Interview of TAdviser with the head of the block of information technologies of Alfa-Bank Martin Piletski

Martin Piletski: The ambition of new strategy is that Alfa-Bank will correctly try to change to answer calls which before it are put by the world of technologies and to develop the business so that to build up good relations both with external, and with internal clients. Main goals - to learn to develop quicker, with higher quality and cheaper. Against the background of quickly changing situation in bank to the sphere it is very important.

Within new strategy it is paid to further use of culture of Agile and active integration of advanced technologies of development and deployment of projects (DevOps) into operation of the IT block much attention. The key place in it is taken by change of culture of interaction of IT and business. Strategy includes many cultural changes aimed at improvement of relationship and mutual understandings of business and IT.

Strategy also assumes fast changing of business processes of bank because the markets quickly change, and clients will be more and more price-sensitive its services. An essential part of strategy will be devoted to these processes. One more area which it covers, - development of a multikanalnost.

Martin Piletski: We are in an ecosystem, and, of course, should look at it. By strategy preparation we communicated with professional advisors much – with Big Four of the consulting companies in the financial sphere. They shared with us information, including, about the international experience and practice. Also very much communication with IBM company helped: it has a good technique of assessment of a didzhitalization of financial companies, and they provided us the view of a situation.

By strategy preparation we looked also at other financial companies in different regions, including Europe, the East, Central Asia. Everywhere there are best practices which could be introduced in the organization.

All these observations led me to several personal outputs. The first – the industry quickly changes, and rates of change will be very high in the next five years. One more output – goes differentiation between the companies more and more, and, I think, only couple of percent from them will appear in "winners". The rest will difficult survive in the market, they will collapse and battle at the price of services for the client.

Martin Piletski: I assess something positively, and something is not present. In general it is possible to tell that within the previous strategy we reached very much. It was interesting and included several main slogans: multikanalnost, development of own competence center of IT, implementation of BPM and BPMS. Alfa-Bank already implements multikanalnost elements - it is a great achievement, now all market goes this way. We also implemented BPM. We develop competence center. Also we received many source codes of our systems what we paid less attention earlier to. Thus, we laid the foundation for further serious development.

Minus, perhaps, at rates of changes - they do not suit me. About 50-60% are made of what we were going to make in three years. Such rates of changes were connected with crisis and some other things. It would be desirable that everything occurred much quicker. New strategy considers it and also our previous errors.

Martin Piletski:For the last three years we had ruble expenses, we optimized the budget, and for this period it decreased approximately by 20%. For 2017 the budget is still imposed. I expect that it will be at the level of 2016, maybe, there will even be small growth. As I already spoke, a considerable part of new strategy is connected with cultural changes, creation of joint commands, Agile implementation – all this does not require heavy expenses, and requires a special spirit on change of approaches in the company.

Alfa-Bank carefully weighs what to make investments in, and investments should bring economic effect, there should not be implementation of technologies for the sake of technologies. Therefore we very much develop the system of tracking of effects of projects - both short-term, and long-term. Very much attention is paid to it.

Martin Piletski: There is a lot of sources of cost reductions. We optimized costs practically for everything. These are tens, and even hundreds of small tasks which in total gave effect of economy. It affected, for example, and expenses on the state, and on licenses which we transferred from the currency plane to ruble, on replacement of a part of proprietary technologies by open source.

Also we saved thanks to failure from third-party support of a number of systems, from cooperation with some companies, and transferred support to our own competence center. In it examination on BPM systems, ERP, a back-end and to the frontal systems, etc. develops. We began to create this center about four years ago, and now in it already five or six divisions with the general state in several dozens of people. The competence center on support of ATMs was one of the first.

Martin Piletski: Regarding technologies we will look at internal perimeter, and somewhere we will continue to work with partner outsourcers because achieved high discounts there. It is difficult to give a ratio of services of outsourcing and insourcing as dynamics of projects within a year changes.

I can note that Alfa-Bank differs from other banks "A" of a class a little. This class means model of the most effective expenditure of money – only where it is really necessary. When we compared our bank to the international companies, we had an indicator of use of outsourcing above an average. So it developed historically. In some areas use of outsourcing reached 100%. In other banks "A" of a class comparable by the size to ours, higher level of insourcing is observed. It means big efficiency, than at us. Now we close this gap which historically arose, returning to an average quadrant concerning balance of outsourcing and insourcing.

In Alfa-Bank it is used tens, hundreds of systems, and on some of them earlier we had no competences, all of us gave works on them to partners. When there are significant changes in currency rates, the ruble weakens, you begin to consider efficiency of these costs, to look for local partners with whom there will be payments in rubles, to increase own competences, etc. I think what about 1/3, can be even to a half of services, we will buy in the market, but at the same time we will have own competences. Thus, we in very considerable degree will not depend on vendors.

Take, for example, a system back-end where on some technologies we strongly depend on suppliers. Within two years we will show that ourselves are experts in this area that we can understand these technologies and without suppliers.

Martin Piletski: It would not be desirable to do advertizing to any suppliers, but DevOps is about the technologies which are used in support areas and maintenances in the field of Big Data. In these areas open technologies successfully work for us. There is also an area of integration where there are such systems as WebSphere. They can also find a quite good alternative with the open code.

End in itself to implement open source everywhere where it is possible, at us at the same time is not present. We study a successful and bad experience of the companies which already passed some way concerning use of open source, and we want to apply the best already acquired experience.

Martin Piletski: I understand a slogan about increasing investments into IT. It reflects a paradigm that everything around very much changes, and the dependence on IT increases. It concerns not only bank the sphere, both machines, and refrigerators, etc. Computer technologies allow to create new materials, to reduce the price of products, to replace human work. At the same time, money in itself will not help. Along with investments also change of culture, behavior, training of people, change of standards of decision making is necessary.

Martin Piletski: We – IT – are engaged in the fact that we help business to achieve its goals through automation. Tasks to the IT block are set by the one who is closer to the client and understands the processes. Both the individual, and the Central bank, authorities, etc. can be the client. Now in Alfa-Bank we build the culture of "the owner of a product". This is the person who is responsible for a product. For example, opening of accounts. The owner of a product knows how to perform this procedure quickly and correctly. This person has a special IT command which also understands this product and is engaged in it.

Martin Piletski: For the last 3-4 years there were significant cultural changes in Alfa-Bank. The top management of bank began to understand and accept the value of IT really. In certain cases now the top officials know about DevOps even more, than employees of the IT block. The top officials are involved in a chain of adoption of projects, creation of a cultural element.

Martin Piletski: The financial block is engaged in it. It has partners who are engaged in different businesses, including the partner in IT investments. This partner has a clear understanding of IT projects and a technique of efficiency evaluation of projects. All results are estimated by financial effect. If, for example, due to optimization of any process the number of complaints from clients is reduced, then leaving of clients to competitors will be less that, as a result, will pour out in economic effect. The non-material effect of any project can be transferred to a financial criterion: service quality improvement, improvement of dialing of clients, process simplification, creation of the best impression, opportunity to sell is more than products, the help in the solution of a question of the Central Bank because of which differently Alfa-Bank would be fined, etc.

Martin Piletski: Three years ago I would tell you that in IT 1231 employees work, they are separated into six divisions and five competence centers. Now I can tell that the IT has no borders. We have many divisions which are engaged in automation. It both Alpha Lab, and division of BI, the card center, is IT in divisions which are engaged in product activity, etc. It is a trend which I see in all world companies: there is an IT central block which is responsible for large projects and infrastructure, and there are IT employees who are closer to business and help to understand business challenges.

Taking into account it, I would tell that now about 1500-1600 employees from whom about 250 people – in Alpha Laboratory work for automation in Alfa-Bank. At the same time there are a lot of "gray" zones where employees are engaged in automation, but are registered as business users. And in it there is nothing bad as often indistinct border where the IT and where comes to an end begins.

Martin Piletski: The greatest attention is required now by projects of infrastructure transformation. Such tasks often look unattractively, but similar projects create the soil for what the company wants to implement eventually. There are huge financial pluses, but the command does not see them, and I help them to see these pluses. For example, if we created a MDM system, it is capable to work through social networks, and it means that we can refuse some number of SMS and save on payment to operators.

One more project requiring my special attention - the ERP system which we want to implement. Still we implemented the ERP system of SAP only regarding processes of HR. Now we want to use ERP and for the processes connected with business activities, accounting of assets, etc.

Martin Piletski: Certainly, at present it is infrastructure projects too. Purchase of new servers, upgrade of systems that they were capable to work with more high load, projects on the future to pave the way – they labor-consuming and costly and therefore are welcomed by nobody. Here I act and as the sponsor of projects, and as their defender, the head, the guru.

If to look at the price list of our server for the core banking system, then these are the seven-digit amounts in dollars. Servers stand more, than the whole building where they stand. At the same time each 2-3 years need to be bought the new server because requirements to a system grow, we extend. These costs should be planned in advance, to prepare estimates and so on.

Martin Piletski: A number of technologies which are not fully used already came to banks. For example, it is possible to carry to like those BPM, BPMS – they even at the very beginning of use. At the same time, in my opinion, what will change the bank world is not technologies, and first of all culture. If the bank purchases technologies for millions of dollars, it will be as the general who has one thousand tanks, and his soldiers at the same time will be as janitors who never held in weapon hand. All technologies require an ecosystem around themselves, people, they demand changes in the heads.

The existing technologies are already enough to make the world it is crazy beautiful, however many instead of fully using their potential, think of what new to implement from what is not mastered yet. Therefore, I think, now it makes sense to wait and master a little what already is.

Many banks still use technologies to which not one decade, the set of systems which are not connected with each other, and at the same time implement Big Data and other similar things. It is necessary to put in order "kitchen" at first. When the apartment empty, to it it is possible to deliver a new sofa, new things, and many, figuratively speaking on a sofa try to deliver still something. I can call the mass of useful new technologies, but I think that at first cleaning from garbage is required, and it requires a lot of cultural support and costs money.

Martin Piletski: So far there is not a lot of, but we are going to remove. Within transformation we are going to remove many duplicative systems. These systems grew from other culture, at other relation, they reflect business in the past. I think, each large bank will have one hundred, another of systems which with each other compete. We will not integrate data of all these systems, it will be difficult to be made because now the 21st century, time of other technologies.

Martin Piletski: Big perspectives. The FSSP, for example, well automated work of court ushers. If they did not make it, just would fill up us with papers – we receive them many every day. Among other examples of exchange of documents in electronic form - we can hand over in electronic form financial statements of bank, annual reports. Examples when we can exchange with state agencies and auditors electronic documents, there is a lot of already now. We send information gigabytes there.

I would tell that with development of the electronic digital signature big perspectives for electronic interaction are created. It would be good to create an ecosystem in which all parties could exchange documents in electronic form, without paper. So far we are from it very far: still one of troubles in Russia – on everything is necessary a piece of paper with a stamp. The EDS can promote in many respects the solution of this problem, and those initiatives which are accepted concerning the EDS recently, they are very useful.

Martin Piletski: The alpha Laboratory develops very violently. I think, it will be correct if you ask this question directly Alfalab's heads.

Martin Piletski: These plans remain. So far we were definitely not defined to what regions Alpha Laboratory will extend, but the approximate ideas already are.

Martin Piletski: Earlier I already mentioned that a part of functions of contractors takes away on itself our own competence center now. One more important change - we began to pay more attention to intellectual property and volume that Alfa-Bank had source codes softwares which is developed for it. Earlier we often allowed suppliers to reserve the right to source codes. Now the intellectual property is for us bigger value, and we often conduct careful negotiations with suppliers on a question, lump and in what volume it will belong upon completion of works and also - as she can dispose.

I can give one more big change. Earlier we employed suppliers for accurately fixed range of works on volumes, terms and payment. Now we pass to other principle: we agree with suppliers that they were a part of our Agile-command and participated in the project as a resource.

The third change – we leave big, "cool", "antler" suppliers to less large. It is possible to tell including to it which work in a garage. Sometimes in garages very valuable things are created. Often begin the big successful companies, but then when they grow up with garages, quite often become "antler", and the quality suffers. We began to separate the companies on actual values which they create, but not on image.

Martin Piletski: Such companies are, but I cannot report their name now.

Martin Piletski: The effect is huge, it is calculated by millions of euros. For example, having stopped the relations with one of suppliers, we received an economic benefit approximately in 3 million euros. I expect from the termination of the relations with the second supplier still big benefit – 10 times more. The speech in both cases goes, of course, not about a single-step prize, and about lower TSO within several years.

Martin Piletski: We always look at that with whom the contract is more profitable. It is sometimes more profitable with integrator, and it is sometimes better to imprison him directly with vendor. If unambiguously it was more profitable in all cases only with one party to sign the contract, life, of course, would be much simpler, however in practice it is necessary to select and look at a number of factors at adoption of such solution.