The announcement last week, that National Australia Bank is to spend $1.8 billion to return the financial institution to its former glory days, provides some valuable lessons. One of the most important is that you can’t be a first rate organisation with second rate technology.

Having finally realised what consumers have been screaming at all banks for the past 10 years - you can’t do without branches – NAB has set about developing a new teller platform. The new system under development will actually enable NAB to catch up to other banks, which already have customer-centric systems at their shop windows, enabling tellers to cross market appropriate products and services to clients.

NAB also plans to pump $20 million into its online consumer finance area, involving projects such as web-based approval for credit cards and personal loans. Other technology projects in the pipeline include a business intelligence system for management and an enterprise wide desktop replacement program. There is even a project to develop a system that will enable the bank to more effectively market to its high value customers.

Of course, with all these new well-funded projects in the pipeline, NAB is going to need a lot more skilled IT people to do the development work. Some of the development can be sent offshore but we hear that competition for good IT people in India is pretty hot at the moment. Therefore, the NAB is going to have to put quite a lot of people on locally both as permanents and contractors. However, competition for good IT people is starting to get pretty hot in Australia right now as well. It’s ironic that just two or three years ago, the bank was happily writing out pink slips by the dozen to some of its best and most innovative IT developers.

The news that NAB is preparing to shell out hundreds of millions on new technology just to recover lost ground should serve as a warning to other organisations that used Y2K and the tech wreck as an excuse to put the shutters up on IT investment. Technology is a core component of just about any sizeable business in the marketplace. Those who argued that technology was not core and something to be outsourced to cheap offshore locations were wrong. Those cheap locations are now getting more expensive by the day. Meanwhile, companies such as NAB are realising that having first rate technology is not a luxury but a necessity to provide competitive advantage.

Australian IT professionals have suffered long and hard over the past five years. Many, unfortunately, had enough and simply left the profession. IT has largely fallen out of favour with young people and not enough IT graduates are coming through. The dire warnings of the IT skills shortage doomsayers of yesteryear are finally starting to ring true.  The NAB case is by no means an anomaly. The South Australian Government nearly a decade ago succumbed to the folly of whole-of-government outsourcing. Now, when it wants to upgrade its systems and extricate itself from its single-vendor arrangement with EDS, the SA Government finds the state desperately short of skilled IT people – so short that it wants to import them from India! It looks like the chickens have well and truly come home to roost.