Download - Wholesale Clients Technology, Operations and Property Services (TOPS) Update Keith Edginton
Wholesale Clients
Technology, Operations and Property Services (TOPS) Update
Keith Edginton
London, 25th June 2001
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Agenda
Context
TOPS Target Operating Model
TOPS Transition Plan
Progress to Date
Sourcing Strategy Update
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TOPS Business ManagementMartin Smith
TOPS Human ResourcesBarbara Turner
TOPSCOO - Wholesale Clients
Keith Edginton
TOPS America
Michael Geslak
TOPS Europe
Ron Teerlink
IT Strategy, Projects &
DevelopmentMike Hampson
Operations
William Higgins
TOPS Asia Pacific
Bob Davis
Technology Operations & InfrastructureWaleed Hanafi
Technology
Keith Edginton ai.
Property
Martin Smith a.i.
TOPS has a strong, committed management team focused on delivering the transition as quickly as possible
Context
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The management team has a wealth of experience and functional expertise
Role Responsibilities BackgroundWho
• Wholesale Clients COO• Global Head of TOPS• Global Head of
Technology a.i.
• Deliver Wholesale Clients cost savings• Transform TOPS into a commercial
proposition• Maintain business as usual while mitigating
operational risk
• Global Investment Bank COO• UBS - CIO Europe
Keith Edginton
• Global Head of IT Strategy, Projects and Development
• Project rationalisation• Strategic asset divestment• Overall responsibility for TOPS-wide Transition
• Head of UK PMU• Head of UK Equity IT • Morgan Stanley• CSFB
Mike Hampson
• Global Head of Technology Operations and Infrastructure
• Infrastructure rationalisation and efficiencies• Technology support
• Asia Pacific CIO• Visa International - Network
Services
Waleed Hanafi
• Global Head of TOPS Business Management
• Global Head of Property a.i.
• TOPS MIS, Operational Risk Management and Audit control
• TOPS Financial Control• Optimise property portfolio
• London COO• Head of UK Finance
Martin Smith
• Global Head of TOPS HR • HR advisory services for TOPS staff and mgt• Key individual policy
• Head of UK Central Services HR
• UBS - Global HR
Barbara Turner
• Global Head of Operations
• Establish global organisation• Deliver regional hub processing• Reduce cost per trade
• Head of UK Operations• UBS - Europe Operations
William Higgins
Context
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The structure is strengthened by the implementation of a regional matrix and a number of significant recent hires….
Role Responsibilities BackgroundWho
• Regional Head of TOPS Asia Pacific
• Deliver transition from regional to functional structure
• Maintain oversight, control and co-ordination for region
• COO Asia Pacific Regional Office• Bank of America - Asia Pac
Strategy and Planning
Bob Davis
• Regional Head of TOPS Americas
• Deliver transition from regional to functional structure
• Maintain oversight, control and co-ordination for region
• COO North America Treasury & FI• USA Regional Head of Risk Control
& Middle Office
Michael Geslak
• Regional Head of TOPS Europe
• Deliver transition from regional to functional structure
• Maintain oversight, control and co-ordination for region
• Manage Workers Councils and Union interactions
• European Division - Head of Operations
• International Division Head of Organisation and Information
• COO Germany
Ron Teerlink
Context
• Global Head of Technology
• Define and Implement global IT strategy for Wholesale Clients
• ING Barings - Chief Information Officer
• Skandinaviska Enskilda Banken - Group Head of IT
Lars Gustavsson
• Global Head of Propery
• Optimise property portfolio• Deliver property transition savings
• Prudential - Head of Property EMEA
• Citibank - Head of Property Europe
Ray Carneiro
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TOPS is the largest of the Wholesale Clients Business Units, with a presence in all major locations around the world
47 countries47 countries
Technology, Operations and Property ServicesTechnology, Operations and Property Services
Cost base €2.1bn+Cost base €2.1bn+
8000+ people8000+ people
Context
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1
2
3
In line with the Strategic Review ABN AMRO has prioritised 3 areas to maximise economic profit
Double revenues
Reduce operating costs• Simplify and rationalise IT • Restructure operations into hubs • Consolidate buying • Streamline support functions
Maintain risk capital & reallocate toward priorities
Context
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Within this prioritised framework, TOPS will initially focus on Operating Cost Reduction while preparing the ground for revenue generation
1
2
3
Double revenues
Reduce operating costs• Simplify and rationalise IT • Restructure operations into hubs • Consolidate buying • Streamline support functions
Maintain risk capital & reallocate toward priorities
Context
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Agenda
Context
TOPS Target Operating Model
TOPS Transition Plan
Progress to Date
Sourcing Strategy Update
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TOPS’ strategic goals are focused on reducing cost, establishing a service culture and pursuing revenue opportunities, while continuing to mitigate operational risk
Technology, Operations & Property
WCS
C&CC
CorporateCentre
PC&AM
?
?
ExternalProviders
InternalStaff
?
?
Short term
Long term
Cost Reduction
• Deliver annualised savings across TOPS of €432m by 2002
• Create cost transparency and accountability
Cost Reduction
• Deliver annualised savings across TOPS of €432m by 2002
• Create cost transparency and accountability
Attain/Maintain Control
•Manage and deliver change effectively•Agree service levels•Efficient and responsive
Attain/Maintain Control
•Manage and deliver change effectively•Agree service levels•Efficient and responsive
Commercialisation
•Create performance culture•Pursue revenue opportunities
Commercialisation
•Create performance culture•Pursue revenue opportunities
- TOPS Operating Strategy -
TOPS Target Operating Model
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Europe HubEurope Hub
Americas HubAmericas Hub
Americas Securities
GTS PaymentsFX/MM
Americas Securities
GTS PaymentsFX/MM
European Securities
GTS PaymentsFX/MM
European Securities
GTS PaymentsFX/MM
Local Ops GroupLocal Ops Group
Local Ops GroupLocal Ops Group
Asia Pacific HubAsia Pacific Hub
Asia Pacific Securities
GTS PaymentsFX/MM
Asia Pacific Securities
GTS PaymentsFX/MM
Local Ops GroupLocal Ops Group
IT infrastructureIT infrastructure
IT infrastructureIT infrastructure
IT infrastructureIT infrastructure
Global Functional Hub
MISStatic DataOperations ControlStrategyManagementService Management
Global Hub
OTC Derivatives
ET Derivatives
IT Strategy, Projects & Development
The organisation structure is being simplified and rationalised, duplication removed and support service provision regionalised and globalised
TOPS Target Operating Model
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Agenda
Context
TOPS Target Operating Model
TOPS Transition Plan
Progress to Date
Sourcing Strategy Update
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Control Initiatives
Rationalisation Initiatives
Vision / Transformation Initiatives
• Global Ops Control and Control MIS
• Global Reference Data
• Global Organisation
• Americas Securities Regionalisation
• European Securities Regionalisation
• AsPac Securities Regionalisation
• Global FX & MM Hub
• Global OTC Derivatives Factory
• Global ETD Clean-up
• Global Network and Supplier Mgt
• Global Operations Performance
Framework
“Attain and Maintain Control of the Organisation”
“Reduce Operating Costs”
“Enable Transformation”
- Current Transition Programme -
• Establish Organisation and Governance
• Establish Global Project Office
• Define Service Provision with IT Customers
• IT Asset control review
• Establish TOPS system infrastructure
• Consolidate AmLo IB Development
• Integrate DI, O&I and RIM
• Reduce Contractor Ratios
• Consolidate Asia Pacific Country IT
• Consolidate North American Development
• Rationalise Global Project Portfolio
• Platform Management and Consolidation
• Long term IT Operating Model
• WCSBU Technology Architecture Initiative
• Global Procurement
• TOPS Balance Sheet
Other / Programme Management
• Global Network Management
• Market Data Rationalisation
• Lotus Notes Architecture
• Country IT and Data Centre Consolidation
• Property Review
• Transition Management
Operations Technology
Operations Technology
Operations Technology
By the start of the year we had developed a detailed transition programme comprising 34 key control, rationalisation and transformation initiatives
TOPS Transition Plan
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Increase Savings Deliver Benefits Early
Single location (‘Hub and Spoke’)delivers maximum savings
Building on the best available infrastructure will deliver benefits in the shortest period
‘Green field’ site does not meet timing criteria, therefore need to consolidate into an existing location
The first wave of consolidation should focus on AmLo as this represents approximately 40% of the total TOPS global cost base
Since the launch of the transition programme we have been investigating a number of ways of increasing and accelerating the delivery of savings, the first of these was called ‘Project Magellan’
AmLo shows duplication in all areas: processes, services, IT infrastructure and projects
TOPS Transition Plan
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Choices have been made between Amsterdam and London, based on best ‘value for money’
London provides the best solution for AmLo securities processing
IT strategy, projects and development should be optimised across AmLo
Centralisation of securities processing
Rationalisation of IT Development and Project Offices
London provides the best solution forAmLo IT Infrastructure service provision
Centralisation of associated IT infrastructure
Amsterdam provides the best solution for a European Treasury processing hub
Centralisation of Treasury processing
TOPS Transition Plan
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The original transition programme, pre Project Magellan, identified €305m of annualised savings, given a restructuring cost of €506m
TOPS Transition Plan
Restructuring CostAnnualised
Savings
Operations
Technology
Property & Procurement
Other
Total €506m € 305m
€192m
€150m
€94m
€70m
€138m
€108m
€59m
-
- High Level Cost Benefit Analysis -
FTE Savings
758
589
-
-
1347
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We estimate that the total programme, including Project Magellan, will deliver €432m of annualised savings, given a restructuring cost of €630m
TOPS Transition Plan
Restructuring CostAnnualised
Savings
Operations
Technology
Property & Procurement
Other
Total € 630m € 432m
€221m
€245m
€94m
€70m
€160m
€213m
€59m
-
- High Level Cost Benefit Analysis -
FTE Savings
879
1222
-
-
2101
Our total annualised savings would reduce the WCSBU efficiency ratio by approximately 6%
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Operations
TOI
IT SP&D
Property & Procurement
Total P&L Savings€408m
20012001
€151m €482m
€161m
€99m
€114m
€108m
€143m
€92m
€110m
€63m
€19m
€12m
€87m
€33m
TOPS has committed to deliver €249m of annualised savings by the end of this year
20022002 20032003 20042004
€474m
€161m
€99m
€114m
€100m
€432m €249m €476m €474mTotal Annualised Savings
20002000
€30m
€0m
€0m
€30m
€0m
€0m
- Annualised Savings Target (TOPS) -
TOPS Transition Plan
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Agenda
Context
TOPS Target Operating Model
TOPS Transition Plan
Progress to Date
Sourcing Strategy Update
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Almost 30% of this year’s targeted annualised savings have been delivered so far and work is underway to deliver the remainder of the savings ‘pipeline’
Realised SavingsSavings in the ‘pipeline’Savings not yet in pipeline
€12m€12m
€13m€13m
€89m€89m
€165m€165m
Target P&L Savings €181m
Target Annualised Savings
€249m
€80m€80m €71m€71m
- Savings Delivered as at End of May -
The pipeline includes committed outflo
ws of 483 FTEs
from 01/06 as a result o
f Project M
agellan
Progress to Date
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More detailed analysis shows that we are materially on track, with our restructuring costs less than planned and our savings realised to date slightly ahead of schedule
Progress to Date
Total 2001 Actual Target Variance€m €m €m €m €m
Restructure Costs 630 432 49 55 -6
Annualised Savings 432 249 71 67 4
Target May 2001
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Agenda
Context
TOPS Target Operating Model
TOPS Transition Plan
Progress to Date
Sourcing Strategy Update
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TOPS will remain accountable for the levels of services provided to its customers, irrespective of where the services are sourced from
Target Service Delivery Model
LoB1 LoB2 LoB3 LoB4 LoB5 LoB6 LoBn
ServiceDelivery
Management
Srv1 Srv2 Srv3 Srv4 Srv5 Srv6 Srv7
“Client Demand for
services”
“Provision of services”
Service Level Agreements will be used to manage relationships with the business and service
providers
Sourcing Strategy Update
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TOPS will remain accountable for the levels of services provided to its customers, irrespective of where the services are sourced from
Target Service Delivery Model
LoB1 LoB2 LoB3 LoB4 LoB5 LoB6 LoBn
ServiceDelivery
Management
Srv1 Srv2 Srv3 Srv4 Srv5 Srv6 Srv7
“Client Demand for
services”
“Provision of services”
In the target state, TOPS will focus on service delivery
management, and the provision of a limited number
of services
Increasingly look for support services to be outsourced
either internally or externallyService Level Agreements will be
used to manage relationships with the business and service
providers
Sourcing Strategy Update
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A low level of annuity business combined with a largely fixed cost structure leaves Wholesale Clients particularly exposed to market volatility and margin erosion
- Current Structure - - Target Structure -
BULL MARKET
BEAR MARKET
PROFIT
LOSS
Total Cost
Revenue
Fixed Cost
Variable Cost
€
Fixed Cost
Variable Cost
PROFIT
Revenue
Total Cost
€
BULL MARKET
BEAR MARKET
COSTCOST• High, fixed cost base
• No protection from margin erosion
• Low, variable cost base
• Better protection from margin erosion
• Better utilisation of resources
VALUEVALUE• Unresponsive to market and competitive pressure
• Technology base is inflexible and unreliable
• Deliver more revenue for lower spend
• Capability to grow the business more quickly
CONTROLCONTROL• Cannot measure service delivery
• Lack of management bandwidth
• Agree and implement service levels
• Total cost transparency
• Retain control of key services
RISKRISK• Delivery is high risk for the bank • Delivery is low risk for others
Sourcing Strategy Update
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The transformation from a fixed to variable cost base will begin with the divestment of businesses that are no longer relevant
Retain Assets
Divest Assets
Keep in-house
Re-source
TransformInternally
Mgt Contract
Joint Venture
Outsource
Divest assets which are no longer relevant
to the business
Divest assets which are no longer relevant
to the business
Identify and retain core strategic assets – the ‘family silver’
Identify and retain core strategic assets – the ‘family silver’
Decide on the best sourcing model for non-
core assets
Decide on the best sourcing model for non-
core assets
Need:Delivery capability
Need:Delivery capability
Need:A supplier
Need:A supplier
Need:A partner
Need:A partner
Need:A partner
Need:A partner
Need:Buyers
Need:Buyers
Portfolio of Assets
- Managing Technology Assets -
Sourcing Strategy Update
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A sourcing strategy has been adopted that allows us to move to a variable cost structure while retaining ownership of those core skills and services that we do best
Outsource to
high value provider
Keep
Outsource to
high competence
provider
Keep and reengineer or partner
with outsourcer
Key:
= Services sourced inside TOPS
= Services sourced outside TOPS
- Potential Sourcing Model -
Current Capability Level
Competitive Advantage
Hig
hL
ow
Low High
Sourcing Strategy Update
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- Capability & Competitive Advantage -
Current Capability Level
Competitive Advantage
Hig
hL
ow
Low High
SP&D Business Solutions
SP&D Business Solutions
SD&I LondonSD&I London
SD&I PakistanSD&I Pakistan
Development(AAITS)
Development(AAGITS)
ABN AMRO Infoserve
ABN AMRO Infoserve
ISAPISAP
Technology Development
Capability
VoiceVoice
eMaileMail
Network Services
Network Services
Customer Support
Customer Support
IT OperationsIT Operations
Technology Infrastructure
We have used the sourcing model to analyse capability and competitive advantage for Technology Infrastructure and Development Capability
Sourcing Strategy Update
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The first tranche of the strategy concentrates on our Development Capability
- Development Capability-
Implement a new operating model for our Development Capability, which replaces the current fixed cost base with a variable cost service
Provides a reliable, scaleable service that provides flexibility both in terms of cost and skills
A variable cost service will be assessed by reviewing development using a new sourcing approach and new licensing agreements for products with a large cost base such as ISAP
StrategyStrategy
ApproachApproach
BenefitsBenefits
OpportunityOpportunityTransform an organisation of 1000 people who provide development services and systems maintenance to all Business Units in over 50 countries with a current cost base of approximately €140m
Note: Figures include SD&I London, Amsterdam, Pakistan and ISAP
Sourcing Strategy Update
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The second tranche will run in parallel with the first, addressing the additional cost reduction and service improvement potential in our Technology Infrastructure
- Technology Infrastructure -
Further reduce cost, reduce operational risk and improve service quality through re-sourcing provision of services
A lower cost, reliable, scaleable service that provides greater flexibility
Infrastructure services will be assessed to determine the appropriate approach, which include the single / multi-vendor and fast track choices
StrategyStrategy
ApproachApproach
BenefitsBenefits
OpportunityOpportunityImprove the operational efficiency of our voice, eMail, network, customer support and IT operations services which represent over €330m of operation cost and approximately 1500 people
Sourcing Strategy Update
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Perception of Not Getting the Best
Deal
No diversification of risk or skills (‘all our eggs in one basket’)
Perception that we have not got the best deal Does any one organisation have all the required
skills?
Perception of Not Getting the Best
Deal
No diversification of risk or skills (‘all our eggs in one basket’)
Perception that we have not got the best deal Does any one organisation have all the required
skills?
We are managing the vendor relationship issue, which is a choice between the multiple service provision approach versus the strategic partnering approach with a global entity
Greater Value to the Bank Ability to create innovative solutions, e.g. a
venture or alliance, which delivers more value at lower cost
More power over a single supplierBetter service quality worth more than low price alone Vendor more likely to be flexible to changes in our needs
Greater cost transparency and flexibility from the supplier
Greater Value to the Bank Ability to create innovative solutions, e.g. a
venture or alliance, which delivers more value at lower cost
More power over a single supplierBetter service quality worth more than low price alone Vendor more likely to be flexible to changes in our needs
Greater cost transparency and flexibility from the supplier
Play Vendors Off Against Each Other
Potential to ratchet down price through competition
Ability to appoint functional/regional ‘specialists’ Perception that ‘due process’ has been
completed
Play Vendors Off Against Each Other
Potential to ratchet down price through competition
Ability to appoint functional/regional ‘specialists’ Perception that ‘due process’ has been
completed
Potentially Poor Service - ‘False Economy’
Contractors will claw-back the discount, e.g. through contract inflexibility
‘Beauty Parades’ are slow and expensive – often negating the price reduction achieved
Cherry-picking by vendors (small contracts receive less attention from the vendor)
Smaller scope for innovation or flexibility
Potentially Poor Service - ‘False Economy’
Contractors will claw-back the discount, e.g. through contract inflexibility
‘Beauty Parades’ are slow and expensive – often negating the price reduction achieved
Cherry-picking by vendors (small contracts receive less attention from the vendor)
Smaller scope for innovation or flexibility
Benefits Disadvantages
Technology Partnership(Sole-source)
Multi-Vendor
- Sole-Sourcing versus Multi-Vendor -
Sourcing Strategy Update
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We continue to consider ways of delivering even greater savings in a shorter time period, while at the same time minimising execution risk and increasing the certainty of delivery
Focusing on our core competencies while at the same time considering alternative sourcing approaches for those non critical tasks which we do not do well will enable us to deliver even greater value
Summary
TOPS are focused on establishing a ‘client first’ organisation and reducing cost through globalising and regionalising service provision
We have developed an aggressive transition programme that will deliver over €430m of annualised savings within the next 24 months
TOPS have already realised over €71m of annualised savings and our pipeline for the rest of the year indicates that we are track to deliver the remainder of the projected savings
Our activities this year will underpin the bulk of the savings scheduled to be delivered in 2002
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Cautionary Statement regarding Forward-Looking Statements
This announcement contains forward-looking statements. Forward-looking statements arestatements that are not historical facts, including statements about our beliefs and expectations.Any statement in this announcement that expresses or implies our intentions, beliefs,expectations or predictions (and the assumptions underlying them) is a forward-lookingstatement. These statements are based on plans, estimates and projections, as they are currentlyavailable to the management of ABN AMRO. Forward-looking statements therefore speak only asof the date they are made, and we take no obligation to update publicly any of them in light ofnew information or future events.
Forward-looking statements involve inherent risks and uncertainties. A number of importantfactors could therefore cause actual future results to differ materially from those expressed orimplied in any forward-looking statement. Such factors include, without limitation, the conditions inthe financial markets in Europe, the United States, Brazil and elsewhere from which we derive asubstantial portion of our trading revenues; potential defaults of borrowers or tradingcounterparties; the implementation of our restructuring including the envisaged reduction inheadcount; the reliability of our risk management policies, procedures and methods; and otherrisks referenced in our filings with the U.S. Securities and Exchange Commission. For moreinformation on these and other factors, please refer to our Annual Report on Form 20-F filed withthe U.S. Securities and Exchange Commission and to any subsequent reports furnished or filedby us with the U.S. Securities and Exchange Commission.
The forward-looking statements contained in this announcement are made as of the date hereof,and the companies assume no obligation to update any of the forward-looking statementscontained in this announcement.