A Winning Blend of Business and Technology
When the world is teeming with technologists, the fact that IT at one of India’s largest banks is headed by a seasoned banker points to two prominent imperatives: that you have to understand your business first and foremost, and secondly, you have to have unflinching interest in using all the modern tools possible in increasing business and sustaining growth in the face of stiff competition.
The unassuming CIO that he is, given that he holds an MA in Economics, and is a certified associate of the Indian Institute of Bankers (CAIIB), D. Krishnamurthy, GM-IT, Bank Of India (BOI), has always been at the helm of all major business strategy decisions of the bank, for which he gives kudos to the board of directors. He says, “I started off as a banker but since 1982 I have been in and out of the IT department. Now as the GM IT, I am a member of all the committees of the bank, be it finance, retail, strategy, etc.”
On getting into the IT groove
“Well, it was when I served a short stint in London that I could see first hand how IT can be a benefactor to business. It was during this stint that I was exposed to core banking solutions (CBS) of different hues, namely Altel, Sanchez, Hagan, Kindle, and could understand how such solutions can uniformly monitor various processes and accommodate new ones as well.”
Thus started Krishnamurthy’s interest in IT. He began attending short-term courses to enrich his knowledge base on how IT can be a supportive tool for banking. And he has seen it all, both technology as well as banking processes, to evolve from one stage to the next. He says, “Every time a new user uses a software, it evolves and a vendor has to take it in his stride to enhance the value of the application.”
Krishnamurthy’s in-depth understanding of various banking processes has given him the edge to amalgamate technology and banking. He asserts, “Understanding of both business processes as well as IT helps in deciding the type of products and how fast they are to be delivered, besides addressing and understanding technology vendors.”
He provides an example: “Instead of debit, double entry book keeping might make more sense for a vendor.” In addition, according to Krishnamurthy, it helps in deciding how much volume a particular system can handle, and adopting best practices in business, thereby giving value to customers, and finally, in delivering appropriate reports and analysis to the board.
Apart from London, Krishnamurthy has served in Singapore and Hong Kong as well and regards those stints as valuable learning experiences. He has served in various banking departments like forex, treasury management and training (all these departments use complex statistical models based on IT).
On the necessity of process performance management
Krishnamurthy believes that without a strong mechanism to measure the performance of processes and systems, achieving efficiency of processes and RoI on systems can be a mirage. Thus two committees at Bank of India, namely the business strategy committee and business planning committee, appointed two consultants for this purpose. Ernst & Young was appointed for system-aided business process reengineering (SABPR). All system and application led processes were mapped and product delivery mechanisms were monitored under this. Boston Consulting was appointed for macro business process reengineering (MBPR), in which the organizational structure and business flow mechanism were mapped.
On growing complexity in technology as well as banking processes
Banking processes and technology have both grown complex. On the positive side, technology enhancements have provided the opportunity to adopt a lot of new approaches. For instance, data warehousing and business intelligence can provide useful knowledge on behavioral patterns of customers. On the flip side, technology complexity has made business unmanageable in some areas, giving rise to the necessity of outsourcing.
Last year BOI had decided to go for a as part of its mega initiative to outsource IT infrastructure management CBS (Finacle). Krishnamurthy believes firmly that while it is imperative for bankers to manage banking, the supporting IT functions ought to be handled by those who can be banked upon. In case of BOI it is HP who will manage its IT infrastructure. The bank has a dedicated IT team of around 50 personnel who work in tandem with the bank’s one point IT contact, HP.
On benefits through the outsourcing mechanism
Krishnamurthy points out two major benefits through IT outsourcing. He says, “Over a period of ten years our IT cost is going to be fixed. This means there will be no upfront capital investment. In addition, as per the contract, the benefit of price reduction during this period will be passed on to the bank as also the benefit of any technology change. Moreover, we will use best of breed technology at very competitive prices. ”
Speaking on selecting HP for outsourcing, Krishnamurthy says, “We zeroed in on HP on account of its track record in handling outsourced set-ups. Also, the company responded to our requirements favorably, and has provided us very competitive pricing for their services.”
On the drivers of outsourcing
Three Cs namely, compulsion (compliance regulations-both from the RBI and other market regulators, as well as business necessities), competition, and cost reduction, can be recognized as the major drivers of this approach amongst banks.
BOI happens to have most number of branches (750) centrally networked without a core banking solution. The bank still has more than 1,800 branches that will be outside the outsourced mechanism and would be managed by the in-house IT team.
Way back in 1989, BOI had been the first among the nationalized banks to establish a fully computerized branch and ATM facility at the Mahalaxmi Branch at Mumbai. The Bank is also a Founder Member of SWIFT in India. It pioneered the introduction of the health code system in 1982, for evaluating/rating its credit portfolio.
In recent times, it has added some more firsts to its credit, namely, being first amongst PSU banks to conduct data warehousing and data mining, first to share ATMs under the sharing network, and most recently, the first to outsource the CBS.