Financial services giant Legal & General has an IT department of around 1,000 people. Over the past five years it has established itself as one of the most innovative IT users in the financial services sector, investing heavily in Web-based financial services and cross-industry technology ventures.
For instance, it is spearheading an innovative industry initiative to link the back-office systems of mortgage providers across the Internet. The multimillion-pound investment uses an XML-based data exchange standard to enable financial advisers to offer an acceptance in principle for mortgages within minutes. L&G has developed the project largely with in-house IT staff.
Despite this track record, director of business technology and delivery Margaret Smith remains sceptical over the business case for investing in so-called cutting-edge technology. Her advice is focused on tried-and-tested technology - such as servers or platforms - from well-established suppliers such as IBM, when pushing the envelope with a new IT system or application. "Most companies that use bleeding edge technology don't make a success of it," Smith says. "Most innovative applications don't tend to be written on innovative technology. The last thing we want is a risk in terms of the system technology."
So how does L&G limit the risk factor when choosing, installing and monitoring IT systems? The answer is a robust project and change management framework with clearly defined stages for an IT project's life cycle. The idea is to make sure any changes to an IT project can be fully justified by anyone in the business. "When you specify business requirements, anyone who wants to change this has to do an impact analysis of the cost and timescale and risk assessment for the project," explains Smith.
"Common project management will become more important with application service providers, as it is a relatively new area. After the application or software package is rolled out, L&G will hold a review to assess how the project went and see if any lessons can be learned. "We have quite strong change management," says Smith. "With a post-implementation review once something is in production, we look at what went well and the lessons learned by the project team."
A rigorous testing regime is also a crucial element of L&G's approach to software development. This testing is not outsourced and the stages include core software testing, such as stress management tests, then systems integration, through to pre-production and production. "One of the biggest problems is testing. The software is very complex and you have to test it in a realistic environment," says Smith. But inevitably things will go wrong; applications will fall down and information will be corrupted.
Smith places IT failures into different levels of threat to the business. The importance of an IT failure is partly judged on the number of people affected and the potential loss of income, Smith adds. Legal & General sells a wide range of financial products over the Web, so if any of these sites fell down it would be considered a top priority for L&G to correct.
"A problem with systems software is more serious than problems with third-party software. With systems software you have to work with their labs to get things solved." But Smith only sees legal action against a supplier as a last resort. "We prefer to get the problem solved rather than litigation," she adds. There has been a trend in the financial services sector for large-scale and long-term outsourcing deals. But aside from outsourcing printing, Legal & General has kept outsourcing to a minimum. "We choose what we outsource very carefully," says Smith. "There are quite different views in the marketplace and you have to look not just at the cost issue. IT is strategic for Legal & General and we are very much an IT company."