IT at centre of Standard Life business strategy

S tandard Lif e h as had to make its share of cost cutting as the recession bites. But its investment in IT has helped the...

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 access 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 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 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:

  • Standard Life

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

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