UK Bank’s IT Disaster Enters 2nd Week, Contagion Fears Rise

“This turned what was a super-hard systems job [into] a clusterfuck in the making.”

By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.

Customers of UK bank TSB have probably lost track of the number of times the bank has declared its new online system, Proteo4UK, to be operational, only to find that they cannot log on. Even today, seven days after the system was supposed to be up and running and ten days after work to complete the migration began, and six days after we lambasted the banks for this fiasco, many of the customers are still unable to access their online accounts or make payments.

At the end of last week, TSB’s CEO Paul Preston announced he was drafting in a crack unit of IT technicians from IBM to “put things right” once and for all, no doubt at substantial extra cost to the bank. It was a bif snub for TSB’s parent company, Banco Sabadell, which oversaw the platform switch and claims (or at least claimed) to be a wizard in the art of migrating data. Indeed, TSB’s data migration was intended as a showcase to the world of Sabadell’s savoir faire in the IT department.

Initially, the IBM team had until the end of Saturday to fix the IT problems Sabadell helped to create, yet on Monday morning (April 30), the online system appeared to be no less broken than it was on Thursday when Preston succinctly told ITV News that the bank was “on its knees.” On Sunday night a spokesperson for the bank warned customers that Internet banking is still operating at around 50% capacity. “For every 10 customers who try to access our internet banking, five will be able to access this service.” And five won’t.

As each day goes by, the costs, both material and reputational, continue to mount. The fact that the bank chose to execute the data migration at the end of the month, when companies usually pay their workers and suppliers, has merely added to the chaos. Moody’s has warned that the bank’s IT migration difficulties raise the risk of customer defections while increasing costs as management tries to patch up customer relationships.

As part of its damage-limitation charm offensive the lender has pledged to waive overdraft fees and interest charges have been waived for the month of April. It has also raised the interest on its saving account from 3% to 5%. Estimates suggest this could cost the bank an extra £30 million a year. TSB has also announced that it will consider claims from non-TSB customers who suffered losses as a result of banking services being lost.

This is all happening at a bank that is not exactly in the finest fettle. On Thursday it reported first quarter results showing a 39% fall in pre-tax profits to £19.3 million. Much of that was blamed on the extra rental fees TSB’s new parent company, Spain’s Banco Sabadell, had to pay TSB’s former parent company, Lloyds, to use its old IT system, which skyrocketed in 2017 from £92 million to £214 million.

As part of its acquisition of TSB in 2015, Sabadell received a £450 million lump-sum ‘IT dowry’ from Lloyds to help pay for the migration of company data. Nonetheless, with each month that went by without a new system in place Sabadell was having to pay out almost £20 million in fees to Lloyds. And that gave very clear incentives to management at both Sabadell and TSB to hurry the IT upgrade process along, even it meant cutting big corners and taking big risks with customer data.

“The time period to develop the new system and migrate TSB over to it was just 18 months,” one insider has complained to The Guardian. “I thought this was ridiculous. TSB people were saying that Sabadell had done this many times in Spain. But tiny Spanish local banks are not sprawling legacy systems” like Lloyds Banking Group’s.

To compound matters, the Sabadell development team did not have full access to or control of the system they were trying to migrate customer data and systems from, since Lloyds Banking Group was still the supplier. “This turned what was a super-hard systems job [into] a clusterfuck in the making,” the insider said.

If, as the insider alleges, the disastrous roll-out of Proteo4UK at TSB was foreseeable a long time ago, at least to many of the tech workers involved in the project, and yet the management went ahead anyway, adopting a hope-and-pray attitude, TSB, and by extension Sabadell, are likely to pay an even higher price for this epic IT disaster — especially if, as feared, some records are indeed lost or corrupted.

There are also reports that “gremlins” have now hit Lloyd’s IT system, which raises the prospect of contagion spreading from TSB to its much larger former parent company (of which I am a customer).

The UK financial ombudsman and the Financial Conduct Authority have launched investigations into the scandal and executives at TSB and Sabadell are scheduled to be quizzed by the Treasury Committee on Wednesday. The longer the outage lasts, the higher the fines will get, the more damage will be done to TSB’s already tattered reputation, and the more likely it is that the bank’s customers will switch to one of its rivals. In the absolute worst case scenario, TSB’s senior management may even lose their bonuses. By Don Quijones.

But Spanish parent, Banco Sabadell, proclaimed triumphantly to its Spanish audience that the botched IT transition was a resounding success. Read…  UK Bank’s Tech Chaos Blocks Customers from Their Funds: Day 5 
 

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  28 comments for “UK Bank’s IT Disaster Enters 2nd Week, Contagion Fears Rise

  1. BradK
    Apr 30, 2018 at 6:37 pm

    a crack unit of IT technicians from IBM to “put things right”

    Where a busload of 20-something H1-B’s FOB from New Delhi pulls up, for which Big Blue invoices at $250 per head per hour.

    “For every 10 customers who try to access our internet banking, five will be able to access this service.” And five won’t.

    But Spanish parent, Banco Sabadell, proclaimed triumphantly to its Spanish audience that the botched IT transition was a resounding success.

    Healthcare.gov, V2.0 — representing a five-fold improvement over the original, where the success rate was 1 in 10.

    Murphy’s Law: Technology is dominated by those who manage what they do not understand.

    • Sinbad
      May 1, 2018 at 3:23 am

      Agreed, I worked in IT for many years, and management are always pick and shovel types. Trying to explain even the simplest thing is almost impossible, some couldn’t even check their own email.

      • Hendrik1730
        May 1, 2018 at 9:05 am

        That’s how management became management. Too stupid to do anything else.

        • upWising
          May 1, 2018 at 11:09 am

          IN financial and governmental circles, The Septic Tank Rule prevails.

          [In septic tanks, the “you know what” rises inexplicably to the top, floats around far too long doing nothing more than stinking up the place until, finally, it begins to rot and sink to the bottom, where it belonged all along.]

    • hidflect
      May 1, 2018 at 4:23 am

      Had to deal with “IBM” when I was working in BHP. Appalling outfit. Bunch of bureaucratic gatekeepers in Mumbai who just stalled every task by endlessly requesting authorizations before sitting on the process until shoved to the next stage. Good luck. These guys get paid by the hour.

      • Mike G
        May 4, 2018 at 2:39 pm

        Headless and clueless. That’s why we called them the Indian Bowel Movement.

    • Dave D'Rave
      May 7, 2018 at 8:32 pm

      Agree.

  2. Alex
    Apr 30, 2018 at 7:43 pm

    I put a stop on migration from
    home grown system to canned when the implementer from the supplier would have have a caused a clusterfuck. I took a lot flake for that. In that situation no one gets kudos.

    • Matt P
      Apr 30, 2018 at 9:49 pm

      Too much personal experience with this. I basically refused to do a project while I was a remote worker because I calculated the failure potential at 95% based on the time frame and expectations of the results of the project. I knew that would mean my job once it inevitably failed. I was of course quickly drummed out after pushing back anyway, but at least I was already looking on my own terms.

      • Gibbon1
        May 1, 2018 at 12:45 am

        Almost the definition between an experienced worker and a green one is the experienced one can see the train wreck coming before the train leaves the station.

  3. raxadian
    Apr 30, 2018 at 8:01 pm

    Looks like “Do this in half the time for half the pay or we will hire someone else” worked wonderfully, right guys?

    Guys?

    *Cue JAWS theme*

  4. Mike Earussi
    Apr 30, 2018 at 8:15 pm

    Virtually every time some company tries to save money by doing something in a hurry it usually costs them far more than if they had slowed down and done it right in the first place.

    This reminds me of the old saying about there never being enough time to it right the first time, but there’s always enough time to do it right the second time.

    • Franco Jaeger
      Apr 30, 2018 at 8:59 pm

      It’s even worse. After Reorganisation Nr. 60 in x-years it is done the very! same way it was done before Reorg. Nr. 1. As Nr. 60 is sold like the discovery of the americas by the (sometimes) same Management.

    • dos tacos mas
      Apr 30, 2018 at 9:07 pm

      Speed
      Quality
      Cost

      Pick two. That will determine how much of the third one you will need. Of course, everyone wants all three, but that’s not how the world works.

      When I worked IT, we had a standard protocol to determine how long a job would take. Take the number provided by the vendor (for example: 2) and double it (now 4). Then, increment the timeframe +1 unit (days become weeks, weeks become months, etc.). So if something is supposed to take 2 weeks, plan on 4 months and you’ll be close.

      • dos tacos mas
        Apr 30, 2018 at 9:11 pm

        One more guiding principle:

        You want it bad, you get it bad;

        The worse you want it, the worse you get..

        • Cynic
          May 1, 2018 at 5:15 am

          Italian proverb: ‘Nothing really good, at a ‘really good’ price.

    • bemused
      May 1, 2018 at 5:54 am

      I was in the US Coast Guard many, many moons ago. We had a different version of that old saying — never enough time to do it right, but always enough time to do it over. Key difference: nothing was mentioned about doing it right the second time either. This was usually said in reference to repainting where rust is bleeding through. Right way to do it is to chip off the old paint (properly adhered paint won’t chip off) down to bare metal, feather the edges until smooth, apply a coat of primer, top off with paint — good as new. All too often: Inspection’s coming! Slap a coat of paint on it — rust bleeds through in a couple of weeks. More paint!

  5. Javert Chip
    Apr 30, 2018 at 8:39 pm

    This just reeks of bank senior executives who know very little about technology pounding a round peg into a square hole.

    You can’t make a baby in one month by impregnating 9 women.

    • May 1, 2018 at 5:17 am

      > You can’t make a baby in one month by impregnating 9 women.

      Have you tried?

    • X-Pat DE
      May 1, 2018 at 1:42 pm

      Also in IT and this is what I keep saying to management: You can’t complete a 100 MT project by hiring 100 contractors for a day.

  6. Matt P
    Apr 30, 2018 at 9:45 pm

    Why was a bank from a country with a shaky banking system allowed to buy a UK bank in the first place?

    • Gibbon1
      May 1, 2018 at 12:49 am

      Reminds me the recent wolfstreet article starting with “An unusually fierce spat broke out this week between two of Europe’s biggest utilities companies, Spain’s Iberdrola and Italy’s Enel, both of which are locked in a bidding war for the Brazilian electricity company Eletropaulo. ”

      You go, what why are two European utility companies trying to buy a Brazilian Electric company? This makes no sense what ever.

      • Me1985
        May 1, 2018 at 8:41 am

        You have no idea how a mid manager can get rich in Brazil . Let alone a top executive . Ironically many of them have vacation houses in , guess where , Spain or Italy !

  7. IT worker
    May 1, 2018 at 1:46 am

    The question I have ask some friends at Lloyds is whether they will get any blowback on this fiasco. They thought not at the data export worked… But we’ll see.

    Lloyds is a bank that seem to always find a way of bulls it up.

    We shall see where the finger(s) of blame land.

  8. Hendrik1730
    May 1, 2018 at 8:55 am

    Citation : “In the absolute worst case scenario, TSB’s senior management may even lose their bonuses.”

    Is THAT the worst thing that can happen? Come on, now, we cannot have THAT, can we???

    It should be the FIRST thing that would need to happen. Overpaid morons ….

    • May 1, 2018 at 9:16 am

      This statement was one of the funnier things I read yesterday. DQ humor at its finest. Did you miss the sarcasm?

  9. Jim Graham
    May 1, 2018 at 2:54 pm

    “”Indeed, TSB’s data migration was intended as a showcase to the world of Sabadell’s savoir faire in the IT department.””

    Book of Proverbs, 16:18, Pride goeth before destruction, and a haughty spirit before a fall

    eg, they were a perfect example of PRIDE goes before the fall.

  10. Ray Cornwall
    May 4, 2018 at 9:10 pm

    From the article (with Google Translate):

    “To finish fixing the platform, TSB has announced the hiring of a team of IBM group technicians to analyze the operation of the system and polish the last defects. IBM already collaborated with TSB in the migration process, and now a team from the IT firm has placed itself under the direct orders of the CEO, Paul Pester, CEO of TSB, to finish solving the situation.”

    It’s one thing (and many have commented on this) to try to solve this problem by throwing bodies unfamiliar with the system. But there’s something even more of a mess here- how is the CEO going to improve things by personally heading the team? What tangible benefit is there to having a man with no technical experience head up this team? What is he going to do to make this better?

    Oh wait, I see. His name is Paul Pester. I get it. This is management by loudest voice.

Comments are closed.