Hewlett Packard Enterprise - Bold decisions: help banks revamp their IT infrastructure
Taking a large bank through the next stage of evolution will require IT transformation, which is notoriously arduous for a global organisation. Who better to help than a global IT company that has gone through its own radical overhaul? We speak to Paul Kember of Hewlett Packard Enterprise about how to build a roadmap for change.
Banks are often criticised for not grasping the nettle when it comes to technology transformation and, therefore, putting themselves at risk from new entrants that threaten their traditional core markets. It is evident that the financial services sector is in a state of flux, thanks to technological advances and new regulations that open up the market to new competitors, but, for large banks, the process of change is neither quick nor straightforward.
Nevertheless, banks do need to make big changes to their IT infrastructure to compete in a dynamic market. Fortunately, they can do so with the help of partners and service providers that understand the challenges they face.
"It is easy to show larger enterprise banks that they should capitalise on new technology and to talk about the massive threat from fintech companies, for example, but I have worked in financial services for many years, including my time at Hewlett Packard Enterprise [HPE], and I have a lot of sympathy for them. It is easy to say what they should be doing, but it is hard to drive IT transformation across a large global organisation. It is incredibly difficult to move from legacy architecture," says Paul Kember, vice-president financial services for Europe, Middle East and Africa, HPE.
"I feel for the CIO because the expectations of the board and of the media make it really tough, not to mention the demands on customer service. There is growing cost pressure and more regulation to deal with, and while there are many organisations saying what the future looks like, there are few that can help banks to get there. As the saying goes, 'if you wanted to reach that destination, you would not choose to start from here'," he adds.
HPE was created when Hewlett Packard reorganised in 2015 and is an industry-leading technology company with a portfolio that spans from the cloud to the data centre to workplace applications. One of the divisions focuses exclusively on the financial services industry, looking at the sector's needs not only in terms of technological capability but also how a large organisation can best implement the new solutions that are being developed by new start-ups across the world.
"IT should be about achieving simpler, faster and better banking, which is hard to do in a large organisation that has an established culture. As technological capability increases and cost pressures rise, a large organisation needs different skill sets. It may need to 'out-task' some functions to third parties, as well as implementing new technologies. The problem for some banks is that they struggle to make this change," says Kember.
"Our own organisation has made many bold decisions in the past five years. Back then, we were trying to cover all the bases, and we were struggling with execution challenges and a rising cost structure. Those challenges are similar to those that banks are facing now. We split the company in two because we needed to change. To go forward, we have had to restructure. We took very bold management decisions and that is what banks need to do to fight the rise of challengers."
Mapping out the hybrid model
For a bank, any major IT transformation is beset with challenges. Firstly, culture needs to change along with technology. Secondly, the transformation needs to be not only global, but also swift and efficient in its implementation. Thirdly, big changes need to happen behind the scenes without disrupting the service to customers. In an increasingly competitive marketplace, banks' success is defined by customer service, so there is much at stake.
"Banks need seamless customer service and internal service, too. Making the change is a process of evolution, and that may involve breaking off some pieces of the organisation and handing them to specialist providers or organisations like HPE. We find that most of our clients are moving to a hybrid IT model and we would endorse that," Kember explains.
Implementing a hybrid model involves analysing a bank's IT assets and requirements in order to decide where best to locate certain parts of that infrastructure. Some will be kept in house, others can be located near the core of the organisation and others can be placed in the public cloud.
"We are involved in creating that kind of hybrid model, which is a software-defined infrastructure. HPE has a long history in the banking environment. It is a tried and tested infrastructure service provider to leading banks worldwide, which means that we recognise the challenges they face," Kember remarks.
"Also, because of the transformation, our own company has gone through, we can look at how HPE made changes in terms of technology and culture. It is, after all, a huge change. Our offering is that we can get organisations from A to B by mapping out the journey over time using our services and our ecosystem of partners."
Partnering for change
HPE's approach to addressing the challenges of IT transformation in the banking sector is based not only on its own process of evolution as an organisation but also on a clear set of core beliefs. The first is its commitment to the hybrid IT model.
"It is all about making things simpler. We use our technology as a market leader and our drive towards a software-defined model. Data centres are controlled by software, and automation is a key priority. There are many types of cloud - private clouds, those provided by partners and the public cloud - all of which are suitable for different aspects of IT infrastructure. HR and CRM are increasingly moving to service providers through the cloud. For the public cloud, we work with a number of public-cloud providers and have a particularly strong partnership with Microsoft Azure," says Kember.
The second core area of focus for HPE is what it calls the Intelligent Edge. This examines the proliferation of data that is caused by phenomena such as the internet of things (IoT) and the growing use of mobile devices to connect to networks. It deals with the analysis of data at the edge of the network.
"This is a huge growth market for us and our clients. Employees and customers want services delivered to
any device, anywhere and at any time. There are more applications for the IoT, and we are starting to see it in financial services organisations for capturing data and analysing trends. We are also seeing more desire for analysis of data at point of sale rather than shipping all of the data to a data centre. In banking, this is just emerging, but it is growing rapidly," Kember explains.
"Along with that, we are seeing a huge move to a consumption-based pricing model. Organisations can pay per use for the services they need. So, a bank would only pay for particular IT services when it uses them. It is hard to deliver this model, but it provides clarity on costs and serves as a map for transformation. It enables banks to share cost equitably across business units, which is something that they sometimes struggle with, but this model helps a lot."
The final core area of focus for HPE is the provision of services to get partner organisations to help with IT transformation. Helping a bank to identify how to break off parts of the organisation is a key element in defining the most cost-effective model.
"It is rare that this kind of transformation can be done through a single vendor. That is why partnerships with fintechs, independent software vendors and systems integrators are so important. The partner ecosystem is more crucial than ever and sometimes HPE will take the lead, while at other times it will work on contract. One important thing we do is connecting banks to companies in Silicon Valley. Pathfinder is our venture investment and partnership programme, which takes equity stakes in fintech companies and other innovative organisations. Our role is to make the connections with the companies that will support banks in their transformation," says Kember.
"I get to meet a lot of clients and they are all at different places on the spectrum. A lot depends on the capability of the CIO or the COO to drive the necessary change. But there are common themes to all - the hybrid model, mobility, achieving transformation in the branch network and taking cost out - though each organisation faces different challenges. We always look at each client individually to see how best to drive change."