The real reason Absa wrote off R2.4-billion in software

Absa Group’s decision to write off R2.4 billion in software assets is attributed to a combination of factors beyond just the accelerating obsolescence caused by Artificial Intelligence. According to Absa Group CTIO Johnson Idesoh, the write-down reflects a strategic shift towards faster technology modernization driven by evolving customer expectations and a need for greater IT flexibility. The impairments were significant, impacting various divisions within the bank, with the largest hit taken by head office, treasury, and other operations.

This move is part of a wider trend in the banking sector, where institutions are investing heavily in IT modernization, particularly transitioning from on-premises mainframe architectures to cloud computing. Absa’s IT spending reached R16.7 billion, and is expected to increase, while newer, cloud-native banks like Capitec have considerably lower IT costs. AI is further accelerating this shift to the cloud, as hyperscalers like AWS, Google Cloud, and Microsoft Azure offer robust AI tools and software.

Absa’s strategy involves leveraging partnerships with companies like AWS and Huawei, and a disciplined 'build, buy, or partner' approach to prioritize scalable, secure, and innovative technology. While acknowledging AI’s impact on software obsolescence, Absa currently prioritizes simplifying system architecture, migrating to cloud-native platforms, and phasing out legacy systems to meet future goals and customer demands.

(Source：Techcentral)