Navy Federal Credit Union CIO Jerry Hermes: Global Presence, Small IT Footprint

Delivering the IT backbone that provides financial services to military personnel around the world has its unique challenges. Washington, D.C.-based Navy Federal Credit Union ($41.5 billion in assets) has 185 branches worldwide, but most are small and some actually shut down part of time.

"Our overseas branches are primarily in naval bases; when the ships aren't there, neither are the sailors, so if there are no family or support staff present, then a branch may be closed for weeks at a time," explains Navy Federal CIO Jerry Hermes. "We don't have a huge global [IT] footprint, but we do have to have telecommunications in some fairly remote areas."

In Iraq and Afghanistan, for instance, local networks and infrastructure are far from state-of-the-art, Hermes acknowledges. "We have dial-up connections in some places," he relates. "We cannot and do not have IT support people in a lot of these areas, although we'll make occasional trips to do health checks. But for the most part, we have stuff that doesn't require highly specialized skills for maintenance." Hermes adds that he tries to automate as much IT support as possible, using remote IT and network monitoring tools to keep tabs.

In fact, Hermes says, his top current IT initiative is to implement new monitoring and business service management software; he's currently evaluating responses to an RFP. "This will give us a whole new level of monitoring," he asserts. "We'll be able to tell what's going on in the business as well as the physical [IT] components."

In the past, Hermes notes, Navy Federal monitored individual technical components but couldn't see the impact of a server outage on a business process, such as a loan approval. "We don't always know the relationship between someone asking about a car loan application he filled out online and a server being down," he says. "We're more focused on analyzing a failing server than the interruption of a specific business service." Once the IT organization understands how applications are affected by IT, staff will be able to respond more tactically - for instance, by rerouting a transaction to a different server rather than just replacing the server, according to Hermes.

Along with monitoring tools, Hermes says, he uses analytics to help IT become more resilient, better target its efforts, and improve applications and infrastructure so as to require few major upgrades and to make the best use of servers and memory. For example, "We found recently that we had an application asking for the same information multiple times," he relates. "We were able to reduce the overhead of that application and therefore extend the life of components running it by not having to upgrade as quickly as we thought."

Testing in the Cloud

After the business service management project, Hermes' next priority is to reduce application testing time and thereby reduce time to market. Many of the credit union's applications, he explains, touch other applications, which requires a lot of integration work and a long testing cycle.

Cloud computing solutions, Hermes says, should help Navy Federal create new test environments quickly. "Because we're heavily virtualized, we're looking at using a private internal cloud to accommodate our testing needs," he comments. But, Hermes adds, there is a data management challenge: how to run multiple parallel tests concurrently in a cloud without having to replicate data across each instance. "You have to figure out how to do the data governance piece so that you can run it in parallel," he says, noting that his organization uses multiple Oracle and IBM DB2 databases.

Meanwhile, partly for regulatory reasons, the credit union is making infrastructure upgrades to stay current, such as rolling out Microsoft Windows 7 and Office 2010 across the organization, Hermes reports. One hurdle: Some home-grown and vendor-provided apps are hard-coded to work with Internet Explorer but don't play well with versions 8 and 9, he contends.

Despite his interest in the cloud, however, when it comes to new technology, Hermes doesn't typically rush to buy the latest gadget. "A long time ago I lost my appetite for new technology in terms of it being a cool thing," he says. "I don't get a buzz from technology as much as I do from seeing how it can support or empower the business to do something new."

Mobilizing the enterprise

That said, Hermes does own an iPad. "The primary reason I have one is other execs want to use it, so I got one to learn what applications would work best on the iPad," he claims. "By using it, I'm getting to know its strengths and weaknesses. It's very good for keeping meeting notes and for checking e-mail. Is it worth $800? I'm not ready to go buy 7,000 of them."

Although Hermes expects the iPad to replace some employees' laptops, "There are some technical issues that still need to be resolved for it to be a powerful enterprise platform, such as VPN or some other type of secure access to internal business applications," he says. "Vendors other than Apple - such as RIM [maker of the BlackBerry] - are also introducing iPad-type devices. Competition should address these issues."

The credit union also is testing internal applications on the Droid, which so far is showing more promise than the iPhone for certain apps, according to Hermes. "We're not planning to rewrite a lot of applications for it, but we are looking at how we can deploy it wisely for remote dashboards and metrics, as well as to access e-mail," he reports.

Hermes has enterprise architects developing a mobile computing strategy for employees that he hopes will be completed in September. "We have a lot of people working in remote locations, and sometimes they need to be mobile," he says. "If we can find ways for them to do their jobs with some of these devices and not have to haul large laptops around, that will be useful."

Like USAA, Navy Federal is compelled to offer strong mobile and online banking technologies to its customer base because of the nature of its membership; many of its members are active duty officers on ships or living in tents overseas. The credit union offers an iPhone mobile banking application through Apple's App Store, and it's working on customer-facing apps for the Droid and other devices. "A huge number of younger members make heavy use of mobile and online banking," Hermes notes, adding that a growing segment wants to use mobile devices rather than online banking; some don't even have access to a private computer, he says.

But currently, Hermes explains, the credit union requires a customer to establish an online account in order to sign up securely for the mobile banking service. "Because of security and privacy aspects, it's not something you'd want a telephone operator to do," Hermes observes. "And we have to be careful about authentication and security. If someone just has a mobile account, who are they really?"