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Oz Bank share price dives after reveal of IBM/Oracle plan

National Australia Bank investors don't like the look of its IT plans

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Is it feasible that investors are belatedly learning that a technology refresh might involve spending huge amounts of money on risky projects?

If the National Australia Bank's experience yesterday (13 March) is any guide, the answer might be a tentative “yes”. The bank, which suffered some high-profile outages during 2012, delivered a group strategy and technology announcement to the Australian Securities Exchange, only to see its share price fall by 2.5 per cent on the news.

The strategy – which also includes corporate reorganisation, a shift to smaller branches, greater emphasis on self-service, a product reorganisation, and job cuts – is designed to save the bank $AU800 million.

The bank's executives must be wondering what might count as “doing IT right” after the share price fall. In the technology presentation to investors, it claimed already-significant progress in rebuilding its platforms since 2009, replacing its voice infrastructure to a virtualised hosted platform and replacing disparate networks with a national MPLS operation.

It also claimed significant progress towards a migration of its IT platforms to a private cloud under the hand of IBM, a nearly-complete patching regime that would improve security, and an ongoing project to replace its more than 20 data centres with just two, in Digital Realty facilities, by 2014.

Its next focus – which goes hand-in-hand with the reduction in the number of products the bank offers – is to integrate its upper-layer systems. Its enterprise, core banking, and channel systems will be rebuilt on the Oracle Banking Platform under a program dubbed “NextGen”. The contract with Oracle was announced in January of this year, and is based on a product suite first launched in September 2012.

Perhaps to reassure investors about the perceived risk of using a brand-new environment, NAB emphasised that the Oracle Banking Platform is already in use in its Ubank self-service products. Customers of NAB-branded personal products will be migrated to the Oracle platform in 2014, business customers by 2016, after which, the bank says it will decommission its remaining legacy systems.

Surprisingly, at least to The Register, the bank hasn't yet achieved what's been an aim of most enterprise systems, particularly CRM, for more than a decade – delivering a single customer view. Its presentation to investors notes that in 2009, it still had 20 partial systems and databases to deal with, and the “single customer view” is still listed as a future project.

What's most interesting about all of this is: over the years, Australia's big banks have been staples of tech press success stories (NAB among them: its cloudy Ubank products were case studies back as far as 2011). But when they're talking to investors, it seems, everything looks much more like a work-in-progress. ®

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