IOOF rationalises entire IT infrastructure

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Funds manager and financial services firm IOOF Holdings is enjoying huge payback from its three-year plan to rationalise IT costs.

IOOF CIO Marshall Stephen has managed to reduce IT operating expenses while implementing new technologies to replace the incumbent legacy systems at a time when the company tripled its client base.

Armed with a three-year plan, Stephen joined the 158-year-old company in March 2002 only to find that 86 of the 300 staff employed at IOOF were in the IT department.

"This figure was high for a company not in the business of selling technology, it has been reduced to 40," he said.

Stephen's first objective was to review IOOF's central business system running on an in-house mainframe for the past 15 years.

"When I looked at the cost of running the mainframe I could hardly believe it was so high," he said. "I wanted to get rid of the mainframe and suggested migrating to Sun which I am familiar with."

IOOF proceeded with "cutting the mainframe in half" and custom-built a master fund application on a Sun Fire 4800 system.

"Sun had acquired the mainframe re-hosting business of Critical Path which gave us the opportunity to get the unit trust processing off the mainframe," Stephen said.

In the first 11 months of the project, IOOF cut IT spending by 30-plus percent and attained a position as a "competitor" in the master funds market. "Most of the IT staff were traditional mainframe people but today's IT people understand the business needs," Stephen said.

"We then focused on security, automation, and disaster recovery until we acquired AM Corporation in March 2003.

"The main focus of the AM integration was the conversion of the AM data from its legacy application to our Master Fund Application; one of the biggest questions was what to do with the front end."

Stephen said the Web front end was running on Microsoft while AM's was using J2EE.

"We decided to go with J2EE because it is more of an open standard."

After five months of development, IOOF's new Web front end is going into beta testing at the end of this month and will be in production by the end of March.

The J2EE application server will be Sun's Java Enterprise System which Stephen said is economical because of its cost per user and not cost per access licensing.

"We now have automated some employer transactions from the front end to the back end making it possible to cut out some of the touch points," he said. "Doing this could potentially halve some of our operating expenses."

Next on Stephen's hit list was IOOF's fleet of 450 desktops for some 300 employees.

"Upgrading desktops every three years is costly and we have eight full-time staff just fixing desktop problems," he said. "Sun said it could save us costs by migrating to a thin client architecture so we are now trialing Sun Rays in our Melbourne office. We will roll out thin clients to IT before the general staff but plan to have the Melbourne office of 200 people done by mid-year."

Although Stephen conceded that the thin clients require more servers in the backend, at an acquisition cost of $700 and a shelf life of 10 years for the thin client terminals, he expects to save hundreds of thousands of dollars on desktop costs once the migration is complete.

Not content to just reduce costs with IOOF's information systems, Stephen examined the company's communications network late last year and discovered an "old PABX that was always failing".

"We spend a lot of time calling between Sydney and Melbourne and have a phone bill in excess of $30,000 a month," he said. "In November last year we rolled out a Cisco VoIP solution for our Melbourne office. A stage-two rollout is planned for our branch offices, this will go before the steering committee in late February. It should be rolled out in two to three months and will be fantastic."

The ROI for the VoIP stage two is expected to be eight months, which was not uncommon across all the major projects.

"Most projects had ROIs under 12 months and we are now at the stage where IT is as tight as it can be," Stephen said. "We now have a more robust IT infrastructure and have better educated IT people about the business."