Building Core IS Capabilities For Business Change: The Commonwealth Bank Case

This teaching case provides a practical illustration of the challenges of managing IT outsourcing and evolving the IT function’s capabilities, structure, and governance arrangements in a dynamic business context. A central focus is on retained core IT capabilities at Commonwealth Bank of Australia (CBA) in the 1997-2006 period that were needed to gain business value from IT, and IT suppliers. It foregrounds two persistent issues in IT management. First, what are the IT capabilities that must be retained within an organization? Second, how to go about building these capabilities in the context of the business needs as well as maintain and evolve these capabilities? The teaching case shows the dynamic and evolutionary nature of this process. The case also allows students to explore several other key IT management issues. The strengths and limitations of large-scale IT outsourcing are examined, how CBA dealt with these, and evolved towards a multi-sourcing strategy. How the IT function needed to change its structure and governance to align with dynamic business context and strategy is detailed. The case also deals with the roles of the CEO, CIO and business managers in leveraging IT performance for business value, the building of project and program management capabilities, and how to organize IT to support a business transformation program. Finally the case provides information to enable students to review the case and invent the future for CBA on these many issues.