Hurdles to IntegrationBy Larry Barrett | Posted 2002-09-16 Email Print
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Is a company's biggest asset really its people? Deutsche Bank didn't act that way after it bought underwriter BT Alex. Brown.
Hurdles to Integration
Few industries have as many specialized and internally developed applications as financial services. After using one program for several years, analysts and traders become proficient at, and in some cases dependent on, their application of choice. And the support staff for these applications and systems spends years servicing, modifying and designing these applications for specific needs within their organization. Fate is not always kind toward programmers whose carefully nurtured applications get discarded.
"In financial services mergers, the brawl between technology groups often becomes very intense, especially if the competing technologies are homegrown," says Gartner analyst Don Free. "It takes a lot of architectural work to make it work, and sometimes the acquiring company isn't willing to make that investment."
About the only significant application integrated between the two companies on the equities side was SunGard's BRASS utility software, which is now used to process trade orders. And that integration only happened, says former BT Alex. Brown manager Stein, because the two companies were using the same software to begin withalbeit different versions.
"One of the most frustrating aspects of this whole process was that you never knew who to go to for a straight answer," says former CIO Allopenna. "Deutsche Bank had a global head of this and a global head of that, and that type of communications environment just doesn't work regardless of what direction you're going to take from an IT perspective."
"You're talking about an enormous commercial bank buying a comparatively smaller investment and commercial bank," says David Furlonger, a vice president and research director at Gartner. "Those are two completely different types of organizations, types of businesses. Throw in the fact that it's a German bank buying an American investment bank and you can understand why there was so much political infighting. It's not a scenario that's conducive to a short-term integration much less any kind of long-term business or IT planning."
With more than 2,000 offices and roughly 90,000 employees scattered across 70 countries around the globe, Deutsche Bank is a sort of poster child for heterogeneous systems. At last count, it was using more than 8,000 servers running OS/2, Windows NT and Unix plus more than 80,000 PCs. It has a substantial base of IBM mainframe computers and, according to one former manager, has as many as 110 different data centersincluding 17 which are considered "major"all over the world.
"You have to understand that there was very little integration done when Banker's Trust and Alex. Brown merged back in 1997," says one former Deutsche Bank manager who requested anonymity. "Instead of finding a sensible, repeatable process to integrate their acquisitions, they simply fund the technology through initial connectivity mainly for communication for e-mail and phone service, and the rest of their efforts are spent on cutting costs. They're definitely not a sterling example of post-merger synergies."
At Deutsche Bank, the pressure to control costs and improve profitability is such that its executive management team, in 2001, ordered a 10% cut in technology spending for the next year.
"Usually when a bank decides to merge with another bank, the goal is to improve operating efficiencies, get the best of breed in terms of systems and people and get new accounts," says the former Deutsche Bank manager, who now works as a consultant. "Deutsche Bank was only interested in getting the new customers, and everything else was inconsequential."