The scale of the Group’s technological problems is laid bare in a recent teleconference by Nick Williams, Group Transformation Director. In that teleconference, Mr. Williams talks about the Group’s IT infrastructure, Project Voyager and use of cloud technology. But in seeking to differentiate between where Lloyds is now and where it wants to be in future, he says the Group’s “on premises capability is not fit for purpose”. Mr. Williams then says: “99% of what we host today sits on premises”, which he’s already admitted “is not fit for purpose”. And as if to underline his disquiet, he then says: “The age of our estate is a real concern” and simply buying new hardware is not the solution because “a lot of the applications won’t work on new hardware”. Given the billions the bank’s invested in IT over the years, for a senior executive to be forced to admit that the bank’s current on premises IT infrastructure “is not fit for purpose” is both astonishing and deeply worrying. He should be commended for his honesty.
We predicted this back in 2017, when Lloyds ignored the concerns of many IT insiders who said that the cloud transformation deal with IBM, worth some £1.3 billion, was itself not “fit for purpose”. At the time, Morteza Mahjour, Group Chief Information Officer, said: “As customer demands change and innovation in the industry gathers pace, having a more modern and agile technology platform will help us lay the foundation for the next phase of our strategy.” Stirring words, Mr. Mahjour didn’t stick around long enough to see the shambles Lloyds created.
But all of this begs the inevitable question, why was this technology gap not resolved during the 11-year reign of the Mr. Horta-Osorio? Let’s not forget, he trousered almost £60 million in pay and bonuses before moving to Zurich, leaving Lloyds with an IT infrastructure that’s “not fit for purpose”. That is an astonishing failure of leadership.
The recent employee engagement results confirm the extent of the bank’s problems. A new question on this year’s survey looked at technology, and whether it allowed staff to be as productive as possible. 46% of staff said it didn’t allow them to be as productive as possible. In the Retail bank, we know that Lloyds and HBoS members have been saddled with a ‘new’ Windows 10 device that’s become a running joke. You know things are bad when the engineers installing the new device describe it as ‘rubbish’, ‘cheap’, ‘nasty’ and technically ‘low rent’ (economics jargon for shoddy). Improving technology and IT was one of three themes staff said the new Group Chief Executive should make a priority. If Mr. Williams is correct, it should be Charlie Nunn’s number one priority.
And all of this doesn’t bode well for Mr. Nunn’s new growth strategy, which he will announce in February. In a meeting with analysts following announcement of the Q3 2021 results he said: “we have exciting opportunities to grow and deepen customer relationships across all our businesses”. The Financial Times confirmed recently that Mr. Nunn is also looking “to build out the commercial bank ……..as well as currency trading, insurance and wealth management”. But how can he hope to achieve stretching growth targets in these areas when Lloyds’ IT capability – which runs much of what the bank does – “is not fit for purpose”. Equally, the question Mr. Nunn needs to answer is how much money is the Group prepared to invest to make its IT infrastructure fit for purpose? Is he prepared to spend the billions needed to make Thought Machine’s cloud-based core banking platform a reality? If he’s not, then what’s his alternative IT strategy. JP Morgan Chase, America’s biggest and arguably its most successful bank, recently announced that it’s moving its retail bank’s core system to a cloud-based core system using software developed by Thought Machine.
There are a lot of people in Lloyds who have been working on Voyager and other related projects who are waiting for Mr. Nunn’s answers. He needs to decide quickly.
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