Kiwibank's SAP move criticised

RICHARD MEADOWS
Last updated 15:47 25/02/2014

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The rollout of Kiwibank's new core banking system could become a "nightmare", warns a business consultant with experience of software provider SAP.

As reported by BusinessDay last week, the state-owned bank has confirmed it will spend upwards of $100 million on a new system over the next three to four years.

With 840,000 customers, Kiwibank has outgrown its current platform, which was designed for much smaller credit unions.

Business consultant and tech commentator Lance Wiggs said in his opinion the investment could be a risky move.

He described SAP as a "vast, complex and barely usable system for managing complex businesses", with a history of failure to deliver on promised costs and benefits.

Wiggs has personal experience with SAP rollouts, though not specifically with the German software firm's banking product.

"I hope for their [Kiwibank's] customers' sake that I am wrong," he wrote.

Banking heavyweight Commonwealth Bank of Australia successfully uses SAP, but Wiggs said its vast resources meant it could "force" the implementation.

"If you're Commonwealth Bank, you can throw three or four billion dollars at it, and all these really smart people, and a lot of time, and you can make it happen," he told BusinessDay.

"But if you're a small bank, you have to do what the programme tells you.

"You often under-resource it, you don't pay the expensive consultants you need, and it ends up being a nightmare."

Research suggests that regardless of the provider, any large IT project is likely to become more expensive and time-consuming than initially expected.

A report published by McKinsey and the University of Oxford in 2012 found half of all IT projects over US$15m (NZ$18m) "massively blow their budgets".

On average, large IT projects ran 45 per cent over budget and 7 per cent over time, while delivering significantly less value than expected.

Wiggs also questioned why Kiwibank had not tapped into the talent of local developers to build a "roll-your-own" system, like ASB had done over 40 years ago.

Kiwibank's communications manager, Bruce Thompson, said: "We believed there was nobody capable of producing what we were looking for within New Zealand."

He said the job had been short-listed down to a select few companies, of which SAP was the best fit:

"They have considerable experience in providing banking platforms internationally, and it just fitted with our strategic growth plans."

The exact amount of cash earmarked for the upgrade has not yet been finalised.

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"The $100m is an estimate over a three to four year period, but not a precise figure, because . . . IT costs can vary quite markedly," said Thompson.

Kiwibank chief executive Paul Brock said while SAP would earn a "reasonable part" of the total spend, there would still be opportunities for local providers and contractors.

- © Fairfax NZ News

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