opening thirteen-page passage on a calamitous IT re-platforming project that contributed to a £300 million write-off and left the bank on the brink of collapse.

Says Kelly: "The litany of deficiencies in the way the re-platforming programme was implemented after the completion of the merger (with Britannia Building Society) makes sorry reading. A number of individuals made attempts to improve things at different stages, including a major re-organisation in mid-2011. But it is difficult to avoid concluding that in many important respects the programme was set up and implemented in a way which was almost bound to lead to failure."

Some key highlights:
  • In early 2007 the Bank issued a 'Request for Information' (RFI) to seven potential core banking system providers, as it looked to replace a 30-year old patched-up legacy infrastructure.
  • In 2008, the bank selected Finacle from Infosys, a system that had not previously been tested in UK banks and required significant re-configuration to make it compliant with UK regulatory requirements and banking practices.
  • The bank's management seems to have underestimated the amount of work re-configuration would entail both for Infosys and for its own staff. The project would also require significant effort to migrate data from the legacy systems, to build interfaces with other bank applications, to train staff to use the new systems, and so on. Internal presentations and communication, including papers prepared for the Bank Board, described Finacle as a 'bank in a box'. "This description may have given a misleading impression."
  • The driving force behind the project, bank CIO Gerry Pennel, quits for a new job on the London Organising Committee of the Olympic and Paralympic Games.
  • The merger with Britannia increased the scope of the re-platforming programme, and hence its risks.
  • The project enjoyed neither stable executive sponsorship nor consistent day-to-day programme leadership. Between 2007 and 2012 three different executives were responsible for the programme. There was similar turnover below sponsor level in responsibility for programme delivery.
  • The programme team failed to push back hard enough against the business demand for amendments to the Finacle product. It gathered 18,000 requirements, many of which appeared non-essential.
  • As the work progressed, the scheduling and sequencing of releases changed frequently. Between 2007 and 2012 there were at least five different roadmaps.
  • The programme's expected costs consistently escalated. Expected costs end-to-end were initially estimated in 2008 pre-merger to be £184 million. By 2012, the costs had ballooned to £948 million.


Concludes Kelly: "It is critical for an organisation to understand the extent to which it is capable of managing large-scale change programmes. It is important to be realistic about the scale of projects undertaken,and the burden this places on the organisation. It is necessary to understand what good looks like, using best practices and experience from outside. It is essential to heed warnings and act upon them."

The full report, in al its gory detail, can be found here.

Comments: (3)

Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 01 May, 2014, 19:03

"The programme team failed to push back hard enough against the business demand for amendments to the Finacle product". Sigh, how flexibility, which is a great virtue for a services company, turns into a major liability at times.

Pavel Janovjak - Tatra banka a.s. - Bratislava | 02 May, 2014, 12:34

Nice lessons, I have experienced one core platform change together with Font-End system, Output management system and Service Bus implementations. It last more then 3 years and final costs are subject of disclosure. I can fully confirm, it was a large programme, if not having powerful sponsorship, dedicated bank managers-leaders in project roles, strick delivery tracking, and win-win vendor management, it would be another spoiled CBS programme over in Europe. But the programme succeed and I still believe the bank has invested good money for their core system and renewed frontend, achieving online transactions and customer interactions in multichannel approach.

Hitesh Thakkar - Sun microsystems - Mumbai | 04 May, 2014, 14:04

"Between 2007 and 2012 there were at least five different roadmaps" Amidst sponsors as well as exectuive level leadership changing, biggest risks of attrition of project team people has largest contibution in making FIVE roadmaps.

Imagine how vendor team must have been witnessing all this and maanging to remain focus :)

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