How Lloyds Banking Group Is Moving Finance To The Cloud

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When Matt Trager joined Lloyds Banking Group (LBG) five years ago, the organization was in the midst of delivering a multiyear transformation of its finance function. The goals were to replace the financial consolidation and accounting software as well as the general ledger. After a long and challenging requirements-gathering phase, the cost estimates for required customizations of the planned on-premises finance system continued to rise—exacerbated by the ballooning cost for IT, consultants, and contractors.

But cost wasn’t the only issue. “We saw that all these customizations were building an environment that mirrored the one we already had—it was a lift-and-shift,” says Trager, the head of finance data and architecture for LBG. “Doing things the old way was going to get us the same old answers.”

Courtesy of Lloyds Banking Group

The general ledger project was halted, and the team focused on delivering the financial consolidation solution, which was late and over budget.

Three years later, LBG saw an opportunity to try again. The inefficiency of having both a primary and secondary ledger as well as the accompanying application support issues continued to be a challenge—and since the last effort, the finance organization had matured in business architecture, program management, and business analysis. Another factor: The relationship between IT and the business had changed from being transactional to a more collaborative partnership.

There was also another pressure point: LBG’s secondary ledger ran on an older version of Oracle E-Business Suite, which was on extended support and was nearing end of life. The organization needed to decide whether to update to the newest on-premises version or “do something radically different,” says Trager.

“We had done a lot of restructuring to get the right resources together, so I think our overall capability had really increased,” he says. “So we decided to look out in the marketplace and see if we could leapfrog this program.”

Far More Than a Tech Refresh

Because it is subject to regulation in the UK, Europe, and the US, Lloyds Banking Group is constantly responding to an evolving framework of requirements—while facing the post-financial crisis budget challenges and the need to innovate to meet rapidly changing market demands. Operating on an outdated architecture with a range of disjointed data feeds was not sustainable.

But technology was not the most critical issue; it was a catalyst to help the organization evolve how the finance function works, rethink what finance will look like in the future, and determine how IT can help make that happen.

“We see updating our technology as a way to bring about a broader cultural and behavioral change around how systems, processes, and data are managed,” Trager says. “These projects create moments of truth when you can force a long-standing issue to the surface and clean it up once and for all.”

Initially, Trager and the team, in partnership with IT, met with SAP to learn about that company’s current technology stack and private cloud solution. But the SAP solution offered “lots of customizations—and from an operating model point of view, it still had too many of the hallmarks of what we’d done before,” Trager says. “While moving between two things you understand has inherent benefits (for example, less translation complexity), we were very concerned that moving in that direction would repeat what we’d seen in the past.”

Deciding to explore what other options were available, the team met with Oracle—which, LBG found, had what they were looking for: vanilla configuration, no customizations, and mandatory upgrades every six months.

“That kind of discipline was what we wanted after being in an environment where it was a bit of doing whatever you’d like on your own timetable,” he says. “We look at this as a tremendous opportunity to be current constantly—no more five years out of date, no more having to have difficult conversations with the business stakeholders about finding money to basically keep something we already own alive.”

Oracle’s public-cloud enterprise resource planning (ERP) offering also provided an opportunity for IT to make a difference to the business, says Trager, helping Lloyds Banking Group “achieve our goals of transforming finance within two years for a reasonable amount of money.”

Cloud Advantages Start Early

In the on-premises ERP projects Trager had worked on previously, one of the tough hurdles was convincing the C-suite to invest £2 million to £4 million ($2.5 million to $4.5 million) upfront on hardware (which included an estimate of how much server capacity would be needed five years down the road), and then to wait for several years before a single user could sign on to the new system. And by the time the implementation was done, the needs of the business likely would have changed.

“Having the ability to start a project without spending everything upfront is changing how we’re even thinking about the business case, and it’s much easier to get costs approved and get a project through governance,” Trager says. “Cloud also allows us to start small and ramp up as we scale, without a big capital outlay.”

But one of the biggest advantages to implementing cloud compared with the on-premises application implementation attempted five years ago is the depth to which the business users can be engaged in the transformation, he adds.

“In the requirements-driven implementations of the past, the business never really saw the application until the very end of the process—which meant it could be months, if not years, before the user base got to see the physical application live,” Trager says.

Working with KPMG, whose Powered Finance offering helped speed global design and also provided a preconfigured environment and templates, enabled users to see and experience the actual environment and how it would work. That helped the LBG team to have more-focused discussions with users about capabilities that were missing—and a lot of those gaps disappeared as the users came to understand the changing business processes.

“That got some very skeptical stakeholders on board, because they could have a line of sight into where they’d end up,” Trager says. “Users weren’t having a theoretical discussion about what could be. They were looking at what is, and understanding how they need to mold around it and where they had issues with how it was functioning.”

It was also a big time-saver, because the IT team didn’t have to spend months gathering requirements that would eventually turn into customizations. “The entire design phase was about half the size that it would normally be with an on-premises implementation,” Trager says.

“We’re not afraid of the future now,” he adds. “Having adopted the Oracle-in-the-cloud ERP design, I’m not worried about the next upgrade, because it’s not customized. The only thing I worry about is getting used to doing an upgrade every six months, because we have many memories of upgrades being long and painful processes.”

No Traumatic Big Bang

To avoid the drama and trauma of a big-bang changeover to a new system that affects many across the business, LBG started smaller. The team initially focused on moving the secondary ledger from the outdated Oracle E-Business Suite software to Oracle ERP Cloud.

By doing so, they knew they would learn about the software as well as the new operating model and the design of the system, which would help them later when they moved the primary ledger from SAP to Oracle ERP Cloud.

Starting with a project that was “large enough to make a difference, but small enough not to scare anybody” gave the team a chance to educate users, get them comfortable with new applications and processes, allay security concerns, and let them see the difference between the new system and the highly customized, onerous old one.

“We cut down the size of our initial project so it’s big enough to prove the point, but not so big that you scare everyone and you disrupt the year-end and the month-end processes in some profound way that results in everyone digging their heels in,” Trager says. “You want to raise the temperature slowly so people get a chance to adapt to the situation.”

The team is conducting system integration and unit testing this summer and fall. Trager’s migration strategy is to get the full architecture tested and running in time for a parallel run before year-end 2018. By the end of 2020, LBG hopes to have decommissioned SAP and have the general ledgers moved over to Oracle ERP Cloud.

Margaret Harrist is director of content strategy and implementation at Oracle.

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