Sandy Crombie joined Standard Life in the 1960s in the IT department. Some of the code he helped to developed back then is still in use today. He became CEO in 2004.
Crombie has now joined RBS, but the legacy he has left behind demonstrates how a strong HR strategy in IT can help support and build a business.
- Keeping IT staff on board
- IT plays a key role
- A balance of skills and experience
- Global responsibilities
- Standard Life wake-up call
- SOA savings
- Changes to software development
Standard Life considers IT staff along-term investment,expecting them toproduce their best work after a number of years oncethey have built up business experience. The company, which has a total workforce of 10,000,10% of which are in IT, has a low turnover of IT staff.
Members of the top IT team at Standard Life have an average of 20 years' experience at the company each. This is a boast few businesses can make.
Because technology changes quickly, the company ensures it has young IT workers as well as more senior members of staff."We have a low turnover of staff. When people do leave, we replace them with trainees," says Keith Young, IT head at Standard Life. This provides some younger thinking,he says.
Retaining IT workers for the long haul is not easy. These workers are a very mobile group and regularly move between jobs to better their career. They are also often the first to go when redundancies are made. But Standard Life wants IT people to mature in the business so it can get the best out of them. Young believes IT staff start producing their best work after five years withan organisation, oncethey have gained anunderstanding of what the business needs from IT.
To this end, Standard Life attempts to retain workers and their technical input. It helps its technical staff move into senior roles without giving up their contribution toIT. Young, who has worked at the company for 22 years, says, "If a good technician moves into a senior management role, we can lose a good developer and gain a poor manager. We help them retain skills and move up the company. When you have good people, you have to make sure you hold on to them."
The company mixes experience with enthusiasm, and its IT is not stuck in the past. Unlike many companies in the finance sector it has few legacy systems. It is also harnessing technologies such as service orientated architectures (SOA) and modern methodologies such as agile software development.
Matthew Smith, director of UK regions at recruitment company Harvey Nash, says large businesses can attract and retain good IT staff if they have the right HR policy. "It is a good idea to replace senior people with trainees if you have people whocan move up intoroles that becomevacant." This strategy allows several people in the company to be promoted at the same time.
Smith says Standard Life's strategy to allow technical people to move into management without abandoning their IT skills is a good move. "Some organisations create an environment where the top technology executives are held in as high esteem as the people in the business." He says some firms do not know what to do with IT staff to help them progress. If there is no clear career progression, they are likely to seek a new job.
The mix of new and old has helped Standard Life's IT take centre stage as it has reinvented itself over the past few years.
The IT department took centre stage in 2005 when the company realised its business model was not working and had tochange it quickly (see box: Standard Life wake-up call).
Bob McDowall, analyst at TowerGroup, says Standard Life had to completely change its IT priorities as a result. "Fundamental structural changes ride a coach and horses through the normal planned developments and budgeting for IT development."
When Standard Life realised it needed to reduce costs as part of its transformation, it harnessed techniques such as agile software development and SOA to cut costs. It also slashed costs associated with IT support through a programme that charged each department for itsIT consumption.
The company has also cut 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 now availablefor other parts of the business. As a result, the IT department saves £1m peryear. It also saves £300,000 per year in energy costs, having reduced energy consumption by 70% through energy-efficient hardware and virtualisation.
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. "There is nothing like a specific problem to act as a wake-up call," says Young.
Bola Rotibi, analyst at Macehiter Ward Dutton, says a mix of business experience andtechnical know-how, as well as new recruits, will help businesses drive major IT projects."Younger people may have a lesscynical approach and they will bring enthusiasm. The younger people can drive the project, but you need thosewith experience of the business to manage it."
She says getting this balance is easier said than done, but Standard Life's recruitment and career development strategy for IT workers puts it in a good position to achieve it.
Rotibi says the fact that IT staff can move up within the company will help drive employee buy-in to transformational projects. "The key to making sure the changes are accepted is ensuring the management structure has bought into it."
Standard Life's IT department will now be called upon as the company embarks on its latest strategy to standardise IT across its global operation. Standard Life operates in about 10countries, with customers in 31. Its biggest presence outside the UK is Canada.
The company wants to move away from its current global IT infrastructure, which involves"one company working in silos", and move all operations to the same systems. This will see it develop one HR system, one finance system, one payments system and a single set of collaboration tools.
Standard Life is an example of a company that, although in its 200th year, is not afraid to change. The company dramatically reinvented itself a few years ago, which was made possible by IT. Standard Life's ability to harness the new to get the best of the old will help it reach its bicentenary.
In early 2004, Standard Life demutualised and became a publicly listed company,with shareholder capital replacing the capital raised by policy holders' profits.
Its profitability, particularly in the UK life and pensions business, needed to be addressed to compete long-term within the financial services market.
A cost reduction programme was implemented which involved major IT overhauls. IT is a major overhead and the company set about cutting IT costs.
The company has reduced costs by £24m through its service orientated architecture (SOA) strategy. The SOA has built-in architecture which means developers do not have to decide how to develop an application, thereby reducing development time.
"The 'how' is increasingly abstract in the architecture," says Russell Irwin, senior manager for IT strategy and governance at Standard Life.
He says the IT department builds most applications in the SOA, but can run legacy systems alongside 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 program was introduced, more than half of the code developed was never used.
The agile approach focuses on iterative design and feedback, which differs from the waterfall method usedpreviously. With the waterfall method, software requirements are captured once early on, making it difficult to later adapt to changes in requirements.
With the waterfall method, young saysbusiness users felt they had only one opportunity to tell developers what their requirements were, so they tended to givedevelopers more requirements than they needed, which increased development time.
Another technique used by Standard Life is lean software development, which allows developers to decompose projects into small pieces of work to help them identify where they could cut waste.
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