a. Company and division name:
c. Project designation
An innovative supplier relationship management project (HBOS SRM)
d. Brief explanation of the goals of the project
When Halifax Bank and Bank of Scotland (BoS) merged to form HBOS plc, the
new organization wanted to leverage the synergy between the two companies to
generate significant savings in procurement. HBOS plc, the United Kingdom’s
largest mortgage and savings provider, has 22 million customers and a relationship
with two out of every five households in the UK, with assets totally more than
£440 billion. Success in procurement is based on knowing who spends what with
which suppliers, yet due to the disparate and conflicting operational systems
in place, HBOS was challenged with providing accurate, timely information to
decision-makers involved in supplier negotiations and measuring performance
across the group.
With a company of such formidable size, manually integrating the records
and operations of two major national banks was never an option for day one.
To successfully address company-wide procurement activities, HBOS required
a flexible solution that could address their specific needs, could be implemented
quickly and would be resistant to any business change that might occur later
on in the company’s life.
After the wide success of this initial phase, HBOS needed to extend the reach
of the system to incorporate further subsidiaries. Additionally, HBOS wanted
to include external data on the 20,000 suppliers, giving an even more comprehensive
insight into procurement spend, and due diligence information. To maximize
the economies of scale made possible by the merger, and drive significant savings,
HBOS also needed to gain a better picture of all 10,000 line-items bought through
its e-buy system organization-wide. An accounts payable system from Oracle
was also being implemented at the same time, so HBOS needed to ensure no business
disruption was caused to users.
e. Brief description of the business risks involved
The core business risks and challenges that had to be addressed were: time
limitations; continued flexibility in the face of business change; integration
between disparate operational systems; ensuring accuracy and timeliness of information;
and business and IT user alignment and coordination.
HBOS required a flexible solution that could address their specific needs
and could be implemented quickly. Traditional data warehouses would not fit
the bill as they would take a minimum of 18 months to deploy and would be resistant
to any business change that might occur later on in the company’s life.
Integration with other operational systems was essential to the success of
the implementation. The operational systems used to manage procurement in Halifax
and BoS were structured very differently, so HBOS needed to create a flexible
data warehousing and business intelligence layer above them. HBOS needed technology
that would provide a single, consistent view of procurement data, without the
delay or disruption of standardizing source systems, and deliver accurate, timely
information to decision-makers involved in supplier negotiations.
The project involved people from several different organizations including
Kalido and systems integrator, Acuma, as well as people from the HBOS Procurement
systems team and internal HBOS Group Technology experts. A strong team ethic
permeated the whole project, making a big contribution to success, but also
creating the need for intense corroboration and communication among all individuals/groups
f. Brief description of how the system helps users
The HBOS procurement department is now able to nimbly drive efficiencies.
With the integrated information, decision makers now can make better-informed
supplier negotiations, maintain supplier performance and costs, and develop
stronger relationships with suppliers across a complex organizational structure.
Enabling the e-procurement system to be extended to subsidiaries that run
entirely different ordering processes and are located away from the main centers
of Halifax and Edinburgh, HBOS SRM allows the local units - Birmingham Midshires,
Clerical Medical and Halifax Life and Pensions – to continue with their normal
reporting methods, maintaining agility in the face of complexity and incessant
The procurement department is also now able to compare management information
generated by the new accounts payable with that generated by the old – a tremendous
benefit as typically it is extremely difficult to compare data spanning the
lifetimes of two accounting systems.
II. Organizational Objectives
a. What short- and long-term benefits did the organization achieve from
the project? Did the solution meet the projected goals for saving time and money?
How were benefits measured? Was the system mission critical to the organization?
In short: The SRM system assists in generating significant procurement savings
with spending reports for complex negotiation with suppliers; provides full
visibility of group expenditure within just three months; reduces time spent
by procurement managers on data sourcing and preparation; produces fast, accurate
management information; and enables procurement to be viewed by supplier, category
At the time of initial implementation, HBOS plc was investigating every possible
way to generate savings and knowing each supplier, exactly what was being spent
and with whom, as well as what was being purchased by different areas within
the business enabled the procurement area to be an integral part of cost savings
achieved. With £2.4 billion in annual procurement spending, this initiative
was certainly mission critical to HBOS’ overall success.
HBOS not only achieved, but also surpassed, its primary objectives and goals
in relation to saving time and money. Kalido has helped HBOS maximize previously
untapped revenue opportunities with suppliers.
Through the SRM system, the organization has developed a consistent group-wide
commodity structure, consolidating account codes by eliminating duplicates and
re-ordering them into just 27 commodities split into 142 categories. For the
first time, the organization has a clear view of all 10,000 line items bought
across the entire organization using the e-buy system, with detailed spending
and usage patterns. In addition users can ‘slice and dice’ the output to get
the information they need in the form most useful to them. The solution allows
users to view procurement spend in numerous ways – for example, by supplier,
by category of spend, or by item – and to drill right down from aggregated information
to the level of individual transactions.
In order to give an even more complete picture of supplier relationships,
the procurement team extended the system to include external data feeds. Risk
management specialists Dunn & Bradstreet provide HBOS with due diligence insight
into its top 20,000 or so suppliers, and now supply a comprehensive data file
every quarter detailing risk information. This makes complex procurement information
much easier to understand and analyze.
All of this has been achieved in a fraction of the time it would have taken
to build the SRM system using traditional methods, which unlike KALIDO software,
would have required extensive and costly re-development to reflect the business
changes. The procurement teams no longer rely on IT specialists to provide the
views they need or to make changes. HBOS SRM gives a more complete picture of
the group, with greater accuracy than ever before, and reduces the time spent
by users on data sourcing and preparation. It allows HBOS to monitor actual
spend over time.
With the SRM system based on corroboration with systems integrator, Acuma,
reporting and analysis from Business Objects, Ascential extract/transformation/load
tools, and the project lynchpin – KALIDO adaptive enterprise data warehouse
– HBOS can now examine procurement by time and region through the merger date,
regardless of region or organizational structure changes. This saved the procurement
team massive amounts of time and energy, alleviating the need for extensive
data reconciliation and research.
Success in Procurement is built on knowing who spends what with which suppliers
– acquiring this level of management information was the key to unlocking a
whole range of project and cost saving opportunities and the accomplishment
of such was the greatest measurement of the project’s uncontestable success.
The SRM system has been a great driver in the organization and is expected
to remain a critical component in the years to come – a difficult feat in an
industry so prone to incessant business change where the IT components typically
can’t keep up with the rapid pace.
b. Describe the business purpose of the new system.
The SRM initiative, centered with Kalido’s adaptive data warehouse technology,
has been instrumental in delivering the needed business data and insight to
make required procurement decisions and changes to fulfill the business’ need
for cost savings and internal realignment in light of the merger.
c. Describe the features of the new system.
The new application provides an overarching view of the procurement data with
granular detail. It enables business users to obtain top-level views across
multiple systems. Reconciliation can now be achieved more rapidly and using
fewer resources than were previously required, and the application now also
provides comprehensive insight on supplier risk.
KALIDO’s easy-to-use components remove many of the management issues of data
warehousing. Users can manipulate data within the business models and hierarchies
with ease. The application controls access to data and automatically tracks
all changes made to the warehouse, ensuring that valuable corporate information
is safeguarded at all times.
As the system sits on the corporate Intranet site, authorized users can choose
from a list of pre-written Business Objects reports and enter a supplier name,
for instance, to generate a report with multiple tabs: from high-level information
to supplier invoice lines.
d. Explain the functions of the new system
The system provides reliable, secure and timely access to data across the
enterprise through reporting tools such as Business Objects.
e. Who were the internal sponsors of the project? Which officials
or groups were opposed to developing the application? Why?
Head of procurement was the primary sponsor; there was no opposition to
The SRM initiative was strongly supported by business executives and the
procurement team alike.
f. Were users of the system involved in the project during the
planning and development phases? If so, how?
Integral to the project is the fact that the SRM system was driven by the
business users who work with the data, rather than the IT department wanting
to implement the latest technology. This meant the project fitted so much
better within the business, as it was designed to answer the requirements
of the user.
The HBOS Procurement systems team and internal HBOS Group Technology experts
were all involved in the initial planning and development phases and continue
to be strong advocates/drivers for the continued expansion and growth of
All the amendments and subsequent phases of the project were driven by
the requests of those working with – and benefiting from – the management
data made available by the SRM system. Business users specified the information
that would allow them to make more informed purchasing decisions, with the
IT department adapting the system to accommodate these needs.
The procurement team also anticipated change within the company and ensured
the system architecture was able to cope. As HBOS is such a sizeable company,
regular business change is a fact of everyday life; the solution accepts
this change as a constant, embracing it, and hasn’t required the major reworking
so common with other procurement projects
g. What were the greatest challenges in completing this project?
How were they overcome?
As mentioned previously, the key challenges that had to be addressed were:
time limitations; continued flexibility in the face of business change; integration
between disparate operational systems; ensuring accuracy and timeliness of
information; and business and IT user alignment and coordination. Each was
overcome through the selection of flexible IT solutions such as Kalido, enabling
the project to be completed in three months, fully integrate all disparate
systems, quickly and easily adjust to business change while ensuring accurate
and timely information to a wide range of business users.
h. Were the goals changed as the project progressed? If so, what
were the changes and why were they made?
While the initial goal of the project in 2001 centered on providing a single
view of procurement data in the face of an intense merger, while maintaining
local reporting structures, many additional goals were realized and achieved
as the project progressed:
- Addition of e-procurement data in March 2003 to maximize the economies
of scale and drive savings by gaining a clear view of all 10,000 line-items
- Extension to the collection and aggregation of the new accounts payable
data in June 2003 while avoiding disruption to business users based on business
- Furthering the reach to give the procurement team a complete view of
supplier spending habits within subsidiaries between June and December 2003
- Incorporating external data in May 2004 to provide complete supplier
risk management through early warning indications
Through all this change, Kalido’s extreme adaptability empowered HBOS to
continually update and enhance the SRM system without disrupting everyday
business functions and tasks.
Please indicate the Innovator Award category as listed below. (Categories
reflect the editorial organization of Application Development Trends.
Many projects can reasonably be fit into multiple categories. Try to fit
your project into the category that best reflects the tools and technologies
used. Don’t worry about whether you picked the right category; we will review
all submissions carefully and will make changes where appropriate.
Emphasizes the design and development processes and tools used in enterprise
data warehousing projects, including: data mining tools, online transaction
processing systems, data extraction and transformation tools, database management
systems, universal data management systems, query and reporting tools.
- Describe how productivity tools or techniques were used in the
- Were testing tools used during development? If so, when were
they used? Was the testing cost-effective?
- Was a formal or informal software development life-cycle methodology
employed? If yes, please describe it.
- What formal or informal project management methodologies and/or
tools were used to manage the project? If used, please describe how.
Documentation was provided at all stages by Acuma to meet ISO9000 standards.
- Were software quality metrics used? If so, what were they, and
did using them significantly help the project?
a. What were the major technical challenges that had to be overcome
to complete the project successfully? How did the team respond to those challenges?
The major technical challenge was incorporating such a wide range of disparate
systems and extensive amounts of data.
b. What software tools, including databases, operating systems
and all development tools, were selected for the project? Why were they selected
over competing tools? What process was used to select development tools and
To successfully address company-wide procurement activities, HBOS implemented
the KALIDO enterprise data warehouse to integrate all the disparate systems
and provide a single view of organizational data. Together with Business
Objects (which was already used by Halifax for different applications) and
Ascential, Kalido created an innovative supplier relationship management
(SRM) system that enables HBOS Procurement to consolidate and analyze supplier
data, enabling the company to nimbly drive efficiencies, assist purchasing
compliance and better manage supplier relationships across a complex organizational
These tools were selected over competing tools because, as a package, they
offered the best solution to address the issues at hand and allowed for a
rapid implementation that supplied a flexible, yet robust and reliable, solution
to meet both HBOS’ current challenges, as well as their future needs.
c. Describe the overall system architecture. Were elements of
the technical infrastructure put in place to support the new system? Please
d. What characteristics of the tools and technologies used were
most important in achieving the business purposes of the system?
The most important characteristics were: the ability to cohesively integrate
the disparate systems of the merging organizations; flexibility in the face
of business change; ability to supply an accurate, reliable single view of
organizational data at both an overarching and granular level; and the time
it would take to complete the initial deployment.
VI. Project Team
a. What was the size of the development team?
b. How many person-months/days did the project take, and over
what calendar time frame? Was a formal schedule created at the start of the
project? Did the project stay on schedule?
Not many IT projects are delivered on time, to specification and to budget.
There are usually too many unforeseen requirements, changes and obstacles.
Accenture estimated that 84 percent of IT projects fail on at least one of
these criteria – a credible source as they supply the other 16 percent worldwide.
The HBOS project was delivered in just three months without cutting any
corners and without going over budget. This was achieved by making sure the
specification was right, close collaboration by all the parties to the project,
rigid project management disciplines, intense effort and by ensuring that
the scope of the initial project was contained within sensible limits.
c. Did management and the user community consider the project
In light of the significant business benefits and user conveniences that
the system provides, management and users not only consider the project a
success, but also champion its extension and continued development.
d. If you had to do the project over again, would you do anything
differently? If yes, please explain why.
Based on the continued enhancements and extensions, the only thing possible
to change for an improved result would be to have extended the system to
encompass such a wealth of internal/external information from the start.
We now strive to run all future projects in the same manner in hopes to achieve
such tremendous success.