ICICI Banking on IT

The cost of IT in most organizations is about the same. But it's the value we extract that will determine how competitive we are.

Gunjan Trivedi Apr 09th 2009 A-A+

At ICICI Bank, it's users- not the IT team - that own, underwrite and monitor IT implementations.

Each user group is responsible for the success or failure of the applications they need. It's an approach that K.V. Kamath, MD & CEO of ICICI Bank, champions and is founded on his own experience with ICICI's Project Finance Division in the early 1980s.

That very stint led him to believe that 'incomplete communication and inappropriate ownership' are instrumental in the failures of IT projects.

In your first stint with ICICI’s Project Finance Division, you implemented its digitization. How did the project influence your outlook on technology as an investment?

That was way back in 1981 when all we had was an 8-bit machine with 20MB of storage running on an 8086 processor. Despite this, we ran the entire leasing department of ICICI. When I say we ran it, I mean documentation, mail, spreadsheet, database, billing and accounting processes. It taught us that we could effectively run an almost paperless office and that technology can be applied in an easy-to-understand and cost-effective way across the organization.

The division's computerization also changed the relationship between machines and individuals. Technology was once supposed to be the master and users were slaves. Technology could only be accessed from the CTO's office and by his team of programmers. With the division-wide computerization, this relationship suddenly changed, and machines and users were on an equal footing. People had developed the ability to interact with machines directly and make them do whatever they wanted.

At ICICI Bank, why do business units or user departments own their technological implementations?

To go back to 1981 and the period after, I observed that, by and large, implementations failed because there was an interface in which a third person took in what the user wanted, translated it to somebody else, and then an implementation was attempted. There were two primary problems with this approach: incomplete communication and inappropriate ownership. These are the biggest reasons why IT projects fail. Given this, we felt that user groups should own and implement their own IT.

Does this approach help cut implementation costs and lead to better technology management?

I think those are some of the benefits. The true benefit, however, is in articulating your needs, having a better understanding of technological challenges, finding a way to resolve those challenges, and executing a technological solution. This leads to critical benefits. First, there is a dramatic reduction in the number of failed projects. Second, it enables a reduction in implementation time. Eventually, all this naturally saves costs. Since user departments are conscious of their overheads, this approach leads to further savings.

What then is the role of the CIO at ICICI Bank?

We have to remember that we also need to run technology in such a way that there isn't technological anarchy in the organization. Various user groups can end up setting up disparate systems that don't communicate with one another, hardware platforms that are different from each other, and protocols that don't interact. There is a strong need to ensure this doesn't occur. A CIO brings various user groups together and keeps them in harmony in the context of their technological needs. The CIO is like a small clearing house, which ensures that all systems talk to each other, that all software is compliant to a viable extent, and that various divisions understand the costs involved - hardware and software - in specific projects. This can be done with a team of less than 15 people and you don't need a large office to carry out this function. Here, the people implementing projects are embedded in user groups.

You introduced Silicon-Valley-styled ‘90-day rule’. Is this still the designated time frame for IT projects at ICICI Bank?

This rule not only continues to be the time frame for IT projects, but for any project within ICICI. We're always asking our business divisions why projects can't be done in 90 days or less. For the most part, we have

found that when we have articulated this rule and made it clear that we're going to stick to it, we have managed to. A big advantage of the 90-day rule is that it prevents projects from slipping or of getting out of hand, and being abandoned for lack of inputs. This rule ensures we have tight control over the implementation of projects.

However, there are exceptions. Certain projects, such as a greenfield project, might take more time to roll out. Also, in projects in which the software is available but people need to figure out compatibility issues, implementation can take more than 90 days. Having said that, we have also seen instances where vendors have quoted a year for implementation, and we decided to run the project ourselves with the vendor acting as an advisor. We found we were able to implement the project well under 90 days.

I believe that sometimes there is a lot of leeway built into project implementation schedules. But if you have a confident team, you can roll it out in under 90 days.

Has this approach helped increase ROI?

Honestly speaking, we have never taken the ROI approach. For us, technology is a base case. We can say that we are almost a technology company running a financial services business. When that is the case, which ROI are we talking about? Rather, I stress on figuring out how I can ensure that the cost of a project is in the best interests of the business. I also try to assess by what multiples or factors a project is in the best interests of the business.

How does ICICI Bank deal with compliance? Does Basel II, for instance, put a strain on your IT implementations?

Not at all. In fact, whatever we have had to do in terms of Basel II, we could have almost done in-house. There is no stress at all in terms of what we had to do, as an organization, within the scope of technology or outside. Indeed, technology has gone a long way in ensuring compliance. Increasingly, you have technological solutions that validate whether what you are doing complies with regulatory requirements and internal policies.

With technology, the level of compliance comfort increases because real-time validation is introduced, compared to the manual or end-of-day interventions. In the areas of trading, in particular, with technology, you can have real-time monitoring on limits without causing a sense of strain on processes and functions.

How will IT help expand ICICI Bank's services to rural India, given the country’s poor technology infrastructure?

I believe that when we roll out into rural India in the next 12 to 24 months, technology - in terms of telephony - would have penetrated deep into rural India. And telephony will be the primary connect between urban technology and rural India. Without technology, we don't have a chance to execute our rural strategies.

In fact, we expect that our rural efforts will probably cause a technological disruption in the way we use IT. We might witness an interesting situation, in which we will have to retrofit what we will be doing in rural India into urban India. I think we will have plenty of cutting-edge technology that will go into rural India before it touches more urban areas. We'd rather not touch already installed bases in urban India and do the cutting edge implementations -basically aimed at bringing down costs - in rural India. I expect chip-enabled smart cards, biometric verification, etcetera, to be introduced into rural India significantly ahead of urban India.

Rural India will work on a technology-led, branchless model. In this mode, authentication becomes critical and we will need smart technologies to authenticate. Biometrics is one. We will have to leapfrog with technology if we want to make our rural strategies work.

So far, technology has been a key differentiator for ICICI Bank. With other banks adopting a similar approach, how will ICICI retain its lead?

Ultimately, technology is a mindset issue. I can't say other banks will not do well with technology. However, we have to ensure the strength of our ethos, which is that users own technology. We must maintain the capacity to keep an open mind where technology is concerned, show an ability to take risks, and have an entrepreneurial mindset with technology and leadership.


Frankly, when I look around, I find very few people who have these. For example, let's say you want to run established CRM software. You find that costs are becoming prohibitive and that your vendors are no longer able to dialogue on costs. You are happy with the system, but you face a cost dilemma. What do you do? Do you encourage a user group which says it is happy with the product but holds you, as a CEO, responsible if things go wrong? This user group does not meet the preconditions I mentioned. But, if you have a user group that agrees to own the challenge, that agrees to take a leap and says that they are ready to take a risk since the benefits are huge, bingo! This is the sort of effort which is required to be successful with a technological edge. Now, if there is somebody else who can also take these kinds of decisions, then he becomes a competent competition. Point is: can they do it time after time after time?

As more IT-driven financial products and services are being commoditized, how will ICICI ensure that it keeps introducing market differentiators?

I don't think commoditization happens to that extent. There is still a lot of customization required. And that is where the problem lies. What you see is that, however commoditized a product might appear to be, when you implement, you have to be prepared to face some pleasant or unpleasant surprises. We have become immune to this. Whatever shocks exist, we have to be prepared to bear them. There is, however, a learning curve and it is one of the biggest barriers to anybody competing us. And we're continuously going up that curve.

We have the humility to say that we learn from any business, not just the banking business, and that we keep our ears and eyes open. To be successful, I maintain, we have to have the mindset that we are continuously open to ideas and innovation, and are on the lookout for the next improvement that we can leverage for even greater advantage.