Egg’s chief technology officer Pete Marsden has seen Prudential’s telephone bank evolve into the world’s largest pure online bank. He talks to Liz Warren about how he coped with the challenge of dealing with unprecedented demand using new technology and nurturing a cultural change for staff.
Egg is now the world's largest pure online bank, but it might have been a very different story. E-business was both the saviour of the banking arm of Prudential and also nearly its downfall. The online division was launched in 1996 to sell bank products such as mortgages and savings accounts through Prudential's existing direct sales force of 7,000 people, but organisational conflicts meant the Prudential sales force simply did n0t get behind the new products.
"We were set up as a separate division with a separate culture and identity and most of our staff came from other places, such as First Direct," says Pete Marsden, who became IT director shortly before the new division was created. "We were part of Prudential, but we were universally loathed by the rest of Prudential because we were seen as a threat."
With poor sales, the team had a rethink and in early 1998 it persuaded the Prudential board to give the go-ahead to launch Egg, an entirely separate business based on direct telephone sales. However, Marsden says the team was given "a very free rein" and saw the potential of the internet from the outset.
Egg's technical strategy had at its core a product Marsden describes as "Lego for call centres": Graham Technology's GTX, which offered a multi-tier architecture which would support multiple channels. GTX also allowed Egg to develop call centre systems that would enable it to develop deeper long-term relationships with customers - something that did not exist in the off-the-shelf products available at the time.
Egg set itself the ambitious target of launching the new brand, based on these entirely new systems and processes, in just six months. While Egg met its target, Marsden says going live with the first telephone banking service was "brilliant and frustrating".
"We opened at midnight on a Saturday and I sat behind the telephone associate as she took the first call," he says. "It was great to see that the system worked well, but the associate was so nervous, she ended up reverting to pen and paper to take the customer's details." Marsden puts this down to not having spent enough time training staff and the understandable pressure on the associate of having most of the company's senior managers standing behind her while she took that first call.
The Egg management team had no sooner breathed a collective sigh of relief than it faced the prospect that the company's future would be undermined by its own success: Egg's business case was based on gaining 50,000 customers in six months for its savings account but the good rates it was offering attracted 30,000 applications in its first week.
Egg had tested its systems to ensure they could cope with 10 times the expected volume, so the technology stood up to the load - but associates answering calls were swamped, while other aspects, such as printing application packs, struggled to keep up with demand.
"We had call centres in Dudley and Derby, but we had to create a centre in our London office, with all of our executives answering calls and taking applications," says Marsden.
Egg had also opened new call centres in Dublin and Durham by the end of the following week. "The technology allowed us to roll out new sites very quickly," he says. The culture of the company also helped. "We had set up Egg as a different place to work and the spirit of the people in the company was fantastic," Marsden says.
By March 1999, Egg already had 500,000 customers. It knew it could not cope with the volume of customers with its existing systems and processes. It decided to add the internet as an additional channel and found its choice of technology again helped, allowing it to make basic services available online in just one month. A month after that, Egg stopped taking applications by telephone. "That was a big cultural change, because a lot of people at all levels had come from First Direct, where the call centre was king," Marsden says.
With the internet now its major channel, Egg decided to invest in a proper internet architecture, with a content management system, an Oracle customer database and middleware from BEA. This was implemented in less than six months to coincide with the launch of what turned out to be the world's fastest-selling credit card. "That is typical of Egg, we don't just do one thing at once," Marsden says.
This time, Egg's ambition was nearly its undoing, as the new systems struggled with high transaction volumes resulting from the new card. "We had not tested the call centre and the website working at high volumes at the same time," Marsden admits. "They were all very new technologies to the UK, so we had to fly in technical specialists from the US to make it all work."
On top of that, because Egg had chosen a best-of-breed approach, the difficulties were mainly in the interfaces between the various components. "When we had a problem, the suppliers would point at each other and no-one wanted to own the situation," Marsden says. "We really learnt a lot about how to manage our suppliers."
The move to a more technologically-based service also meant Egg had to change the way it dealt with customer service issues. "Previously, if we had a problem, we could throw people at it. Now we had a bunch of faceless computers. If they didn't work, only IT could solve it," says Marsden.
"We learnt a lot about what it meant to be an internet company in that time. We could have dampened down demand by changing interest rates or other aspects of the product, but we decided we wanted to try to keep our products good ones and take the attitude that if we had service problems, those were our problems and we should sort them out."
These days, there is much less chance of the company taking such a rollercoaster approach to projects. "As a start-up, the risks we took and the choices we made were very different to the ones we would make now as an established business with 2.9 million customers," Marsden says. "We did not know we were making history - we were too busy to think about that."
Milestones in Egg's business
1996: Prudential launches online division to sell mortgages and savings accounts initially via insurer's existing direct sales forces but later as separate division
1998: Prudential board gives go-ahead to launch Egg - a separate business based on direct telephone sales using Graham Technology's GTX call centre systems in six months time
October 1998: Egg goes live with first telephone banking service and attracts 30,000 applications in first week. Call centres in Dudley and Derby are insufficient so call centre in London set up, closely followed by Dublin and Durham
March 1999: Egg decides to add internet channel after gaining 500,000 customers. Basic services are available online within a month
May 1999: The bank switches off the telephone sales channel
July 1999: The company switches to an internet architecture comprising content management system, Oracle customer database and BEA middleware and launches credit card
September 2003: Egg has 2.9 million customers.
CV: Pete Marsden
January 2000: Chief technology officer, Prudential Banking
September 1997-January 2000: IT director, Prudential Banking
March 1996-September 1997: Business consultant, Prudential Banking
October 1994-March 1996: IT consultant, TSB
May 1993-October 1994: Project leader, First Direct
July 1991-May 1993: Analyst/programmer, Leeds Permanent Building Society
September 1990-July 1991: Honours student, Huddersfield University
June 1989-September 1990: Analyst/programmer (university placement), Commercial Union
September 1987-June 1989: Student, Huddersfield University
This was first published in September 2003