Westpac Banking Corp.?s plans to move its mainframe processing to Australia have been scuttled by New Zealand"s Reserve Bank at a probable cost of millions of dollars.
Earlier this month, Westpac had planned a weekend move. Just a day before the scheduled move, the Reserve Bank pulled the plug.
Westpac?s official position is that the Reserve Bank had not completed formulation of its outsourcing policy, and that it had agreed to hold the move till this was done. It had proceeded as far as it had because a moving date had been set.
However, the Reserve Bank says it had an undertaking from Westpac that it would not move the mainframe processing from New Zealand to Australia unless the bank agreed that such a move was permissible.
"The undertaking was offered following the bank expressing concern to Westpac that their planned moving of their mainframe processing to Sydney was inconsistent with the bank?s stand-alone capability requirements," the Reserve Bank says in a written response to Computerworld inquiries.
"One of the main interests that the Reserve Bank has in outsourcing arrangements relates to the ability of a bank to continue operating in the event of a crisis situation. This could be either where a bank, or its parent, fails, and a statutory manager appointed to run the bank is required to continue operating the bank, or where a third-party service provider is unable to provide the services as per its outsourcing contract.
"The Reserve Bank did not consider that Westpac?s proposal was sufficiently robust in terms of those objectives. Westpac and the Reserve bank have agreed to undertake further work on the issue.?
The outsourcer in this case is IBM Global Services Australia.
Westpac has been planning the mainframe move for three years and seems to have regarded the Reserve Bank?s earlier statements about outsourcing as mere words.
Abandoning the scheduled move will impose real costs on Westpac. Industry sources reckon there will be a minimum cost of $2 million, plus a probable upgrade or mainframe replacement in Australia, and now a need to re-licence the mainframe software in New Zealand. A large team would have been committed to the move and, probably, some man-years of work gone into the planning.
Significant decisions
This embarrassing situation happens at a time when Westpac is making significant technology decisions on other fronts.
It has made a decision on standardizing software development toolsets across the group. A contract has yet to be signed, but the winner is a consortium led by Telelogic, including Mercury Interactive and Object Consulting. Mercury has been the tools provider of choice in Westpac?s Australian operation but the New Zealand subsidiary has used Rational tools for some years. IBM bought Rational last year and may now find they are on the outer at the bank.
The good news for IBM is that Westpac locally has chosen its new Power 5 mid-range boxes to replace a Sun E10000 and F15000. Westpac has signed a letter of intent to take two P5/70 16-way machines.
It?s a huge loss for Sun because the two boxes combined had 101 active processors. IBM measurements suggest the fully configured, 32-processor P5s will easily handle the workload: the company claims it has benchmarked the 16-way P5 as equivalent in performance to a 72-way Sun machine on an SAP application. Westpac was due to replace the E10000 anyway and it?s understood the P5 was a no brainer because of the lower cost.