NAB seeks new servicing model
National Australia Bank has kicked off its core banking replacement program by hiring Oracle to develop a computing platform for its forthcoming low-cost bank brand that will be launched later this year. The bank refers to this, for now, as Star Direct, but is likely to have other branding.The project, understood to be worth around $30 million, is, however, just a drop in a bucket compared to the $800 million-$1 billion that the bank will have to spend to completely overhaul all its IT systems over the next few years. As Michelle Tredenick, NAB's chief information officer confirmed yesterday, the overhaul is critical as the bank's current IT systems are "not sufficient to support our future strategic direction."While NAB was at pains to make clear yesterday that Oracle has been selected only for the first stage of its strategy, it will have come as a blow to Infosys, which was the other NAB front runner with its Finacle suite.It may not however prove a killer punch, as there is a hint of the suck-it-and-see about the Oracle deal.NAB's decision to take only an incremental step in its IT investment strategy at this stage highlights that the bank is still evaluating the most effective model for the delivery of core support services around the organisation.A related initiative is the creation of what the bank terms ServCo, and referred to internally as a new services company.Glenn King, until recently operations director of NAB's Yorkshire Bank subsidiary in Britain, will manage ServCo.One topic NAB hasn't discussed externally is the rest of the servicing model for Star Direct. Having taken 18 months already to develop its Next Generation platform strategy, NAB yesterday admitted it would take another six months before the next phases of the strategy were fully mapped out; stages that will undoubtedly be informed by its adventures with Oracle.Until the strategy is complete it won't be clear whether the greenfields banking platform being developed by Oracle will run standalone - effectively quarantining Star Direct account holders - or be developed further as the new core platform for the entire bank, in which case there will at some stage still have to be a massive effort to transition across from the legacy systems.By starting small, the bank can demonstrate it's still investing in the future despite its recently revealed massive exposure to the US credit crisis. At the same time though, since Oracle has only been named for this essentially standalone first stage, if it all goes pear shaped the bank could try something else, probably Infosys' Finacle.The Financial Review reported last month that Infosys was shaping up as Michelle Tredenick and the IT team's preferred solution while chief executive Ahmed Fahour favoured Oracle. The marketplace is certainly characterising Oracle's win as a proof of concept even though it's only got to prove it can build a greenfield banking site, a cheap and uncomplicated challenge compared to a complete legacy overhaul.The one challenge that the bank shouldn't have to tackle at this stage