This week Paul Pester, disgraced CEO of struggling TSB, quit following the bank's second major IT crisis. Pester was criticised for his role in the bank's mismanaged banking platform migration back in April, which left some customers without access to their accounts for more than a week, and 1,300 people defrauded. And as if that wasn’t enough, this weekend a four-hour window of planned downtime in the early hours of Saturday morning lasted all weekend, leaving customers unable to access their accounts via the bank's mobile apps or online banking.
This latest fiasco compounds the fact that today, every organisation is primarily a technology company, no matter what product or service it provides. Before digitalisation, there was a clear demarcation between tech companies and non-tech companies. The switch from analogue to digital blurred the lines as organisations struggled to stay relevant and started to deploy technology solutions as they focused on reimaging their business. Today, the most successful and highest performing companies have little separation between their business strategy and their technology strategy.
With technology at the heart of a company’s operations, much more than a business enabler, it becomes business critical. So critical in fact that, if the technology infrastructure failed, it could in theory bring the organisation to its knees – both financially and from a brand reputation perspective. According to the bank’s interim accounts published in July, the IT meltdown has cost TSB £176.4 million, pushing it into a £107.4 million pre-tax loss for the six months to the end of June.
The reality is that the failing of a technology system has a significant business impact, carrying significant financial risk. And as more and more businesses run technology-driven organisations, offering services and products online, the questions of risk and impact becomes greater. This applies more to established companies facing the danger of industry disruption. Firstly, there are the risks involved in standing-still, running business critical technology on dated legacy systems. Then secondly, in a rush to catch up and transform, upgrade existing infrastructure and or carry out major application migration projects from legacy systems to more modern infrastructures, it can be easy to ‘cut corners’ by not fully appreciating the impact or risks associated with that decision.
Principally, any change of any major infrastructure carries potential risk and needs to be managed and prepared for accordingly. If these haven’t been fully considered, there’s a real danger of going in blind to the way in which such projects are handled. According to a TSB insider who spoke to The Guardian back in April, TSB’s technology system, inherited from Lloyds Banking Group, held the scar tissue of multiple prior mergers and was unsuitably large for a bank with a relatively small customer base.
But while such pressures on the IT function are often not fully understood by the people driving the pressures, when you consider the consequence of consumers not being able to access online services – from money held in personal bank accounts through to critical health and care provision – the risks associated suddenly seem very high.
While a more considered approach to technology always impacts timescales and usually increases costs, it undoubtedly goes a long way to eradicating possible risk. And when you consider the risks from brand reputation damage, the tally of compensation claims and the loss of loyal customers when it goes wrong, we’d argue that giving due diligence of that process of reason versus risk is worth it – every single time.
Because even those companies that have a strong product and reputation will struggle if they fail to connect with their customers in a technologically valid way. Just ask TSB.