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Executive Project Management & Field Study MBLEPMY Assignment II Group ETHO 609A Group Members 1. Belay Gemechu43041507 2. Belay Gezehagen72176717 3. Mekonnen Zewdie72198680 4. Mezgebe Yifru72179449 5. Mulatu Gebre72198672 6. Tezta Ketema72266653 7. Tilahun Tadesse72222700 8. Wondimagegnehu Negera72176652 August, 2011 Table of Contents Executive summary 3 Chapter 1- Introduction 5 Chapter 2 – General overview of the macro environment and theoretical background7
Chapter 3- initiation of information technology project in the CBE 14 Chapter 4 – strategic positioning of the project within the organization24 Chapter 5- scope, goals and objectives of the IT project management of the CBE 34 Chapter 6 –Recommendations42 Chapter 7- Personal Reflections46 References 69 Annexes 71 Executive Summary The need of information technology to facilitate the banking operation and assist in decision-making process was recognized by the Commercial Bank of Ethiopia quite early. These days, Information Technology is an enabler which the Bank resort to deliver effective customer services.
Technology has moved from being ‘a business enabler’ to ‘a business driver’. The development of Information Technology paves the way for the Bank to deliver services to its esteemed customers at their location and able to perform paperless transactions. The growing competition and expectations led to increased awareness amongst Banks on the role and importance of technology. Commercial Bank of Ethiopia, the leader in the industry, is investing on the superior state-of-the-art technology to meet the threat of competition and to retain its customer.
Hence, it can be concluded that the Ethiopian banks should give a further thought to IT as a competitive edge. On the other hand the shielding of the financial sector against Foreign Direct Investment (FDI) is not long lasting and will be removed in the near future. One of the conditions for membership to the WTO is opening up the banking sector to foreign investors. Sooner or later when protection is lifted off foreign banks will inevitably join the sector with better technology, experience and capital.
Thus, customers will be familiarized with new products and accessibility to banking services will be radically improved. For banks like the Commercial Bank of Ethiopia where banking technology is backward and conventional banking is the business model it will be very difficult to be competent and become successful. The vision of the Bank “to become a world class commercial bank by the year 2025” implies, among other things, a lot of duty is awaiting the bank to be done in years to come. The introduction of modern IT technology is one of the means to achieve this vision.
To this end, Program management office is established to carry out the overall management of the IT Projects, product selection, project monitoring, evaluation, testing, product parameterization and customization, project implementation and rollout, risk and change management. The PMO draw IS Strategic Roadmap that indicates the required Information Technology support and realization of the CBE’s vision through time with a clearly defined deliverables subject for periodic revision. In order to gain competitive advantage as a pioneer of new technology, CBE has placed top priority on this huge IT project.
The resource allocated both in terms of finance and man power shows this fact. The integrated information system is not something limited only to automating core business processes but consist packages that support ancillary functional unit like human resources management, risk management, human resource information systems etc. Concerning the positioning of the PMO, the structure of the bank shows the priority given to the project in order to enable it carry out the mandated tasks properly.
The level of support imparted by the leadership is observed in the involvement of the Board of Management, Consultants, the IS steering committee, the PMO itself and its director for the success of the project. As indicated as one of the critical success factors, support of all the processes of the Bank stands at the top of all for proper implementation of the project. Processes or departments are given directives to play complementing role instead of competing with Program Management office for resources in order to achieve the common goal.
The executive management commitments, the ongoing update on the project progress, among others, have cultivated a common attitude towards the project. The regular meeting that involves top and medium level managers to discuss the development of the project has brought in a unique and keen aspiration to all. The unison created among all units of the Bank for the successful implementation of the project has raised the bar in terms of forging a common value. Despite all the strong point stated above, the project had some setbacks.
The overall processes of the project starting from its conception to its present level have entirely disregarded the feedback of external customers and their expectation is not solicited. End users like District offices and branches have not been represented in the core team of the project. Project planning was not formulated with well defined milestones and project procrastination was observed. Contract signed has not been exhaustive to address all the requirements of the project sponsor and its full enforcement has been put at stake.
Chapter – 1 5 Introduction The SBL – MBL program generally gave us the foundation upon which we can easily understand organizations and its smooth operational modalities. At this stage of our learning, the team members unanimously believe that we got adequate tools/weapons to run companies more efficiently than we do before two-to-three years back. Surprisingly, this one, the executive project management (EPM) assignment, is the most enjoyable assignments the team undertook recently.
While many of the MBL modules and their assignments share common features of having more of theoretical bias, this course and its assignment have essentials that are non-existent in other modules. The practicality of the theory and the learning opportunity it provides from the real life has been inspiring for all of us. We made an effort to reconcile what the theory says to what is practically done in our field study. This has given us a chance to cement our rhetorical knowledge with practical application. Our group has made deep discussion as to the kind of project to take up for the assignment.
The discussion includes the amount of budget allocated for the project and the importance of the project for an organization so that our evaluation will be holistic, comprehensive and complete. This eventually led to selection of IT project of the commercial bank of Ethiopia. The short term project is fully completed and the long term part is still in progress and other elements that helped towards its execution are in accordance with the plan. 1. Preliminary to this Field Study During the study school, we have been given an instruction by the module’s professor on how to go about this assignment.
Accordingly, the group has done the following activities before writing the assignment of MBLEPMY two. Before working on the assignment, Assignment of MBLEMPY two needs to ensure a project that has accomplishment stage of 75% – 100%. Notwithstanding the captioned requirement, the team takes note of the following facts in consideration of the project: ? Easy accessibility of information in different modes such as willingness of the management to allow us working on this live project, access to printed documents, interview with the project manager and team members, Prior exposure and knowledge of the team members about the project, and accessibility of the project to the team members, ? Identifying the total investment capital outlay to be greater than USD 1 million, ? Identifying stage of accomplishment to be 75% – 100%, ? Scheduled the convenient program for visit and interview, ? Selected secretary for the assignment to handle the cooperation between and among team members to accomplish the assignment, Determine the type of data required, prepared interview question relevant to the assignment, nominated individuals who can ask questions in an organized manner, and the team members agreed to ask additional questions without interrupting one another and the interviewee, ? Interview question were sent to the project manager before a day of the interview, ? Team members conducted an interview with the project manager. Chapter- 2 7 General Overview of the macro environment and Theoretical background Many companies buy computer hardware they assumed necessary for a new or improved Information System (IS).
Then they purchase some software to go along with the new hardware. Now they realize their hardware is inadequate for the new software, so they buy more powerful hardware. And the vicious cycle continues. Pretty soon they have a whole bunch of hardware and a lot of expensive software: but do they have an Information System? Only if they have made sure that all the hardware and software purchases fit in with their organizational IS plan and that their people know how to use it. Organizations need a planned project for the development of their information resources for several reasons (Brown, DeHayes, Hoffer, Martin, and Perkins, 2009, P564).
In some firms, the management of all diverse applications of IT is not organized under a single person. Yet most firms want to share information among diverse parts of the firms and use that information for strategic or operational advantage (Brown, DeHayes, Hoffer, Martin, and Perkins, 2009, P564). Deciding which new systems to build and how to use it should be an essential component of the organizational strategic planning process. Organizations need to develop information systems that support their overall strategic business plan and in which strategic systems are incorporated into top level planning.
Once specific projects have been selected within the overall context of a strategic plan for the business and the systems area, an information systems plan can be developed. The plan serves as a road map indicating the direction of systems development, the rationale, the current situation, the management strategy, the implementation plan, and the budget. Developing a plan for a company’s information resources helps communicate the future to others and provides a consistent rationale for making individual decisions. Alignment of IS strategy with the organization’s business strategy is a fundamental principle.
IS managers must be knowledgeable about how new technologies can be integrated into the business and must be privy to senior management’s tactical and strategic plans (Brown, DeHayes, Hoffer, Martin, and Perkins, 2009, P564). As we have seen, information technology (IT) is becoming a core resource for organizations in today’s global economy and is affecting, if not determining, what organizations produce and how they are managed. Anyone with casual familiarity with today’s news knows that IT is influencing the whole of society, not just the business arena (Brown, DeHayes, Hoffer, Martin, & Perkins p620).
Hussain (2002) suggest that changes in the macro-level environment could influence changes in the strategy and or structure of banks, which in turn could lead to changes in management control systems, including performance measurement practices. The macro level environment is an out realm of banks, which is outside their control. Innovations in management philosophies, trade liberalization, new technologies, increased competition, changes in regulatory frameworks, and uncertain economic and political conditions have often been cited in the banking literature as major factors that influence the functioning of banks (Helliar et al. 002). We categorize the macro level factors into three, namely economic conditions, technological innovations, and socio-cultural and political environment. In recent years banks have faced an uncertain economic climate because of macroeconomic factors such as globalization, liberalized deregulation, privatization, and highly fluctuating, at times unpredictable, inflation and interest rates (Harker & Zenios 1998); Helliar et al. 2002; World Bank 2009). Such economic conditions place pressure on banks to improve performance (Burney 1999; Williams & Seaman 2002).
As in other industries, the degree of competition in the banking sector is primarily driven by the need to create efficiency in financial services, the quality of financial products and the degree of innovation in the sector (Frei et al. 1998; Oberman 2006). The literature suggests that the innovations in technology has contributed significantly to the expansion of the banking industry (Kimball 1997), with Kaplan & Norton (1996) arguing that the impact of information technology is even more revolutionary for service than manufacturing organizations.
Over the last two decades there has been a phenomenal increase in the offer of e-banking or e-bill payments, smart cards and stored value cards, in order to stay competitive (Allen, McAndrews 2002). These advancements have allowed banks to innovate customer service and delivery channels, not only to fulfill the needs of customers, but also to achieve economies of scale and to increase competitiveness (Hitt & Frei 2002). These days, Information Technology is an enabler of the business process of the Bank which is designed to deliver effective customer services.
Technology has moved from being ‘a business enabler’ to ‘a business driver’. The development of Information Technology paves the way for the Bank to deliver services to its esteemed customers at the location where they are living and able to perform paperless transactions. 13 Socio-cultural and political environment The socio-cultural and political environment is generally characterized by the rules and requirements to which individual organizations must conform if they are to gain support and legitimacy. DiMaggio & Powell 1983) and Scot (2001), suggests that political pressures generally result from changes in the interests of individuals or groups, and underlying power distributions that provide support for the existing institutional environment. Socio-cultural pressure is associated with differentiation of groups and the existence of heterogeneous or divergent beliefs and practices. The presence of these pressures undermines the stability of organization, hence resulting in the gradual abandonment of a set of management practices within an organization (Stark 1996). 1. The impact of Micro Level Environment on the project
Project management initiatives represent the whole process of preparation, role defining, and curriculum designing for developmental trainings, program manager selection and other activities undertaken by an initiative team before project kickoff. On the other hand, organization of project management indicates the extent of commitment and strategic emphasis given to the success of the project by the project owner. This is explained by priorities given in resource allocation, in selection of core team and the strategic position of the project in the structural setup of the organization (Graham and Englund, 2004).
According to Graham and Englund (2004) the success of a project depends on eight factors that are useful to measure how successful is a project at hand. These are: • Strategic alliance of the project to business strategy of the organization Measures the degree to which the project is aligned with business strategy. • The support and commitment of the upper management • Meticulous project planning with well defined milestones • Internal and external customers feedback as end users of the project output • Motivation and project team development Consistency and continuity in support of project execution • Flow of information and communication among project teams and stakeholders • Organizational support for the project in promoting, rewarding etc project team members It is within this contextual purview that we review the establishment of the IT Project Management Office of the CBE. This encompasses, among other things, the process of appointment of the Director of Program Management Office (PMO), the establishment of different committees, core team building and the overall project planning.
In addition to the requirement by the regulatory body, the National Bank of Ethiopia ( the central Bank) to computerize banking operations, the many challenges in today’s dynamic and competitive banking landscape forced CBE to initiate its IT projects. Especially, increasing customer awareness of emerging technologies is forcing the Bank to look for alternative and innovative product lines and service delivery channels. The efforts to be made in addressing these customers need shall improve profitability and success of the Bank.
Like any other banking institutions worldwide, the Commercial Bank of Ethiopia (CBE) is not strange about these issues. As leading Bank in the country, CBE should be responsive to the ever-increasing customers need, and hence, it established PMO to satisfy the needs of its esteemed customers. 2. Creating an environment for successful projects in an organization Graham and Englund (2004) outline seven steps for creating an environment for successful projects as shown below. • Developing senior management support Develop a structure for interdepartmental input • Develop a process for project selection • Develop upper managers’ abilities in managing project managers • Establish a project manager’s development program • Make project management a career position • Develop a project learning organization The process begins with developing senior management support. If this is not obtained, most of the succeeding steps will fail and the organization will require new senior management. The next step is to develop a project management process using interdepartmental input.
Without this input, the process will fail because the departmental cooperation needed for good project management will probably not be forthcoming. The next step involves developing a process for project selection. If this is not done correctly, there will be massive fights for resources among competing projects. The following step involves developing upper managers’ abilities in managing project managers. Without this, there will be a return to the old ways of managing and not advancement to project management.
Subsequent steps involve developing a project management office to accelerate progress up the project management maturity scale, determining a project management career ladder so that the position is considered real, and creating a learning organization to leverage strengths and help ensure that past mistakes are not repeated (Graham and Englund, 2004). 3. Developing Project Management Initiative Creating an environment for successful projects requires the following (Graham and Englund, 2004): • Researching the practices that correlate with project success, Getting that knowledge implemented across the company and • Developing a project management curriculum. These three steps constitute project management initiatives. A project management initiative represents corporate resources expended to help people anywhere and everywhere in the organization improve the environment and skills for effective project management (Graham and Englund, 2004). The people in the initiative should be experienced project managers with the ability to motivate, develop, and coach others. To achieve and sustain a project-based organization requires some form of initiative or project office.
A project management initiative provides the following (Graham and Englund, 2004): • Conceptual models for project management • Curriculum for project manager development • Help in project manager selection and development • Consulting services • Continuing development opportunities • The latest information for project managers • Forums for developing best practices • Forums to help upper managers • A central information source for project managers entering new areas Above all, upper manager sponsorship is required for successful project initiatives.
Project management initiates should be established at the corporate level. A project management goes across disciplines and participation from people in all functions is important. The representatives are drawn from each major business in the company. Individuals are expected to make their contribution towards achievement of PM’s initiatives. PM practices should be inculcated into the heads and hearts of all practitioners (Graham and Englund, 2004). For an initiative to succeed on an ongoing basis, the support of senior management and achieving status as a core competence are vital.
The PM initiative consists of the following elements/components (Graham and Englund, 2004): • The initiative team, comprising permanent staff members dedicated to the initiative. They are members of an interdisciplinary project team with a wide breadth of experience, such that if one person cannot solve a problem, another can. • The PM Council, an advisory group • Consulting services on general project matters, project start-ups, assessments, project plans, and tools • Training resources such as courses and workshops.
Courses and workshops were available to everyone in the company to learn about the practices of project management. Courses in this curriculum addressed the problems encountered in creating an environment for successful projects. • Information resources: a survival kit, videos, proceedings, cassettes, and referrals • Conferences for project managers and upper managers. The purpose of the conference was to do the following: o Improve professional knowledge about project management o Share best practices for managing projects o Learn from external experts about projects management Network with other people in the organization involved in managing projects. Web Shops to provide distance learning. Chapter- 3 3. 1. Initiation of Information Technology Project in the CBE Banking as a strategy oriented business is a new phenomenon in Ethiopia. Before two decades the banking sector was under monopolistic ownership of the government. However, with the liberalization of the economy, local businessmen have begun to invest their money into the sector. As time went by, the sector has shown enormous changes in terms of profitability and business strength.
The number of banks has been increasing as the commercial banking has become a worthwhile and lucrative investment. Business approaches and decision making have been revolutionized. Flexibility in decision making and prompt responses to demands of customers is given top priority to attract new customers and retain existing ones. The strategy of the new private banks has worked effectively and as a result the market share of the commercial bank of Ethiopia has significantly declined. It has become unthinkable for the bank to do business as usual like the good old days.
The dynamisms of the environment have not allowed the management a tiny of time for taking a breather without implementing the required change to stay aboard in business. In such a highly competitive market environment, everything has to be done fast to stop customer defection and market share decline. Actions have to be sorted out and what to change and how to change must be identified before all other things. As road paver of change, Business Process Reengineering (BPR) has been implemented by benchmarking big banks like City Bank, HSBC Bank, State Bank of India and other globally recognized banks.
The benchmarking has further given the management the knowledge that there are a number of things yet to change but the introduction of state of the art technology is to be prioritized. Having realized that proper IT solution is not an option but a must, the management of the Bank has developed the first Information Technology short and long-term Roadmap document in 2006. The project ranges from selection and procuring appropriate software to its implementation to materialize short and long term business objectives of the Bank.
The IT Short-term strategies that focused to pave the way to the long-term IT Strategy of the Bank were fully implemented. Parallel to the Short-term roadmap IT strategy, the Bank conducted Business Process Reengineering (BPR) on both Core and Support Processes. Accordingly, three Cores and eight support process were identified. The Bank implemented both the core and support processes BPR Study recommendations. The recommendations of the Core and Support BPR study are used as input in developing Information Systems (IS) Strategic Roadmap.
At the early stage when new private banks have joined the sector competition has not been fearsome since the new banks have not been well tested in the market to get public confidence. The long time dominance of the sector by state owned banks has created the perception that private banks are less reliable than the state owned ones. This perception, however, has been diminishing overtime as more dependable investors are joining the sector. As time went on, the pioneer private banks have become stronger in terms of profitability, reliability and customer base. The Commercial Bank of Ethiopia has been obligated to face two challenges.
On the one hand the existing commercial banks are getting their influence deep rooted in the business and on the other hand new entrants are joining the sector with better technology and business models. These two scenarios have convincingly attracted customers towards privately owned banks resulting in huge decline of market share of the commercial bank of Ethiopia. For instance deposit market of Commercial Bank of Ethiopia has declined by about 60% over the last two decades. It is not long time since the Bank has implemented Business Process Reengineering (BPR). As a result of the BPR, the structure of the Bank has undergone changes.
They have been redesigned in a way they are apt to improve customer satisfaction and business performance. In this connection the study of the BPR has drawn a roadmap that depicts what the bank has to do both in the short and long run to execute the envisioned change. Since the implementation of the BPR, the Bank has been undertaking series of changes that are precursors and forerunners of the grand change that is expected to transform the Bank. This grand change is the application of appropriate IT technology to all systems, structures and most importantly to core businesses of the Bank.
CBE believes that developing the right Information Technology (IT) is a critical growth-driver of the Bank’s business. Now the Bank is in the right time to acquire and use cutting-edge IT systems to efficiently deliver the Bank’s services while closely adhering to good governance principles. This Information Services Strategic Roadmap project is designed to deliver the required Information Technology support and realization of the CBE’s vision ‘To Be World Class Commercial Bank’ through time with a clearly defined roadmap subject to periodic revision.
The need for employment of information technology to facilitate the banking operation and assist in decision-making process was recognized by the Commercial Bank of Ethiopia quite early. Accordingly, the attempt to take initiatives consistent with the development in information technology and local conditions were taken for implementing application and communication architectures. In this regards, CBE Management developed the first Information Technology short and long-term Roadmap document in 2006 and endorsed by the Board of Management.
The IT Short-term strategies that focused to pave the way for the long-term IT Strategy of the Bank were fully implemented. Implementation of core banking system with branch solution for rollout and adopting the latter to the branches of the bank throughout the country dates back to 1983 with acquisition of mainframe class computer by the National Bank of Ethiopia (NBE) intended to support online banking operation for the 25 branches in Addis Ababa, International Banking Department, the NBE itself, and other government Banks and Insurance Corporation.
However, the system’s capacity confined the implementation to just NBE, and CBE’s four branches and one department. The purpose of the IS Strategic plan implementation is to align IS with the Bank’s business mission, vision and business goals and establish the overall goals and direction for the bank wide IS projects. The IS Strategic plan should describe how IS helps to achieve CBE’s mission. The IS mission and vision should closely align with its corporate mission and vision. The IS Strategic Plan establishes goals for IS’s contribution to the CBE’s roductivity, efficiency, and effectiveness, and establishes methods for measuring progress towards those goals. As a result, business and IS goals are closely aligned, and business and technology decisions are made co-operatively to improve the efficiency and effectiveness of the Bank’s business operation. 3. 2. The benefit of project as observed from different perspectives 3. 2. 1. Competitors As said earlier Information Technology (IT) is having a significant impact on an organizational life. It is an asset used as a competitive strategy.
This facilitates the changes in organizational processes, its strategies, structures and functions. Financial services industry has become virtually dependent on and continues to invest in IT to gain a competitive advantage. IT has the ability to enhance differentiation. Furthermore, the rising competition in the Ethiopian banking industry has further widened the scope of IT. There are three major financial institutions in Ethiopia banking industry: Banks, insurance, and micro-finance intuitions.
After the economic liberalization that took place in 1992, many private financial intuitions have been flourishing. And the total number of commercial banks reached sixteen, of which thirteen are private banks and the remaining three are public owned banks. The Ethiopian banking industry, however, is still blocked from non-citizen investors. Entry of new Banks resulted in a paradigm shift in the ways banking in Ethiopia. The growing competition and growing expectations led to increased awareness amongst Banks on the role and importance of technology in Banking.
Commercial Bank of Ethiopia, the leader in the industry, is investing on the superior state-of-the-art technology to meet the threat of competition and to retain its customer base. According to the IT strategic document of the bank, CBE has started investing on IT at large scale since 1997. Installations of ATM, branch networking, were the major accomplishments. In November 1998, the Bank implemented its Core Banking System – Bankmaster by acquiring from a company called Misys International Banking System (IBS) to solve its Y2K problem.
The system supported CBE’s 33 Branches and 2 Head office departments (Finance and Trade Services) by delivering online-real-time services to its customers. The system, however, had various inherent problems such as lack of flexibility, limited interface with other systems, limited functionalities, developed on old programming languages, etc. Having these problems, hence, the Bank has been replacing the existing core banking application with a robust Core Banking System that would help the Bank to increase its service quality and expanding its electronic channels to serve customers 24×7.
The envisaged Core Banking System shall have basic functionalities that address the Core Processes’ requirements and support various e-banking channels and shall be implemented at the CBE Branches wherever appropriate. On the other hand, as evidenced by their financial reporting, most private commercial banks most often declare profit during the first year of their operation. This shows that the banking industry is booming in the country and there are wide unbanked markets.
Adding a witness, the financial result of the banking industry for the year 2010 was, for instance, characterized by high growth, high profit and high dividend (Access Capital: 2010). Propelled with this trend, six new entrants are in the pipe line; Enat, Hawassa, Debub Global, Noah, Zam-Zam, Mercato city banks are to mention. Moreover, the country is in the process to be member country of WTO (World Trade Organization) in the near future. If the country, which is now pushing for the World Trade Organization (WTO) membership, opens its financial sector for foreign banks, the competition will be stiff.
In order to combat with the stiff competition that might come up with foreign banks due to the enforcement of WTO membership, most of commercial banks, both private and public owned, are investing on IT to tackle the influence of Multi National banks who are awaiting the opening of the market. Hence, it can be concluded that the Ethiopian banks should give a further thought to IT as a competitive edge. Information technology helps banks to gain competitive advantage and improve organizational performance.
The real competition that the banking industry would face comes when the industry open for foreign competitors. We can dare to say that all banks operating in the country use the same type of IT technology. Considering these facts, commercial bank of Ethiopia has been investing a huge amount of funds on IT technology since 1997 to sustain the competition over IT by way of introducing new products and enhancing the IT skills of its employees. Commercial Bank of Ethiopia has crafted its vision “to be a world class commercial bank by the year 2025”. A lot has to be done to carry out its vision.
The bank has more than one IT projects and CBE has established a Program Management Office (PMO) in order to properly coordinate the efforts to run two or more IT Projects at a time. The Program Management Office is responsible for the overall management of the IT Projects, including RFP preparation, product selection, project monitoring, evaluation, testing, product parameterization and customization, project implementation and rollout, risk and change management. So far, the CBE has successfully accomplished ATM service, branch networking and other IT projects.
The core banking solution is on the final stage to be implemented. Initially the core banking project was planned to be operational in May 2011. However, due to the changing scope of the project the schedule is changed, and it is expected to go live by October 2011. As evidenced from the progress made in the project process, the IT projects of the bank are presumed to have great impact on the efficiency of the bank and help to intensify the competition in the banking industry. The project covers the following areas: 3. 2. 2. Core Banking System
The strategic documents of the IT project indicate that CBE needs to have proven, multi-currency, multi-lingual, one stop solution that offers integrated/unified banking products, which could be delivered across the branch networks by the aid of contemporary technology delivery channels. The core module of the banking software shall support Straight Through Processing (STP) for the transactions emanated from external institutions such as the SWIFT System, to avoid human intervention. The name of the game in the banking sector is mainly marketing differentiation. What benefit can the bank offer which is better than its competitors?
Can it sustain this differentiation over a period of time from its competitors? Therefore, competitor analysis and monitoring is crucial if the bank to maintain its position within the market. As it has been explained above, there are 16 banks operating in the country and more than six are on the pipeline. The core banking solution has great impact to deliver its service to the customer so as to excel its competitors. As per the press release of the bank, following the opening of 160 new branches, for the fiscal year of 2010/2011, the market share of the state-owned Commercial Bank of Ethiopia (CBE) has grown from 33 to 41 percent.
It is also expected that when the core banking IT project get completed, the market share would further increase. 3. 2. 3. Card Banking (Payment System) The Bank is in the process of acquiring Card Based Payment System. The main objective of acquiring the system is to start the Visa Card Services by deploying ATMs and POS Terminals with the related software in Addis Ababa and regional towns and introduce different e-based delivery channels through time. In addition to the ATM and POS basic services, like cash deposit, check deposit, Money Transfer, Utility Bill payment (electricity, telephone, etc. are also part of the project deliverables. The bank is the first to conduct feasibility study on card banking payment system. But, due to various reasons, the system has not yet been implemented. The competitor bank has implemented the visa card service some years ago simply by taking the idea and those staff involved in the project in the CBE. 3. 2. 4. Supply/demand The IBM Company has been selected to install the core banking solution with total cost of three million USD to modernize core banking systems and support launching 500 new branches. Under the terms of the agreement, IBM ill provide hardware, software and IT services to support the bank in its rapid business growth and its shift from manual financial processes to real-time financial services. The infrastructure will also enable the bank to strengthen and extend its relationship with credit card providers such as Visa and MasterCard and roll out new mobile and internet banking services. The project is a turnkey solution for an integrated banking solution. Though it is costly, the turnkey project, from our group point of view, is advantageous because it is a ready to use upon installation/completion.
The CBE, however, has a need to recruit, train and engage sufficient number of IT professionals with an assortment of specializations. In view of scarcity of trained and skilled manpower in the countrywide, the skill and knowhow of the key professionals maintained is attractive to the competitors in the banking industry and other public and private organizations locally. We have been informed that during the previous and current fiscal years, considerable number of qualified IT professional and Support Staff engaged in different key areas have left from the project office.
It is clear to imagine that the performance of the Department could be highly affected. The time required to replace IT technical staff is considerably takes longer time. The causes for increasing the turnover are salary, benefit, and unavailability of training on time. 3. 2. 5. Impact of IT in banking services It’s clear that technology is playing a bigger and bigger role in banking business. In banking industry, size represents a source of competitive advantage, founded on a perspective of economies of scale and scope.
Commercial bank of Ethiopia, takes the lion’s share of the commercial banking market of the country in terms of credit, deposit, and customer base and branch network. The bank is also starting up a new subsidiary branch office abroad – Southern Sudan, Juba. This brings the number of total branch outreach to 384 as at June 30, 2011. The bank has been for more than 70 years in business. But, its advancement in IT is not as expected. The main attributes could be that the country was following the socialist ideology for almost two decades where there were no competitions in the financial market of the country.
The purpose of the IT Strategic Plan is to align IT with the Bank’s corporate mission, vision, and business goals and establish the overall goals and direction for the Information Technology Program Bank wide. To sustain the leadership position and to compete against competitors, the bank is investing huge amount of funds on IT technology since 1997. 3. 2. 6. Information Technology as a Competitive Tool Information is now treated as a corporate resources and competitive weapon and the focus now is on exploiting information technology for competitive advantage.
Being competitive in the 21st country will depend on the effective use and application of information technology to manage the information resources. Information technology helps a business in reshaping itself to the changing environment. In this role, information technology with its strategic perspective helps an organization to achieve internal as well as external advantage (Amaratunga and Mukrima, 2003). 3. 2. 7. Protecting and creating new value Organizations will put forward a number of reasons as to why they have interest in investing in information technology.
The most common includes the need to sustain and improve competitive position: to increase revenue or reduce costs or to improve flexibility or service excellence and responsiveness. Commercial Bank of Ethiopia has installed Automated Teller Machine (ATM) for the first time in the country to improve customer service and expand its service outreach. The current IT system of the bank is partially interfaced with other separate and independent system, and in order to solve this problem and to increase customers’ satisfactions, the bank introduces new banking solution that believed to curb the current problems.
The core banking solution is assumed to be fully implemented in October 2011 since it failed to be implemented as scheduled – May 2011. Various reasons were cited for the delay: resignation of IT personnel, lack of commitment from some team members, and some employees were suspended from the project, where they were allegedly spying and providing important documents to competitors and third parties. CBE has deservedly won public confidence where it has to protect its existing values. Upon completion, the project undoubtedly creates additional values, minimize risk and cost and maximize the benefits.
The team has understood that the government is also playing its role for successful completion of the project by providing timely support with regard to leadership and sanctioning the necessary resources. Chapter – 4 4. 1. Strategic positioning of the project within the organization As indicated earlier, evidence obtained from the commercial bank of Ethiopia indicates that the need to employ information technology to facilitate the banking operation and decision support tools was recognized by the Bank quite early to enable it respond to ever-growing needs and tests of the customers.
Accordingly, the attempt to take initiatives consistent with the development in information technology and local conditions were taken for implementing application and communication architectures. Despite intermittent trials here and there it was in the year 2006 that, CBE’s management developed the first Information Technology short and long-term Roadmap document and got it endorsed by the Board of Management. The IS Short-term strategies that focused to pave the way to the long-term IT Strategy of the Bank were, more or less fully implemented and gave it important positioning in the industry.
This IS Strategic Roadmap is designed to deliver the required Information Technology support and realization of the CBE’s vision ‘to be world class commercial bank’ through time with a clearly defined roadmap subject for periodic revision. The Strategic Roadmap is devised to execute five distinct strategic goals that will focus towards optimizing the use of Information Technology to achieve the Bank’s business objectives. These are: • Establishing program management office and hiring ICT consultancy firm
Acquisition and implementation of a cutting-edge IT Systems by introducing core banking application and switching system Via the use of IT Systems, enhancing the Planning and decision making Processes Building IT Control and Security Systems Developing Information Technology Knowledge and Skills Of course the target of this IT Strategic Roadmap is to implement an Integrated Information Environment that will help the Bank to achieve its mission and meet the needs of its customers now and in the future.
The integrated information environment shall consist of an infrastructure of hardware, software, data communication link, standards, policies, procedures, capabilities, and processes that deliver valuable tools, services, and capabilities in ways that are predictable, cost effective, and adaptable. The implementation of the strategic road map is meant to enable the bank: ? Provide anywhere banking services to its customers through multiple delivery channels; ? Increase profits through the ability to identify and act on the right opportunities; ?
Analyze and classify its customer base into various manageable segments through effective use of CRM; ? Reduce credit risk through consolidating and monitoring customer credit exposure and continuously enhancing credit policies by in placing and ensuring adequate credit risk mitigation techniques; ? Decrease reporting time radically through integrated MIS; ? Reduce operational errors, transaction cost and improve customer services for cost-effective process streamlining; ?
Enhance the system security and control on the customers and MIS database; ? To become a leading Bank in the country. It is with this grand vision and strategic road map that the CBE’s PMO was established. To gain competitive edge in the industry CBE has placed this project as top – do or die project. The resource allocated both in finance, human resource and executive ownership is also clear indication of this fact. 4. 2 The project and its position within the organization’s organogram
Based on huge lesson gained from previous projects and in line with the dictates of the IS strategic road map that required the establishment of an independent PMO, the CBE has early identified the key critical success factors for the realization objective of the IT projects management office. The sponsor of the project has clearly indicated the need to abide by the following principles to ensure project implementation, of course within the set time frame work and budget. Among other things the following fundamental guidelines were laid down from onset: The full backing and co-operation of the CBE’s Board of Management and Process Council, in which the Process Owners have to seriously contribute to the design of the projects, screening of the consultant, and concluding the contract in view of the past experience and the desired transformation; ? The Process Council (Executive management Team members) shall commit itself to availing the necessary recourses for the project and ready to exploit it to the maximum possible with a view to ensuring success. ? Stability of the project team members is assured for the duration of the projects; The project team includes a representative from each of the Core and Support Processes, and the requirements and approval will be solicited and obtained from each Process Owners before confirming the system/module design; ? The Bank shall provide the resources required to meet the scheduled deadlines; ? The Director Program Management shall be empowered to make decisions in order to maintain sufficient momentum to meet the agreed project deadlines; ? The project Team shall be full-time and dedicated for project management and implementation as per the vendor requirement; All business requirements will be completed and signed off by the CBE business representatives in a timely manner according to the schedule; ? There will be dedicated member from the business representatives in the project team as a member; ? The vendor shall assist in all aspects of testing activities and the Bank will accept ownership of the Acceptance Test. Besides, it was also clearly stipulated that The PMO shall exist to provide IT Project management support for all Information Technology (IT) projects successful implementation across the Commercial Bank of Ethiopia (CBE).
With regard to its discretion it was indicated the PMO shall carry out one or more IT projects at a time depending on the priority set by CBE’s management. As part of the IT Projects implementations, knowledge transfer to the IS Staff is one of the main concerns of the PMO so as to support the system after the project goes live. 5. In order to discharge the entrusted responsibilities and meet goals and objectives and properly handle the project management process, the PMO of the Commercial Bank of Ethiopia is proposed to have the organizational structure depicted hereunder.
We can clearly see from the organogram that captioned project is well positioned within the organization to enable to carry out the mandated tasks properly. To enable us gain understanding with regard to the power vested , we would point out the functions and responsibilities of the Board of Management, Consultants ,the IS steering committee, the PMO itself and its director in the following paragraphs. 4. 3. The Board of Management The Board of Management (BOM) is to oversee the overall project management and execution activities.
Moreover, the BOM provides major decisions to issues that may be escalated by the CBE’s President, the sponsor of the PMO. The BOM would also be advised by the IS Steering Committee and the consultant. 4. 4. Consultants/Consulting Firm The hired IT a Consulting Firm would exhaustively assess the existing ICT environment and business requirements in which the CBE operates and recommends effective solution that enables the Bank so as to render a world class commercial banking services. The firm also would be working as an advisory to the IS Steering Committee and the Board of Management on technical matters.
In addition, the firm would provide technical assistance to the Project Management Office during the ICT projects installation and implementation. 4. 5. IS Steering Committee The sponsor of the PMO shall be the President of the Bank. The Project sponsor would: • Approve sufficient budget and resources for the implementation of the IT projects; • Ensure mobilization of adequate staff for the various activities of the project; • Controls project scope, direction and approve all major project deliverables; • Setting-up the Program Management Office and fulfilling the required resources staffing, materials, office, vehicle, etc. ); Holds regular status meeting to keep update the project progress and informs same to the Board Chairman. The IS Steering Committee shall be chaired by the CBE’s President. Members shall be VP – IS, two Board members, two External Professionals and a member from the National Bank of Ethiopia. In addition, the Process Owners (VPs) shall be case-based member of the IS Steering Committee. The IS Steering Committee shall handle the following major tasks: Provides quick decisions on procedural and policy issues; • Provides decisions on outstanding issues which may be escalated by the Program Management Office; • Provides solutions to critical risks which are likely to impact the schedules and costs of the project • Resolve constraint and project conflicts; • Approves the project plan and on-going changes to the plan; • Approves all major project deliverables; • Ensures the deliverables are complete and the project stays within scope; • Holds regular status meeting to review and monitor the project progress. . 6. Program Management Office The Program Management Office is responsible for the overall management of the IT Projects, including RFP preparation, product selection, project monitoring, evaluation, testing, product parameterization and customization, project implementation and rollout, risk and change management. The PMO will serve as the main contract point of the selected vendors to implement IT Projects and shall manage any IT related projects conducted in the Bank.
It is led by the fulltime Director, who reports to the IS Steering Committee chaired by the CBE’s President. 4. 7. Responsibilities of Director – PMO It was clearly indicated that the Director of the PMO needs a favorable environment that enables him to work in an independent but accountable manner. It was clearly stipulated that the Director – PMO would manage and control the proper integration of the IT Projects to fulfill the business objectives of the Bank. Accordingly, the Director – PMO is entrusted with responsibilities to: Ensure that the IT Projects are delivered with the expected quality, time and budget; • Properly administer the project staff by taking the necessary measure; • Ensure that knowledge transfer is made to the PMO teams and IS technical staff; • Ensure that consultants input and advices are implemented; • Prepare periodic progress report and submit to the PMO’s Sponsor; • Coordinate various teams involved in the IT project implementation; • Monitor project costs and schedule as per the approved budget, and highlight any potential problems. To restructure the PMO organizational structure, whenever necessary • To staff the PMO with dedicated and capable staffs with high integrity 4. 8. Competitors, supply & demand, protecting existing values and creating new values In its vision to become world class commercial Bank, CBE has long envisaged to craft a strategy to enable it reach the desired destination. The aforementioned strategic road map is meant to contribute to the realization of the vision in the technology frontier. CBE’s implementations of the first switch to enable it provide card banking services was one of the earlier initiatives.
With a passage of time and entry of new local banks who strategically positioned themselves by introducing latest technology, expediting the implementation of the technology solution was no more an option but an issue of survival. Besides, the fact that the central bank required all domestic banks to implement a core banking solution for its operation meant the need to take the first mover advantage. However, CBE being huge bank in terms of its branch net work and volume of customers it opted to defend its standing in the industry. This and other critical issue has compelled CBE to embark on the project a bit earlier than others.
Despite its ample resource, due to the unique nature of the IT projects CBE couldn’t source the prerequisite capability from within. Of course it has to compete with all industry players all of which are required to put in place core banking solution in compliance with the central bank requirement and also remain competent in the industry. Thus CBE’s PMO has to compete with all industry players including micro finance institutions. In this regard losing a seasoned and trained staff from the PMO was not uncommon despite the real commitment to ensure staff motivation and thereby their retention.
Due to the promising growth of the Ethiopian economy that has registered double digit for over six years and steady momentum the financial sector is taking up, suppliers of hard ware, soft ware and IT and communication infrastructure has eyed on the market. Some are on the verge of establishing a local office instead of stretching from South Africa or Kenya where their regional hub is located. Supply in terms of the captioned items might not be an issue of concern though the internal capability to manage out sourced services is yet to develop within the local companies.
The knowledge transfer in this line also seems to creep. Thus it has remained a challenge as the Banks are forced to rely on mere service of consultants. They say supply at times create a demand. There is of course is an ardent demand for the improved state of the art technology enhanced services Banks aspire to provide by the few urban populace, which constitute only 15% of the entire Ethiopian population. Due to the low average per capita of the nation and low level of awareness it is only a few who would line up demanding the captioned enhanced banking services.
The financial economics view reminds us of return on investment and the related measures. No doubt the outcome of the CBE’s PMO, technology enhanced state of the art banking services, would fetch comparatively a good demand though pay back would remain worrisome. The extended recap of the initial investment might mean the potential challenge to cope up with the latest patches of technology releases. Team work has been one of the long lived values of CBE. Though as such there is no formal knowledge management infrastructure in place there is good culture of transferring on organizational knowledge.
Besides, the collaboration sought in implementing the Business Process Reengineering has contributed in fostering strong team work among the processes of the Bank. As indicated as one of the critical success factors, support of all the processes of the Bank stands at the top of all for proper implementation of the project. Complementing instead of competing among processes for the common goal was built though process. The executive management commitments, the ongoing update on the projects progress among others have cultivated a common vision in the Bank.
The regular meeting that involves top and medium level managers to discuss on the development of the project has brought in a unique and keen aspiration to all. The unison created for the project implementation has raised the bar in terms of forging a common value. If cultivated this can also be geared for higher goals and future projects. On the other hand few in the project did not conceal the fact that the two IT empires have been formed. The existing unit that sustains the legacy application of the Bank and of course the to-be set in the road map that is to determine the future of CBE.
At times, some of the culture is bred to the new environment as few staff has moved from the old IT system to the project office. People in the old island also envy for the seemingly exaggerated attention the new project attracted from the management and others. Managing the change has also been a huge task at times. As not expected upon crafting the road map the soft human aspect required lots of work at the beginning. Crating the captioned value, of course was possible through a process. That was one of the great learning acquired.
Nevertheless, the new value to unite for common goal is one of the successes that have already been realized due to the project. Chapter – 5 5. 1. Scope, Goals and objectives of the IT project Management of the CBE It is clearly stated in the project proposal that the primary goal of the IT project of CBE is to facilitate the core businesses of the Bank such as Trade Services, Customer Accounts Transaction Services and Credit by acquiring and install appropriate IT solutions in order to provide efficient customer services.
The secondary objective of the project is to automate units supporting the core businesses like Human Resources Management, Risk Management, Customer Relationship Management, etc. The specific objective of IT project is to support the following basic businesses of the bank. They are basic because the very existence of the CBE entirely depends on its ability of providing these products to the market in a better and efficient way than competitors. Thus, the IT solutions are required to contain packages of modules that are adaptive to the existing products of the bank. Retail/Consumer Banking Module that comprises but not limited to Saving Accounts, Time Deposit, Consumer Lending, Bill Payment, etc; • Corporate Banking Module that comprises current and Overdraft Accounts, Corporate Credits; • Trade Services Module that comprises Import/Export Letter of Credits, Documentary Credits, Guarantee; In addition to the above mentioned basic business process, the IT project also intends to support the following non-basic ancillary functions of the Bank.
They are non-basic because their role is limited to enhancing and ensuring the efficiency of the bank in conducting businesses. a. Treasury Management Module that comprises management of Foreign exchange (Forex), Treasury bills Fund Management, etc; b. Risk Management Module that supports Credit rating/Scoring, limit, Collateral, NPL Management, etc. c. Compliance Management that supports the regulation issued by the international institutions such as Basel II and Anti Money Laundry (AML); d.
CRM (Customer Relationship Management) that supports to classify and track the customers transaction by product, amount, etc; e. MIS that support hard and soft copy Report production, Document archiving and imaging. f. Customers Delivery Channels: g. ATM (Automatic Teller Machine); h. POS (Point of Sale) Terminals; i. Call Center / IVR (Interactive Voice Response); j. Kiosk – A publicly accessible computer terminal that permits customers to directly communicate with the Bank via a network. k. Internet Banking – accessing the Bank’s network through the public internet network; l.
PDA (Personal Digital Assistance) – A pocket-sized, special-purpose personal computer that does not have a conventional keyboard, that can access the Bank’s network via wireless technology; m. Mobile Phone/SMS accessing the Bank’s network through wireless technology; n. Other channels which might be introduced in the future. o. Institutional Channels: a. ACH (Automatic Clearing House); b. SWIFT (Society for Worldwide Interbank Financial Telecommunication Communication); c. Central Bank Reporting; d. RTGS (Real Time Gross Settlement).
The Bank is also in the process of acquiring Card Based Payment System. The main objective of acquiring the system is to start the Visa Card Services by deploying ATMs and POS Terminals with the related software in Addis Ababa and regional towns and introduce different e-based delivery channels through time. In addition to the ATM and POS basic services, like cash deposit, check deposit, Money Transfer, Utility Bill payment (electricity, telephone, etc. ) are also part of the project deliverables. Furthermore, the following are considered as candidate projects: a.
Data warehousing system that can address the information needs of the Core and Support Process units of CBE. Moreover, the warehoused data, among others, could be used to do various researches using Data Mining techniques. b. Enterprise Architecture: An Enterprise Architecture (EA) is a conceptual tool that assists organizations with the understanding of their own structure and the way they work. It provides a map of the enterprise and is a route planner for business and technology change. The EA project helps the bank to acquire an EA vision that helps the bank to chieve an architecture that meets its business objectives, mission and vision. Moreover, the developed enterprise architectural vision drives the bank to reach the point where it can apply IT to the maximum support of its business objectives, mission and vision. There are frameworks, such as TOGAF (The Open Group Architectural Framework), that help to design EA, which meets the banks requirement. c. IT Service Delivery & Management: The concept of an IT service delivery and management may exist in any organization that uses information technology for its day-to-day activities.
As the bank is planning to be the aggressive user of ICT, a very well organized service delivery and management mechanism is very vital. The IT service delivery and management is more of development of processes that help the IT unit to provide a good service and it helps also to manage and continuously improve the IT services. There are frameworks, such as ITIL (IT Infrastructure Library), that help to develop the service delivery and management processes of the bank. d.
IT Governance: IT governance is the responsibility of executives and the board of directors, and consists of the leadership, organizational structures and processes that ensure the enterprise’s IT sustains and extends the organization’s strategies and objectives. How does the organization get IT under control such that it delivers the information the enterprise needs? How does it mana