SBS's strategy for process re-engineering significantly underestimated the challenge of transforming the old business

2.18  SBS's migration strategy sought to recreate the existing business processes for each product on Thaler and then use the features of Thaler to rationalise the processes, improve their efficiency and achieve the desired staff reductions. With up to 30 million NS&I customers, the migration of products onto Thaler was huge by any world-wide standards and clearly required a well-defined strategy to ensure success. In practice however, SBS encountered difficulties in adequately specifying for its IT consultants the complex processes supporting each product.

2.19  SBS migrated First Option Bonds and Fixed Rate Savings Bonds, two of the smaller products, onto Thaler first in November 1999. Internal audit's review of the migration identified a number of failures in key reconciliations between customer and financial records and recommended actions to address these. Savings Certificates were migrated to Thaler in December 2000 but post-implementation reviews identified a continuing backlog in key reconciliations. A lack of skills transfer from SBS' external IT consultants to internal SBS staff meant that tracing the precise cause of the problems was very slow and rectification of problems even slower. SBS's pressure on its IT consultants to migrate products as quickly as possible led them to implement system fixes without full testing which generated additional functionality problems.

2.20  Although SBS took steps to develop permanent fixes to the configuration problems similar weaknesses emerged again following the migration to Thaler of Income Bonds and Pensioners' Guaranteed Income Bonds in June 2001. SBS' internal Risk Management Committee, although aware of the migration issues, failed to identify and adequately address their significance largely because SBS managers at the time were over-optimistic when reporting on the implementation of internal audit's recommendations.

2.21  In accordance with PFI principles, SBS bears the risk of authorising migrations, but NS&I has the opportunity to review SBS's proposed strategy. As the problems with the migrations became more apparent, NS&I decided that the situation could not continue and expressed concern about migrations continuing until SBS could demonstrate that the fixes were in place. SBS is unlikely to complete its rectification plan for Thaler before March 2003 and is preparing revised testing.

2.22  SBS introduced new sales of Capital Bonds on to Thaler in February 2003 because the legacy system was running out of Bond numbers to allocate, and this was completed in accordance with the new approach to migration. SBS then plan to migrate Children's Bonus Bonds onto Thaler in the Autumn of 2003. The final migration, Premium Bonds, which represents a significantly higher risk to NS&I's business than previous migrations, is planned to go live in Spring 2004. SBS says it will mitigate the risk through six months of parallel running before the go-live date. This migration will not only transfer sales and repayments to Thaler, but also offer increased functionality for administering the prize draw. NS&I needs to remain vigilant as SBS transfers the final products to Thaler.