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What can we learn from the debacle caused by the computer problems at RBS last week?
Once we understand what actually happened it will be possible to draw detailed conclusions, but at the moment RBS have not said exactly what the issue was. However, it was clear what the impact was, with millions of customers across the RBS Group (RBS, NatWest & Ulster Bank) unable to access their accounts and delays in processing transactions.
The impact was far reaching, we had a member of staff moving house on the Friday and the funds for the purchase did not come through…
RBS have said that its systems are under “significant stress,” and that it will not return to “completely normal service” before 2 July 2012.
So what has caused a major retail bank to have a customer impacting problem lasting nearly two weeks? The RBS boss, Stephen Hester, told the BBC that ”it looks like a software failure, for which the response was not as well-oiled as it could have been”. The most common view is that this means that a software upgrade by their outsourced IT supplier went wrong and could not be reversed before it impacted customers.
I worked at NatWest 16 years ago and I am at a loss to understand how such a problem could have had the impact it did. There was so much redundancy and such close control of change that the idea of a change impacting the customer was extremely remote. So what has changed in the last 16 years? Lots of things, the complexity of the systems, the volume of transactions, the “banking crisis” and increased outsourcing, are just a few of the significant changes.
Whilst at NatWest I was part of the team that outsourced the first part of a retail bank’s IT service in the UK (the Network, not the software!) and we put a massive effort into defining what would happen in every conceivable situation and built redundancy into every relevant part of the system that could have an impact on customers.
I think it will be “easy” to blame the problems on some complex IT issue, but I think that will be missing the point. I think it’s clear that this was a failure of the Governance between RBS and its outsourcer that has allowed these IT problems to impact customers so dramatically. Stephen Hester said it “looks like…not as well-oiled as it should have been”. An effective Governance regime would have identified this “lack of oil” as an issue and addressed it well before it got anywhere near a customer.
The importance of Governance is often underestimated in outsourcing agreements and is often “done later”, after the contract has been put in place. It’s too late at that point, it needs to be an integral part of the contract, otherwise, experience shows, that it does not happen.
Therefore I think the key lesson from the RBS issue is, get the Governance right, before you sign the contract.
Mike Hill – Itica Consult – June 2012