CIO Ensures Western Union Is Wired for the Future

At 160 years old, the Western Union brand is firmly embedded in the collective psyche. Need to get cash to someone far away in a hurry? To paraphrase the ‘Ghostbusters’ theme, you know who to call. But the 2012 version of Western Union is about far more than simply money transfer. Over the past decade, the company has expanded into a dizzying array of new products and services that capitalize not only on Western Union’s vast global reach – more than half a million physical locations – but also its powerful brand, its expertise in diverse local markets and an intricate web of business partners.

IT has been at the heart of this sweeping business transformation and CIO John Dick and his team are not only enabling change but anticipating it and helping draw the roadmap for the next set of 21st century products. In the latest installment of the IDG Enterprise CIO Interview Series, Dick talked with IDG Enterprise Chief Content Officer John Gallant about his role as a change agent and how IT is helping Western Union capture the opportunities that mobility and social networking offer – particularly in the developing world. Dick also discusses how he has re-architected his organization to keep IT at the center of Western Union’s evolution and talks about the evolving role of the CIO in business transformation.

Tech Titans Talk: The IDG Enterprise Interview Series

John Dick is a member of the CIO Executive Council – IDG Enterprise’s peer-based global community of leading CIOs.

Q. John, let’s provide some perspective here. Talk about the transformation that Western Union is undergoing as a business right now.

A: Our new brand is ‘Moving Money for Better’ and we do consumer-to-consumer, consumer-to-business and business-to-business remittance and payments around the globe. Where traditionally we’ve generated most of our revenue from money transfer – where someone walks into one of our locations and sends money to another somewhere else in the world – we’re moving to much more of a paradigm around multi-products, multi-channels and placing the customer at the center of our business. We’ve been very focused on transactions and transaction volume, but now we’re looking at these adjacencies and transforming the business to become more customer-centric as opposed to transaction-centered. .

Q. What’s driving that transformation?

A: We have had a successful business model and even the last several years during the global downturn, we’ve continued to grow. However, the world is changing around us. Where cash was the primary currency and continues to be, in many economies now – even in developing countries – mobile devices with different currency options are becoming more prevalent. For us to continue our relevance in the world, we need to look at alternate ways of moving money between people. We also, as I said, have expanded into the business-to-business payments market in the last few years, so it’s really expanding beyond our traditional core business to keep the company viable and growing.

Q. What are the kinds of things that you’re offering now that weren’t offered in the past?

A: In addition to money transfers that we still do consumer-to-consumer, we provide bill payment. That’s both cash bill payment, so you can walk into a location and pay, let’s say your utility bill, or you can submit electronic payments through a product we call Speedpay. We do that for around 400 different companies in the U.S. We actually serve as their Web. If you go into one of the major utilities or some of the mortgage companies, there are a lot of different types of billers that we provide that service for. We’re actually the bill processor for that company and we integrate real time back into their systems to process the bill. That’s one of the differentiators, this real-time capability, whereas if you were to pay through your bank, there’s typically a two- or three-day delay in the biller receiving the payment. More recently we’ve gotten into stored value or prepaid cards, so we have a variety of gift cards, general purpose reloadable cards and other products. We’ve started rolling those out in the U.S. I guess it’s been a couple years now. We’re also offering prepaid capabilities now in Europe, and we’re getting ready to launch in the Philippines. The concept there is: how do we provide value to this market of less-banked consumers around the world? We think we’re in the perfect position to do that. That’s the consumer side.

Q. What are the kinds of things that you’re offering now that weren’t offered in the past?

We also offer B2B payments. We purchased a company called Custom House Ltd. about two or three years ago now, and they provide primarily cross-border international payments – say, a UK retailer that’s trying to pay a supplier in China. We offer the foreign exchange and payments capabilities for that transaction. Most recently, last year, we purchased the business payments group from Travelex, that’s called Travelex Global Business Payments, the affiliate. We’re combining those two capabilities together, so we’ll offer business-to-business payments in 18 countries.

Q. It’s an incredible array of products. What was your role in helping shape and steer that strategy?

A. That shifted quite a bit in the three years I’ve been here. The company has increasingly recognized the importance of technology as an enabler of the business change that’s going on, and also how integrated technology is with our products. The information about our consumers, the information about the transaction itself, the device, all this is grounded in technology. So there’s been an increased recognition of the importance of technology as part of the change and being a part of the dialogue as we’re looking at options and introducing new products. I’d say the role of my team and myself in that has been to ensure that we have a laser focus on processing transactions, but also being at the center of some of these new capabilities. Whether they’re new products, new electronic channels, new partners – this expanded focus on the customer, we’re involved in the discussion of every aspect of those projects. My role as a CIO has been in anticipating where our company is headed, ensuring that we put the skills and capabilities in place to support those needs. As an example, we’ve been working on linking our customer information across channels and products in advance of the business asking for those capabilities. It’s [about] anticipating and ensuring that we have those [capabilities] when they’re needed.

Q. Talk in more depth about how the IT organization has enabled this really rapid expansion into new products, new markets?

A: I’ll give a couple examples. Like a lot of companies, our core systems have been architected around transactions. We’re augmenting the transaction processing capabilities with the ability to identify and create a richer experience for the customer. We’ve done that selectively in certain channels, such as on the Internet. But now, we’re ensuring that we’re providing a unified experience across channels and products to the customer. Say, they can stage a transaction on the Internet and then walk into a location and put cash down on the counter to send to someone else in the world. I think a key has really been focusing on the depth, breadth and linkages of that customer information. We’ve traditionally placed a lot of focus on the analytics, particularly for compliance and fraud, and that’s in place. But now the shift is moving not just from the value of that from an internal perspective, but to really place all the information and what we know about a customer back into position to leverage them and their transactions and their experience with us. It’s taking more of an external view on that.

We’ve hired some very experienced and skilled staff that understand information management — how you architect information, how you scale it, how you integrate it to provide a better customer experience. That’s been one of the implications. It also has meant being more customer-centric, not only in how we address the external market, but also the IT group itself. How do we become more customer-centric? How do we improve our relationship and the interaction internally with our business? How do we do that with outside partners? One of the ways we do that is placing our technologists much closer to the customer or the agent in the market. I think that’s a key part of moving to this more customer-inspired culture that we’re trying to create here.

Q. Obviously a couple of key things that play into this are mobile and social technologies. How do they play a role in this transformation for you?

A: You’re right. There are a lot of companies that this is a very active topic for, and I think it’s good news for Western Union. I’ll give you an example. In mobile, over the last couple of years we’ve enabled 150,000 locations in the world that you can take cash or some other payment method to and transfer the money to a mobile phone. There are very few companies or organizations in the world that could do something like that. We’re participating in the ecosystems in Africa and the Philippines, where mobile’s become a more common way of transacting business. From a technology perspective, our role has been integrating with the mobile network operators that are involved in some of these capabilities around the world. We’ve had an active program to integrate our money transfer services into those operators. Social networking is another area where we have an active program. How do we leverage the money transfer service or payments online into some of these capabilities?

Q. John, within Western Union, how are you dealing with this issue of consumerization of IT? We see a lot of companies wrestling with the policies, approaches, and ways for IT to lead rather than react to that trend. How are you approaching it?

A: The devices and access that consumers now have, we see that as a huge opportunity. We have around 500,000 physical locations in the world today, but how many billion consumers now have phones? When I talk to my group and others about this, I talk about the opportunity to go from 500,000 points of presence to billions. Whether it’s the consumer trying to initiate a payment or send money to someone else or a business or a combination of the two, I think we’re in a great position to help with that transaction. Many banks in the world are local to a specific country or geography. We have very high worldwide name recognition, so there’s assurance that comes with us being involved in the transaction for many consumers. That’s something that we can leverage as well

Q: Q. How about internally? In terms of how you’re enabling your own employees, is there a specific approach that you’ve taken to balance the way they’re bringing technology into the company versus IT directing what technology is used?

A: Absolutely. We’re just implementing a new employee mobility program where we’ll allow employees to bring their own devices to work, we’ll allow them to operate remotely and access more of our services with far better ease of use. There are some technologies we’ve been piloting for the last five or six months that are allowing us to do that. It also helps us with our contract arrangements. Within technology, we have a large number of contractors, and traditionally we have provided our technology for them to use for security purposes. Now we will allow them to bring their own technology and we’ve established the infrastructure to do that securely.

Q. Makes sense. John, you’ve also discussed this idea of a shared-value business strategy. Talk a little bit about what that means and how that has come to life.

A: Since 2001, the Western Union Foundation has provided over $70 million in grants. [http://foundation.westernunion.com/about_the_western_union_foundation.html] We’re in a unique position because of the breadth of our coverage and involvement in local markets around the globe. We’ve been working internally and with government agencies and others to define how we can best help society by leveraging the capabilities that we have, the geographic distribution, the money movement capabilities and how we can apply that cross-border and within markets and with partners to help people around the world. We look at this not just from the Foundation standpoint, giving out money to support different causes, but how do we leverage the capabilities we have as a company to assist? And there needs to be a good business proposition to this as well. So how do we leverage our capabilities, provide value to society, but also respect that we have shareholders that we must also provide value back to?

Q. As you look at this transformation process as a company, what would you say have been IT’s major achievements to date in supporting this?

A: It’s been a total transformation. We’ve replaced all of our corporate systems. We’ve encapsulated all of our legacy applications with services. We’ve upgraded or replaced all of our mid-range and large systems and storage. We’ve introduced and rolled out a new point of sale, implemented advanced fraud and other analytics. We’ve consolidated all of our customer information and then we’ve rolled those capabilities out online in 22 countries. It’s been a very aggressive period for the technology group. A lot of that has been self-funded through reduced labor cost, lower maintenance, better contract terms and other cost saving initiatives. We’ve self-funded so the company could put [resources] into expanding the products, expanding channels, into the business side investment that’s been required.

Q. That’s a lot on your plate. As you’ve gone through this, John, what have you learned? What are the key lessons you’ve learned as a CIO?

A: A key one is that it has reinforced again to me that the cultural and people aspects of this type of effort are much more difficult and important than the technology. Having strong technical leaders that have a good technical vision, but also can lead our organization through change is really essential. Also, leadership diversity is important — having different skills and backgrounds. One of the most important roles for me as CIO is to understand those leadership team skills and then weave them together to get better results more rapidly.

Q. Speaking of the organization, how has the structure of IT changed as a result of all this?

A: Well, one, we’ve dedicated resource to work with the business. We’ve put strong technology experienced individuals out working side-by-side with the business throughout the franchise. We’ve implemented several new groups — an information management capability, an integration capability and architecture. There’s been a lot of focus in those three areas. So it’s been building out those organizations that has been the primary structural change. Also, I think we’ve gotten the right balance between insourced and outsourced and offshore and near shore, so we’ve been working to leverage the resource base that we have.

Q. That makes sense. As a result of this, were there particular skill sets or types of knowledge were in short supply?

A: The three areas I mentioned — information, integration and architecture. Also having in the team individuals that are excellent at communication and working with the business. That’s been very important to us as well.

Q. John, you’ve talked about the role of CIO as a change agent. How is that different than the way that most CIOs operate today? And what has it meant for you personally to be a change agent?

A: As I mentioned earlier, I think a big factor is anticipating where the company will be. So as opposed to running operations and keeping in parallel step with the business, it’s really that sense of anticipation and ensuring that the capabilities are in place when they’re needed. That would be one of the differentiating factors. I’d also say that I think CIOs today are in a great position to serve as the change agent. We have a unique understanding of internal capabilities, we understand the market. We typically have worked actively with external partners and providers. Having the vision to connect those dots and then the ability to execute I think is something that we bring to the table.

Q. If you were to give advice to CIOs, to your peers — and I know you’re very active in the CIO Executive Council – what would it be?

A: I think one of the underlying changes that we need to make as a profession is that the focus needs to change from one of systems and technologies to business capabilities and outcomes. Having a broad understanding of how all the various technologies can be meshed together for the business, keeping a pulse on emerging technologies and what new opportunities there might be. But really shifting that focus, I think, is key for us.

Q. You face a particular challenge with this kind of business expansion: having to support a real blend of new and old — things that support older systems and older product lines as well as new capabilities. How do you successfully manage that balance?

A: I think you have to have an intuitive sense of what’s important, and then leveraging the different stakeholders for the value delivery to your organization. The money transaction part of what we do, we understand extremely well. There are a lot of changes in how people are paying and transacting money around the world, so keeping a pulse on that is extremely important to us. But in our case, I think we need to be more experimental, frankly, take more risks. We’ve had a more conservative culture, like a lot of financial institutions, but experimenting more in the market, participating more proactively with partners and other technology providers in the market is really important for gaining that real-time experience. The other thing I think is important for us is leveraging the web [of relationships] we have. We have incredible depth of contact in local markets around the globe, and understanding what’s going on at a local level, being able to leverage that into opportunities. [For example], a payment system that’s being developed in Kenya, how might that apply in Brazil? It’s all about developing at a different pace and anticipating what the business opportunities will be in which markets. How you leverage that understanding of what’s going on in the world, I think is extremely valuable.

Q. You also have to provide technology and support for new kinds of customers or partners as you expand this product line as well. For example, you now have to deal with the challenge of managing physical credit cards. How does IT enable that?

A: Traditionally we’ve developed most of the technology ourselves. With this new multi-product, multi-channel business model, we recognize that we’re not the experts and you brought up the perfect example — inventory management of cards. So who is? How do we provide the connectivity? How do we strike the right partnership and arrangement with the web of companies that’s going to help us deliver stored value capability into the market? The technology organization and IT leadership traditionally has had lots of relationships with vendors and done integration and mergers, so we’re in a great position to help forge those alliances and partnerships with the right providers.

Q. What’s the next step in this transformation of the IT organization along with the company? What’s ahead for the team?

A: I talked about bringing together the customer information, to link our [customers/partners] across products and channels. The next step is really turning on those capabilities at the different touch points. Enabling an online customer to interact at our retail location or vice versa, or to see a holistic view of their services, whether it be a stored value card or bill payment. How do you leverage those different capabilities so it’s easy for the consumer to do what they need to do in the world? So that’s one area. The other is that there is greater value we can provide the customer beyond what we’re doing today. So it’s about exploring those alternatives through partnerships, business relationships, our understanding of the market and in getting out in front. Then the last one, and this is more internal for the IT organization, but we’re also continuously working on improving our internal IT delivery. For example, last year we started down the ITIL journey. So we’re implementing new processes in support of that internally.

Q. John, what’s your advice for someone coming up through IT as a career, someone who is on the ladder striving to be in your role some day?

A: Once again, I think this whole notion of business value and keeping an eagle eye on how you deliver something of value to the business. That’s been an underlying principle for a long time in technology, but being able to express that, anticipating the business needs, so that someone has a very good broad understanding of IT but can work with the business and anticipate what their requirements will be and meeting them at that point. I think that’s really critical for someone that’s trying to move up the chain.