Investors Chronicle is not famed for its hyperbole, but it certainly likes what it sees in Standard Life. Since the Edinburgh-based life and pensions company de-mutualised and floated last year (emerging from the doldrums of several weak financial years) its rise has been “little short of meteoric”, the magazine gushes. Half-year financials show how huge leaps in efficiency led to a 71% jump in operating profit and a 31% rise in new business.
A great deal of the credit for that gilded resurgence is being placed at the door of Standard Life’s IT organisation. Over the past three years in the run up to its listing, the company has built a bedrock of cutting-edge technologies and fresh approaches to IT, with one fundamental purpose – to enable true business agility. It has created one of the most advanced implementations of service-oriented architecture, put into practice lean processes and radically shaken up the structure of the development of its core applications, with IT staff ‘embedded’ within the business units they deliver to.
Standard Life has created one of the most advanced implementations of service-oriented architecture and radically shaken up the structure of its application development.
That shows in its vocabulary: teams – on both the business and IT side – talk about concepts such as agile development, peer and extreme programming, lean methods, provocative prototyping, ‘user stories’, and IT/business co-location with such fluidity that it is often impossible to tell which side of the organisation they originally come from.
But the embracing of such technologies and approaches are not for the pure sake of it. In recent years, Standard Life has driven its portfolio of corporate pension clients upmarket. While three years ago, the company’s typical client was a 25-person engineering company, it has gone after and won a different level of customer: the UK employee pension departments of Nestlé, Coca-Cola, Dutch airline KLM and many other bluechips are now among the 37,000 group schemes handled by the Scottish company. In fact, it now boasts 43 of the FTSE100 companies as clients.
That transition has taken the funds under its management from £8 billion to £14 billion, but it has sought to process those with a much leaner team. In 2004, its pensions administration headcount stood at 870; by 2007 that had been cut to 450, with plans to take that down to 400. But, as part of the massive overhaul of the life and pensions business as it switched from mutual to public status, the company’s aim has been to leverage online, customer self-service and other technologies that improve the service to clients even as those costs are cut.
The depth of the company’s enthusiasm for agile methods is difficult to exaggerate.
“Adopting lean techniques allowed us to de-construct our processes, remove any parts that were wasteful and focus on the parts of the process that were of the highest value,” says Garry Morrison, Standard Life’s customer service director. “We kicked the tyres to see what kind of service our customers were getting, what the service should be like going forward and asked ourselves what technology approaches would support that.”
Within the ecommerce division, which supports almost all of the company’s life and pensions activity, the breakthrough change came two years ago when the company took the radical step of integrating its information systems and business staff.
Historically, information systems (IS) staff were in a different building, in a different part of Edinburgh, says Jill McFarlane, ecommerce development and communications manager. To make a change in the system – no matter how small – a customer-facing pensions employee would need to raise a trouble ticket or a change request and send it over to IT.
“We just asked ourselves, why do we have analysts sitting in a different place; let’s have them in the team, doing analysis purely on the ecommerce offering, with them listening in to what the support staff are hearing from customers and being able to react to that.”
“What we have now is one department, roughly half IS staff and half pensions people: with everyone sitting together,” she says. “We realised that there was an easier way to do it – to get the people who are building this stuff sitting next to people creating the business cases.”
Lean, the manufacturing-industry concept of eliminating waste from processes and concentrating on the value parts of the process, has been part of Standard Life’s business vocabulary for several years.
When the company’s IT management first came across the concept in 2005, there was intrigue as to how that could be applied to the software development process. That led them to Mary Poppendieck’s seminal book Lean Software Development. Impressed, they invited Poppendieck to Edinburgh.
Keith Jones, CIO recalls the sessions: “The light bulb moment for me was when she said that something like 60% of all code that is delivered is never exercised. I thought that was astonishing, that there must be some terrible companies out there doing some really bad things. Then she said, ‘By the way, we have done a sample of Standard Life’s projects and its something like 64% for you guys’.”
What was typically happening was that when business customers signed up for a project they thought it was their one and only chance to get all their requirements undertaken. So they’d specify all of them – all in one phase, says Young. “That differs radically from agile, which lets them work through the requirements progressively.”
One key benefit of agile is that business customers trust IS more, says Young.
The applications produced out of agile methods are much higher quality – not just in terms of a lower number of code defects but also in terms of actually meeting business requirements, says IT design Gordon McLean. “We are able to steer the ship much more often. It allows the business to change their mind.”
To see how that works, just talk to ecommerce customer support reps like Jason Hartless. “From a customer manager’s point of view the transformation has been radical. Up until recently, when a client raised a problem, the liaison would call the IT helpdesk and be given a trouble ticket number. It was faceless; you’d have to keep chasing it, knowing you were in a queue and eventually it might get fixed,” he says.
“Now with these guys here the turnaround time is amazing.” He cites the example of a problem a customer was experiencing with the display of a certain class of new pension scheme ‘joiner’: by walking across the corridor and alerting the mainframe programmer, an error in the underlying code was identified, tested and fixed within a matter of days. “The thing is that the customers are seeing that and appreciating it. They know that they can come to us and even if it is a major problem that takes months, they know it will get done.”
One major issue with that closeness historically has been the technical terms used by both sides – pensions speaking one language and IT another. “That has broken down quicker than I thought it would,” he says.
Identifying problems as they occur and the process of fixing them is now iterative. “Feedback cycles are vastly improved,” says Gordon McLean, IT designer with the company. ”I sit with a business customer and say, ‘Is this what you wanted?’. We can get to the bottom of what they were after. That sparks ideas for them and that is where the business value comes in.”
Customers also appreciate having developers and analysts on the team. Rather than having to wait for the usual escalation of a problem to a separated IS function, problems are diagnosed as they are received and fixed. The fact that such action is taken impresses customers who are used to low levels of services from other organisations. “It works both ways: the business people get a little bit more understanding of what we are having to do. You just bounce. The speed that it goes at is much, much faster,” says McLean.
“It’s slick. The greatest change for me personally, is that I can come off a call, walk across the corridor, get some advice and even though there may be no immediate fix, it helps me decide what I do next with the client problem,” says Hartless.
The iterative nature of the interaction that has flowed from the co-location of the business and IT dovetails nicely with notions of agile and peer programming (see box) – the difference here is that the peers are often not two programmers sitting together but a business person and a developer.
The project line at Standard Life is now much shorter – users are seeing iterations of any development every two weeks at most, and six months is now seen as an extended project.
“The business users are much more impressed with this way of working,” says CIO Keith Young. “Being right beside the practitioners is much better than: ‘I tell you what I want, you write me a report, you disappear for a while, and then I get some code’. Previously the business community couldn’t care less how IS worked, as long as it got better at what it was doing.”
The company estimates it saved £12.9 million through SOA reuse, and 90% plus of projects are on time.
“Now if we said we’d use a traditional waterfall approach they would quite quickly tell us what they thought of us,” chips in one of his colleagues.
“They are watching a system that is being assembled in front of their eyes, that is what is happening,” adds Young.
But the interactive processes do not stop at agile methods. The web design group has started to use what it calls ‘provocative prototyping’. It makes often-radical changes to pages and processes and then distributes the prototype to an unrestricted audience within the company via an emailed hyperlink.
The daily feedback is channelled into daily iterations of new prototypes, with the process running for no more that one to two weeks. “By minimising the time and effort required to participate, we find that senior business managers get involved in something that would be relatively low level normally. The aim is to innovate, be proactive, remove as many of the normal project constraints as possible,” says Robert McGill, senior IT developer.
In interface design, for example, the team will deliberately include text and sentiments that they know go against the existing corporate culture. “By provoking a reaction, we force people to get engaged, suggest alternatives,” outlines McGill.
That was used on the redesign of a two-year old set of screens called My Products that aggregated the different types of products an individual customer might have – life, healthcare, mortgage and so on. Because that spans Standard Life’s different business units, the team struggled to get input as many stakeholders felt the internal politics of the redesign would be too great. “The challenges were ‘what can we do in one month?’,” says McGill. “So that prototype was released for comment for five days; about 50 people commented. But there was such interest generated, and it was recognised as so fundamental.”
Given Standard Life intends to unify the disparate parts of its retail offerings under one point of control, that was a critical test.
The slicker service to customers also translates into lower costs. By moving all but 10% of its 37,000 corporate schemes onto the self-service, straight through processing-backed ecommerce portal, Standard Life has slashed its day to day administration costs. Additional savings have come from building other fundamental planks of IT infrastructure. The company’s SOA now uses 440 shared business services within different applications.
And the ability to reuse services from that catalogue helped the company cut its development budget in half between 2003 and 2006. And in the closing 18 months of that period, the company estimates it saved £12.9 million through SOA reuse. Moreover, 90% plus of projects are on time.
An example might be the service ‘Provide Customer Information’; a recent view of the company’s live catalogue showed that it was in use across 49 applications. Overall, Standard Life estimates its reuse level stands at 54%, with the top 50 to 60 of the services being widely employed.
As that implies, there are still more gains to be made. “Anyone who stands still is going to be lost,” says McGill. “The waterfall development approach or running separate IT and business functions is not going to have a future, because there are companies out there that do it differently, do it faster and deliver business value. And as soon as folks start to learn that, they are going to start questioning their own IT set up.”
Be agile Writing software using agile methods is not just quicker, it saves money and produces better systems too.
Aligning IT and business processes Business agility demands are threatening to widen the gap between business and IT.
Find more stories in the SOA & Development Briefing Room