Bus 754 Information Systems Management

Case Presentation: Postgirot Bank and Provment AB

Submitted By: Kathryn Gannon and Kelly Blazek

April 13, 2003

 

 

History

 

Postgirot Bank, founded in 1925, was established in Sweden as part of the Postal Savings Bank.  Evolving from the need for effective payment transfers, the Bank’s charter was to “provide payment transfer and other financial services, to meet customer needs, now and in the future.” 

 

Postgirot has established a market niche by its willingness to let customer transactions “meet,” meaning that a day’s beginning account balance, plus deposits cover withdrawals for the same day, rather than the traditional approach based on the prior day’s available balance.  This flexibility, plus a wide array of online services, allows the Bank to boast of processing 400 million transactions, totaling 4.9 trillion Swedish crowns, in 1999.

 

Due to consolidations driven by financial services competition, the decision was made in 1999 to sell Postgirot Bank.  To help entice potential buyers, the Bank’s vision was to operate as a paperless entity, and by the year 2000, the Bank was well on its way to meeting this goal.  Given the technical challenges posed by a paperless system, issues of efficiency, capacity, stability, and cost were quickly becoming priorities, both internally to the organization, and also as a means to streamline the structure to aide in ease of integration for a potential buyer.

 

Three trends that were converging at the end of 2000 drove the need for many organizations to gain access to information regarding their IT operations’ efficiency and cost.

 

  1. Overall size and increasing growth rate of IT budgets
  2. IT infrastructure had become increasingly business critical thus failures could paralyze a company’s operations
  3. Organizations saw that the phenomenal rate of market introduction of new or upgraded technology had resulted in a vast proliferation of IT resources throughout most organizations

 

Provment’s IM-System was selected as the measurement tool to assess IT capacity and utilization across the Bank’s four business units; Corporations, Private and Small Business, Postgirot Bank Direct, and Finance.  Initially installed on the UNIX servers, Provment’s IM-System captured data and calculated a comprehensive measure, the resource unit (RU), to compare the capacity, utilization rates, and cost across servers, operating systems, or applications.  At an estimated cost of 240,000 SEK per year per server to operate, the IM-System identified potentially 40 UNIX servers which could be eliminated, generating significant cost savings for the Bank.  Additionally, analysis of the new data showed that each UNIX server had an operating cost of 850,000 SEK.  This was more that triple the previous high-end cost estimate of 240,000 SEK.

 

Issues

 

One issue presented in the case was if and/or when Provment AB’s IM-System should be expanded to Postgirot Bank’s NT/Win2000 servers.  Roland Lowling, IT Operations Manager of Postgirot Bank, needed to convince top managers and key customers of the importance of the IM-System expansion, as well as the potential cost savings to be generated, in order for the system to be implemented.  This was going to be a difficult task since he did not have concrete numbers on how this would have a positive effect on the organization.  It was expected that there would be the same sparse server loads on the NT servers as there were on the UNIX servers.  The operating costs per server were expected to be as high as and certainly more complex than those for UNIX, but there was no actual measurement to prove this.  Prior to 2001, NT operations costs were fragmented and not carefully monitored.  Would the anticipated cost savings and availability of improved management control “numbers” make Postgirot Bank more appealing to potential buyers? 

 

 

 

Also, Roland needs to determine the benefit of utilizing Provment to fully implement the system on the NT servers, as done with the UNIX servers, or if they should try to do more work internally.  Can they continue to use the system without having internal expertise on setup, management, and analysis of results? 

 

Finally, Postgirot Bank needs to settle on an appropriate management reporting structure to get the most out of the information provided by the IM-System, as well as to determine the extent to which the results will be integrated into the Bank’s infrastructure.  Does Roland have the authority to act on the measurement results?  How should the IT resources and teams be realigned for better and more effective utilization of resources?

 

Recommendations

 

Roland Lowling not only needs to convince top managers and key customers on the importance of the IM-System expansion, but also make them realize that an investment of their time is critical in ensuring the measurement program’s success.  Because the implementation of IM-System on the UNIX servers was deemed to be successful, Postgirot Bank should calculate the Return on Investment (ROI), as well as cost-benefit ratios to determine if it makes financial sense to install on the NT servers.  Provided that it would make prudent business sense, education and communication efforts need to be enhanced in order to convince top managers and key customers of the importance of the IM-System expansion.  For example, a seminar should be held with Torsten Wenell from Provment AB as the guest speaker.  At this seminar, Wenell could walk through how the IM-System was placed on the UNIX servers and the results of the project once it was completed.  A question & answer session could be included in which top managers and customers could voice their concerns and opinions.  Additionally, to provide further support, Wenell could discuss how after the IM-System was placed on the UNIX servers, there was broad distribution of the data the system collected across all levels and units within Postgirot Bank, and the new process allowed management to participate in decision making in a way that had not previously been possible.  By placing the system on the NT servers, even more data will be collected and available for analysis, ultimately saving money.

 

Because Provment installed the IM-System on the UNIX servers, the Bank is unable to support the system internally.  If it is determined that the investment is financially wise and is to be installed on the NT servers, the Bank needs to decide if it should continue to rely on Provment for system support and analysis, or if this function should be absorbed internally.  The IT department should do a resource analysis to determine if internal resources could be spared or made available.  Perhaps additional resources would be generated by the elimination of some of the UNIX servers, as initially identified by the IM-System.  Analysis showed that there would be a cost savings of 850,000 SEK per decommissioned server.  This money, along with the cost savings from implementing the IM-System on the NT servers, could easily be used to employ several internal IM-System experts.  An internal resource would be beneficial to continued utilization.  If the project is communicated by upper management as a company priority, it would lend support and credibility to the system, and would help IT allocate valuable resources and support to the project.

 

It will be necessary for the Bank to gather as much information as possible to conclude what the appropriate management reporting structure should be.  This task is critical to ensuring that Postgirot Bank gains the most benefit from the information provided by the IM-System.  Attention needs to be directed to listening to the voice of the customer, to ensure that a reporting system is put in place that meets the users’ needs.  To facilitate this, Roland Lowling and Torsten Wenell should meet with each business unit and different members of upper management to determine the exact needs of the units/managers and to discuss what information the new system can provide to better help them with business decisions.  After the reporting structure has been put into place, surveys can be sent to users to ensure that the structure is adequate, meets the needs of the users, and obtain recommendations for enhancement.  A strong reporting structure needs to be in place to aid Postgirot Bank in making prudent business decisions, allow them to provide IT data analysis to potential buyers, and facilitate an easy transition when and if the Bank is sold.

 

Finally, Postgirot Bank needs to determine how to integrate the system, and the results generated, into the company infrastructure.  Meaning, once a reporting structure has been defined and established, who has the authority to evaluate the results and act on the data?  The Bank should draft a business rule, summarizing the policy and clearly laying out the necessary levels of approval.  For example, if the system maintenance responsibility is handled internally by the IT department, then they should be in a position to initially analyze the data and present the information, along with recommendations, to an executive committee.  Per the committee’s approval, the IT department could have the authority to act accordingly, adding or eliminating servers as needed.