ProjectWatch

FSA: now A-OK?

The Financial Services Authority’s IT department was twice as expensive as those of the companies it monitors. Outsourcing was the answer. Has it worked?

Two years after a highly critical report into its IT functions, financial watchdog the Financial Services Authority (FSA) has been looking to outsourcing to put it back on track.

The FSA has signed an eight-year outsourcing deal with Fujitsu worth £80.8 million to provide infrastructure service support and a technology refresh, while Xansa, in a separate £5.1 million deal, will provide application support and maintenance for three years.

The contracts are the latest developments in the Authority's three-year campaign to sort out the performance of its IT department. Consultancy firm Orbys conducted the August 2005 review and found its information services to be "very immature". The IT operation was classed as ‘poor' or ‘very poor' on no fewer than seven different criteria. The lowest ranking came from its inability to identify business opportunities.

Orbys praised the FSA's IT staff and their technical skills, and blamed the poor performance on the Authority's management, saying they did not fully understand the complexities of implementing IT. Indeed, the report found that the FSA's IT department cost more than twice as much for its size as those at the finance houses that the watchdog monitors.

A concerted campaign of action was put in place to correct the situation and get the FSA back on track. The Authority set itself an ambitious goal: to be the best performing IT department in its business sector by September 2008 — this being the UK government sector rather than the financial services sector, following advice from analyst firm Gartner, which provided consultancy on industry specific benchmarking.

The man charged with making this a reality was FSA information systems director Darryl Salmons who was recruited from outside to overhaul IT services and the Authority's legacy systems. He defined his responsibilities as being: "to transform information services, which was generally recognised prior to my arrival as not operating at its most efficient… We have given ourselves quite stretching targets to beef up the whole IT operation."

The scope of the systems overhaul and transformation programme, codenamed Delta, is hugely ambitious. As well as the technology infrastructure aspects, the transformation plan was scoped to include how the FSA governs what it does and how resources should be allocated. To that end, elements of the planning covered a governance framework, relationship management, IT's interaction with the business, day-to-day operational processes, service-level standards, guidance on how to build new systems, the development lifecycle, and ongoing support of new systems.

A mess of legacy systems
The FSA was formed in the late 1990s from the merger of 11 separate smaller regulatory bodies, and so there was a substantial ‘bodycount' of legacy IT systems. In total, the FSA review found that there were 60 separate systems that needed to be integrated into a data-sharing whole.

Salmons explained: "Our architecture model is based on concepts of reusability and common components, using middleware to make the best use of existing applications, so that we can enable data sharing between existing applications without having to replace everything with a common portal that points to all of them." The project has been influenced by regulatory changes, which have seen demand for new systems, such as technology for filing online regulatory reports. An example is the Integration Regulation Reporting (IRR) programme, which is seen as crucial as it will be visible to external stakeholders. IRR is intended to transform the way that companies interact with the FSA and will allow the submission of electronic forms, meaning data can be managed more effectively while providing regulated firms the opportunity to streamline their reporting processes.

Outsourcing: a vital element
Outsourcing is seen as a vital element of the transformation programme. Orbys recommended outsourcing utility services to a single supplier and splitting project delivery between three different suppliers. The Orbys report said that "FSA information services has a mountain to climb in terms of change necessary to raise the standard up to an acceptable best-practice level."

The services that Orbys said should be outsourced were the management of the FSA's datacentre, maintenance of its voice and data network, frontline help desk supply, desktop management, software systems lifecycle and application management.

But the outsourcing hasn't gone entirely to plan or to budget. A tender notice published in August 2005 estimated a contract of between £15 million and £20 million, well below the current £81 million figure. It is also about one year behind the original schedule.

Under the Tupe regulations for transferring employees, 41 of the FSA's IT staff are due transfer to Fujitsu, while 11 will move to Xansa. The restructuring will see the FSA retain 104 permanent IT staff and 100 contractors. "The fact that we are outsourcing the commodity aspects of IT forces more strategic thinking internally to build new systems, manage partners, and build relationships with the business," Salmons said. "Where we need knowledge, the FSA retains that in-house."

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Originally published in Outsource Issue 12 Summer 2007 p52