Nationwide's transformation into a highly outsourced IT shop

I met up with Tony Prestedge yesterday. He is COO at Nationwide. I was there to ask him all about the building society’s 5 year £1bnIT transformation project, which I will write about, but thought I would use the blog to detail its IT outsourcing journey.

It has enabled itself to transform from a user old ailing in-house technology to a company leading the way in moving to off-the shelf software and a largely outsourced and offshored IT operation.

In 2008 Nationwide did not outsource any IT. Today it works with Accenture, TCS, IBM, Computacenter and BT. The company has retained control of its IT design but has used third parties to enable it to transform while the business runs as usual.

The building society began an IT transformation in 2008 after years of underinvestment. As well as moving to SAP software in the back office and Microsoft for customer facing applications the company has transformed into a highly outsourced IT shop.

Nationwide even has 700 people in India in Pune, Dehli and Bangalore. 60% of IT development and support will be offshore eventually,

What is more the company has not made major redundancies in its IT department because people have left and the company has expanded its IT operation. For example before 2008 it sent £150m on IT but for the last four years it has spent between £420m and £500m each year.

It has also reduced the impact on permanent staff by no longer using large numbers of contractors. “We have not reduced staff because the transformation agenda is so significant. We have seen a reduction in contractors that have been replaced by outsourcimng partners.”Prestedge says that Nationwide used to have about 200 IT contractors permanently. He says that contractors are some of the most skilled IT professionals available but when they leave they take knowledge with them.

Its outsourcing line-up is full of the usual suspects. Indian offshore service provider TCS provides legacy application development and support, IBM develops and supports applications in its customer facing channels and Accenture provides support for the company’s SAP core banking software. Meanwhile Computacenter and BT, which provide desktop services and communications respectively, were Nationwide’s first outsourcing partners.