Standard Life has had to make its share of cost cutting
as the recession bites. But its investment in IT has helped the
company weather the financial storm.
The company, which offers a wide range of financial services,
such as insurance, pensions, mortgages, savings and investments,
reported a profit of £534m for the first six months of 2008, a
51% increase from the same period in 2007.
The company's current strong performance follows a wake-up call
five years ago, when a strategic review showed the business was in
trouble and rapidly needed to change its model.
Key IT
strategies
"We had to change and we had to change quickly to reduce
operational expense," says Keith Young, Standard Life group IT
director (pictured, fourth from left).
The
company
de-
mutualised to
a
ccess capital to invest in new products and services. The move
meant that IT delivery and support had to deliver more at a lower
cost.
The firm adopted three key IT strategies: stepping up its SOA to
increase application re-use introducing agile software development
and lowering the cost of day-to-day IT services.
The cost of the company's IT, which is a major overhead, is now
75% of what it was in 2004, even taking into account increased
levels of business and inflation.
Strength in a
downturn
Young says the crisis and the company's response to it have put
Standard Life in a strong position to facethe downturn.
The IT changes initiated in 2005 started to contribute to
savings in 2007 when Standard Life cut £35m fromoperational
expenses. The company plans to save £100m every year by the end of
2009.
SOA savings
The company has reduced costsby £24m through its
service oriented architecture (SOA) strategy. The SOA has
built-inarchitecture which means developersdo not have to decide
how to develop an application, thereby reducing development
time.
"The 'how' is increasingly abstract in the architecture," says
Russel Irwin, senior manager for IT strategy and governance at
Standard Life.
Hesaysthe IT department builds mostapplications in the SOA, but
can run
legacy systems
a
longside
the
SOA if they behave in the right way and do not cost too much.
The SOA runs on IBM middleware and developers use Java to develop
applications.
The company has introduced
agile software development. Before the programwas introduced
more than half the code developed was never used.
Another technique, lean software development, allows developers
to decompose projects into small pieces of work to help them
identify where they could cut waste.
Cost recovery
The company has reduced the cost of IT consumption through a
cost recovery model. The IT department gets the cost of services
used back from departments. By charging departments back, IT users
become more aware of the costof their requests.
"This helps departments reduce their own costs," says Bill
O'Day, IT delivery and support director at Standard Life.
The company has cut the costs at its Edinburgh datacentre. It
moved its servers to a single floor and freed up 1,400 square
metres of space. It is no longer charged by the business for using
the space, which is freed up for other parts of the business. As a
result, the IT department saves £1m per year. It also saves
£300,000 per year in energy costs, having reduced energy
consumption by 70% through energy-efficient hardware and
virtualisation.
Continuing
transformation
The next IT strategy to be introduced will be the
standardisation of IT systems to help the business expand
internationally. This will involve developing single systems for
HR, payments and finance,as well as a single set of collaboration
tools.
Standard Life recognised that it had to change how it used and
developed IT to survive. Its decision in 2004 to embark on a
business transformation supported by IT meant it did not have to
make knee-jerk IT cost-cutting decisions when the credit crunch hit
the financial services sector.
Useful
links:
Photo: Standard Life IT team, from left to right:
Russell Irwin, senior manager IT strategy and governance; Ralph
Fairweather, senior manager, information systems; Bill O'Day, IT
delivery and support director; Keith Young, group IT director; Bill
Birnie, senior manager development solutions; Philip Medley, senior
manager, information systems