The pace of The Co-operative Group’s Financial Services’ IT transformation has been phenomenal since Gerry Pennell joined the bank in 2003.
‘Technology could have been viewed as something of a sleepy hollow a few years ago, but certainly not now,’ says group chief information officer (CIO) Pennell.
‘The scale of change that we have embarked upon is close to the largest transformation I have seen in the IT industry.’
Such sentiment comes from a man with 30 years’ experience of working in the technology industry. Though Pennell’s experience is largely in financial services IT, he includes technology director of the Manchester 2002 Commonwealth Games on his CV.
Pennell joined as Co-operative Financial Services’ (CFS) director of IT development in 2003, just after the bank’s decision to merge its financial and insurance IT infrastructure.
It was then that Pennell believes Co-operative IT started the process of laying the foundations for putting development on a much more commercial footing.
He became IT director in 2004 before taking up the role of CIO for the entire Co-operative Group in 2005. This includes a variety of brands and businesses – including Co-operative grocery, pharmacy, travel and funerals. Pennell says it has been a busy 12 months or so.
‘Last year we started to take on board the infrastructure services for all the other businesses with the aim of achieving economies of scale by cutting better deals with suppliers,’ he says.
‘Becoming group CIO obviously changed my role and meant that I could not be involved to the same level of detail as I had been previously, although I still spend two-thirds of my time on the financial services side of things because that is still where two-thirds of the IT budget is.’
Pennell admits there was a period of adjustment in taking on the extra workload, but that it was a necessary and important move.
‘It makes total sense because when you look at the strategic aspirations of The Co-operative Group, a lot of it is about exploiting the synergies within our business,’ he says.
Such exploitation includes a full transformation of the group’s IT infrastructure for the insurance business, a project led by Pennell in 2005.
‘The insurance company needed to change its cost base and the way it serviced customers,’ says Pennell.
‘The house-to-house agent model was not sustainable, so although we still needed a sales force we set up a call centre and web capability to quote and close on insurance products.’
Such technology-led business changes benefit from the commercial perspective that Pennell brings to the role, as well as his accumulated experience from three decades in the IT industry.
Pennell, however, regards the changes at The Co-operative Group to be one of the biggest achievements of his career.
‘I hope that over the past couple of years, I have brought a fresh pair of eyes to bear on technology in the company and the way it is managed,’ he says. ‘We have reduced the size of the department, made it much more efficient and effective and we are interfacing with our internal customers much better.’
Pennell is also proud of the management team he has reconstructed to support his role as CIO, a department that is made up of a blend of internal staff and outside appointments.
‘About three-quarters of the management team are external appointments but they are all driving home the changes of our transformation strategy,’ he says.
Pennell has eight direct technology reports and receives support from a human resources and finance person. He leads a department of 900 staff, 300 of whom look after the technology underpinning the retail businesses, and 600 of whom run the financial services business.
‘We are not quiet on any front,’ says Pennell. And with so many areas of the organisation operating under the umbrella of The Co-operative Group, there is a lot going on.
‘We are doing a lot more on the internet for our insurance business – and on the banking side, we are facing faster payments and looking at how we can get a better view of our customers,’ says Pennell.
The organisation has a large chain of pharmacies and is examining the use of robots for dispensing medicine. In the food business, meanwhile, the company is looking at renewing its inventory management systems.
‘Last year, we rolled out a point of sale system in all our food and retail stores,’ says Pennell. ‘We also re-engineered our web capability in our travel business over the past 12 months with a new web site.’
Pennell has additionally overseen a rollout of The Co-operative Group’s membership rewards scheme, which entitles customers to a profit share at the end of the year.
‘We want to service our customers across all our businesses by getting to know them better with the relaunch of our membership rewards scheme,’ says Pennell.
The firm has so far issued two million membership cards managed using an Oracle customer data hub, the core software component of the project.
Other changes Pennell has spearheaded include changing the IT sourcing model across the whole of financial services, which will involve a much higher outsourcing component.
CFS signed a £22m seven-year contract with outsourcer Xansa in 1994, which has already been extended twice, most recently in 2003.
The latest extension, expected to be finalised in March, will see the number of outsourced staff rise from 150 to between 300 and 400. Pennell says the main motivation for outsourcing is fast access to increased capability.
‘Attempting to modernise rapidly requires access to a broad set of skills, so attempting to do that solely in-house would be very expensive and slow,’ he says.
With so many projects and business components under his care, Pennell’s remit is wide and his role presents a range of issues.
‘I think the biggest challenge is trying to work out where you have real o wnership; where you can afford to delegate and where it is not safe to,’ he says. ‘And that is probably the single biggest challenge in my role over the past two years – and I do not always get it right.’
But the success of The Co-operative Group’s IT attests to Pennell getting it right most of the time.
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