The world’s local bank goes global

Most CIOs are concerned with making sure their customers get the right compute resources, the right software programs or the right data. Ken Harvey is also concerned with making sure they get the right kind of coffee.

Harvey, the global head of technology and services at HSBC, has guaranteed that no matter what branch you walk into, anywhere in the world, the same six flavours will be on offer: light roast, medium roast, Cappuccino, decaf, chocolate or hazelnut. It may sound like a small detail, but it’s a good example of the consistency and policy enforcement behind his five-year mission to standardize the bank’s IT and operations.

Last month, Harvey was in Burnaby, B.C., where HSBC unveiled its “Discovery Green” office facility. This will be the home of more than 850 HSBC employees who will be developing the software behind the standardization effort, including moving to a single core banking system that will process billions of transactions each year.

“The diversity of talent here is extraordinary,” he said, adding that while HSBC employs thousands of developers in India, China and Brazil, more than 400 of them could be assigned at any point in time to work in Canada. This is where the climate and culture of the province become useful. “When you ask them, ‘Would you mind relocating near Vancouver for a few years,’ the answer is usually yes.”

The team in Burnaby will be building on the success of One HSBC, which started three years ago and has already brought major changes to the bank’s Internet services, retail systems and trading platforms. In some cases it has meant eliminating and consolidating existing IT. In other cases it has meant creating brand-new systems – and brand-new services.

“I’m always going to have fewer branches in your country than whoever the local 800-pound gorilla is,” he said. “You have to have a reason to want to bank with me.”

HSBC’s new Premier Service, for example, allows customers to easily set up and manage cross-border accounts in local currencies. Supposing you’re a Canadian who worked in the U.S. for a while: you might still own a property there. A Premier Service customer would be able to see all their accounts, move between Canadian or U.S. dollars and do everything else from a single branch. “It gets more powerful the further away you are,” he adds. “If you were in Britain, in Saudi Arabia or Hong Kong, you’re getting a fantastic exchange rate and operating like a global citizen.”

A similar service, HSBCNet, will offer the same benefits to corporate customers, which may be running payroll systems, for example, in nine different countries and need a bank that can easily move around money in minutes.

The One HSBC effect

The project has not only changed the bank’s technology but Harvey’s role within it. While he was initially working at HSBC as its CIO – working with a whopping 100,000 IT staff – he has since taken on the operations responsibility, along with another 30,000 people.

“We had created shared services with unit rate billing and had been applying a disciplined measurement of the quality,” he explained. “Over time, the operational costs as a percentage of revenue kept dropping. We were using better technology and it was costing us less. I wouldn’t say it was something I was pursuing, but our COO at the time said, ‘Do the same thing with operations – find the one best way and implement that all across the world.’ You don’t want to feel like you’re with different banks.” When the COO, David Hodgkinson, retired, the two jobs were consolidated much like its platforms. Though it will probably cost around US$1.3 billion this year, meanwhile, One HSBC is already paying for itself, Harvey said.

Though his staff is larger than that of some of Canada’s biggest enterprises, Harvey manages them in part through a team that makes up one per cent of the total. These 1,000 “change delivery” specialists do nothing but test, document and help design the standards that become policy throughout HSBC’s operations. “About half of them came through ops and IT,” he said. “They were the best we could find the organization who had implemented change. We also did some outside recruiting.”

One HSBC took on more prominence during the recession last year, when the bank reported profits had freefallen 63 per cent to US$9.3 billion. In public statements at the time, HSBC cited One HSBC as a key strategy for containing costs and returning to growth. Implementing “systems-based processes to ensure consistent application of [risk] policies” is intended to help HSBC ensure it is lending to customers who can repay their loans. Harvey credits HSBC group CEO Michael Geoghegan, to whom he reports directly, for making standardization a top priority.

“He absolutely believed in the economy of scale, the idea of the one best practice, of standardization,” he said. “If there was a dispute early on, and there would be – whether something needed to be federated or collective and franchised – he would help settle them.”

While standardization often leads to massive downsizing, meanwhile, HSBC’s cuts haven’t been drastic. About 500 jobs were chopped in the U.K., mostly in back-office functions.

“As we’ve centralized the support, there’s been a downsteam effect,” Harvey said. “We have about seven per cent less staff in 2009 than the start as a result of this process.”

From IT to operations

One HSBC has not been an entirely smooth ride – there were some bumps as the bank originally opted for packaged software such as Temenos’s TCB – but now that more of the systems are being developed in-house and global infrastructure consolidated to four main data centres from an original 30, Harvey is paying more attention to the overall banking experience. This begins with the branches themselves.

“When you walk in there’s a whole lot of ATMs, where you can print your own statements. We’re focused on taking the foot traffic and making it largely self-serve. When you get into the more rich selling of investment products, there’s a private banker area – nice glass offices for the bankers. They can bring these investments up and model them for you.”

All pretty normal stuff, with one exception: Harvey is insistent that desktops do not become a barrier between banker and client.

“The screen must be shared – we’re not looking at a screen the customer doesn’t see,” he said, adding that a flat panel has been installed on the wall in the offices. “If you came in and applied for a mortgage, what the employee would see is the same as you would see. It makes it a very transparent experience.”

On a grander scale, Harvey’s team has been working on forming global purchasing agreements with the plastic producers and ordering with worldwide volume instead of from a specific country or region to supply credit cards. This can bring the costs of offering cards down substantially. HSBC can now launch a credit card service in a new country for between US$1-2 million, Harvey said. “You can take the same approach to (ordering) PCs. Or carpeting,” he adds.

HSBC will likely spend about US$60 million for the core banking system, according to Harvey, which is already in its third release. The focus is on building more functionality and language support to move into more countries. After some 200 implementations in the last year, he expects to see double that in this year.

“By 2012, the transformation is behind us,” he said. “It’ll be all the same core processes, centralized, automated, paperless. Customers will be able to start applying for a credit card online and finish on their laptop on the airplane. They’ll be able to upload the application at the airport when they land and we’ll get back to them in an hour. In three days you’ll be able to pick up your card. That’s the experience we’re striving for.”

SIDEBAR: Tips from the CTSO’s seat

As chief technology and services officer, Ken Harvey is a blend of CIO and COO. Here’s what he’s learned over the course of HSBC One.

Leverage your supplier relationships

Harvey knew One HSBC would be an undertaking unlike anything in the bank’s history, and didn’t want to be overwhelmed by trying to develop a project plan from scratch. So he didn’t. “We stole the blueprint from IBM and British Airlines,” he says, adding that given the amount of business HSBC does in IT purchases and travel, his request was easily accommodated. “I visited those companies a number of times before setting up the structure. They have a lot of experience in moving from a country/regional focus to global.” Even if you’re not an industry heavyweight like HSBC, evaluate the firms with whom you do business. Are any of them particularly agile, efficient, strategic? If so, they’re probably more valuable than any consultant you could hire. And if you can improve your overall operation, they’ll probably want to do more business with you anyway, so it’s in their interests to help out.

Use consistency to streamline operations

It’s one thing to centralize the decision-making around software and hardware platforms, but Harvey has taken a similar approach to other areas of the business. Take marketing. When you’ve last boarded an airplane, you’ve probably seen the HSBC ads on the “jettyway” that connects the plane to the terminal. It’s no coincidence that you’ll likely find the same ads on jettyways from Toronto to Tokyo. “There used to be a person in charge in all those areas who would decide what media to use,” Harvey says. Not anymore. If taking a local approach poses to many variables, why not reinforce your brand experience by putting it in the same place, everywhere?

And while you’re at it, strive to achieve the same consistency with the delivery of IT services.

A/B test your strategy

HSBC has a lot of offices – more than 10,000 around the world – and although the company is centralizing a lot of decision-making it’s not doing so in a vacuum. Harvey says the firm worked with a number of focus groups and double-checked against the feedback by implementing in pilot mode.But not everywhere. “We’d try things out in 20 offices and then not try them out in 20 other offices in the same city,” he says. You can learn a lot from hearing what comes out of the horse’s mouth. Just make sure you walk the horse around a bit first.

Narrow your focus, boost your results

Many companies build in corporate social responsibility into their strategy, including how they use IT. The problem is when the list of charities grows larger than the resources a company has to make a meaningful contribution. Harvey says HSBC has avoided this problem by sticking with two main areas: education and the environment. Its new facility in Burnaby, B.C., for instance, is called “Discovery Green” not just because it will create IT solutions to help the bank make more money, but because it’s achieved the LEED Platinum environmental standard. Choose a couple of targets and give them everything you’ve got. That way those social issues become part of the company’s culture, not just an adjunct activity.

Keep some flexibility amid the standarization

Although HSBC is trying to offer the same experience around the world, Harvey isn’t against making the occasional nod to individual preferences. Those six flavours of coffee we mentioned earlier? They also offer two local teas, like green tea in Asia, for instance.

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Jim Love, Chief Content Officer, IT World Canada

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