Joining Two Financial Giants

By Dennis McCafferty  |  Posted 2009-09-01

In 2008, at the respective San Francisco and Charlotte, N.C., headquarters of two financial-industry giants, HR staffers tapped into their networks to administer benefits and process promotions for employees. IT departments collaborated on the enterprise to develop new business platforms.

Employees overseeing more than 12,000 ATMs nationwide depended on these networks to find out which machines were running and which were down. In Des Moines and other communities where mortgage teams thrived, executives used the networks to generate new loans and satisfy the white-hot demand to refinance homes, given a dramatic drop in the 30-year lending rate.

Then, on Dec. 31, these two institutions announced a merger, as Wells Fargo & Co. completed its acquisition of Wachovia, making it the second-largest bank in the United States, with nearly 300,000 employees.

From an IT perspective, that meant a major network integration was needed to bring it all together. That was the job facing Martin Davis, now head of the technology integration program office for San Francisco-based

Wells Fargo & Co. With more than 23 years of experience in technology management, Davis was serving as Wachovia’s CIO in Charlotte at the time of the acquisition, and he immediately segued into his current role.

For any executive taking on such an assignment, the challenges can be formidable. But financial institutions are nothing without their technology, says Paul Kanneman, the advisory practice leader overseeing IT and business integration for Grant Thornton LLP, a Chicago-based consultancy. They have their brands, but those brands are delivered by the IT structure.

When two giant institutions merge, they need to think about more than just the financial cultures coming together. They need to think about the technology cultures, too. What if one company maintains a very decentralized approach—in which each individual business unit comes up with its own IT acquisition and operational policies—and the other uses a centralized approach whereby the CIO makes all the decisions? This can impact everything, from how funding is authorized to how IT is used. If you don’t think about these things in advance, there will be a lot of angst down the road.

Fortunately, Davis quickly realized that the new corporate parent was tech-savvy: In fact, Wells Fargo was the first financial services firm to offer banking services online—as early as 1995.

Baseline spoke to Davis to find out more about the integration effort, which is still a work in progress. Here’s what he had to say.

Baseline: What were you doing before the acquisition?

Martin Davis: I was always with Wachovia. I started out as a programmer in Winston-Salem in 1984 and progressed from there. Back then, it was all about mainframes and IMS database systems. I moved to Charlotte in 2001 to help oversee the Wachovia/First Union merger.

How complex was that?

Davis: It was a huge undertaking. No two mergers and acquisitions are ever alike. But the strategy behind them is always consistent. We seek out the best of the platforms that already exist, analyze all of them and find out which ones have the best scalability.

The First Union merger allowed Wachovia to grow to three times its size, so that was a top priority. We didn’t want our customers to ever not be able to complete a transaction—or even to notice that there was a merger going on.

How did you end up overseeing the Wells Fargo/Wachovia integration, since you were working for the acquired firm?

Davis: Wells Fargo has a great corporate culture and believes it should take advantage of the best existing resources in acquisitions. At the time, I was the CIO of Wachovia, and Wells Fargo didn’t have as centralized an approach to IT as Wachovia did.

My duties were all about overseeing these transitions, as Wachovia had acquired companies such as First National Bank of Atlanta, Golden West and A.G. Edwards. True, there is a big difference with respect to being the acquirer and the firm acquired. But Wells Fargo’s philosophy is all about tapping into the best talent available to do the job that’s needed. So they allowed me to leverage my skill set.

When you initially started the integration, how immense did the task look?

Davis: It was big. Between the two companies, there were more than 4,000 different systems being used. Just for e-payments, we had to decide on hundreds of systems. But there was no pressure to stick with Wells Fargo’s systems, if it could be determined that Wachovia had a better model that worked.

For mortgage lending, we found Wells Fargo’s to be superior for scalability. At the time of the merger, we had huge needs to fill the demands created by the refinancing boom. We added 10,000 employees just to handle those orders. The Wells Fargo platforms were superior in handling that demand and conducting secure transactions, so we zeroed in on those.

But, when it came to the retail brokerage side of the business, we liked what we had with Wachovia’s systems. We found that Wachovia had more experience in this area, and that its systems were better equipped to help us compete.

What were some of the initial challenges?

Davis: With anything like this acquisition, you’re bringing disparate teams together and trying to get them all to be on the same page. However, with IT departments, every member has his or her own preferences [regarding] the systems they’re using. There’s nothing wrong with that. They helped develop those systems, are working with them every day and take a lot of pride in them.

Our challenge was to get the teams to focus on the prize, which means evaluating which systems are best suited for the situation and going in that direction. Which systems allow us to serve our customers in order to be the best financial institution coast to coast? That’s what we tried to get them to determine.

For example, the online banking platform was found to be superior on the Wells Fargo side. Wells Fargo’s customers constantly said how easy it was to use and how intuitive the interface was. So that’s what we went with. At the end of the day, it’s about the customer, and the customer wants convenience.

The fortunate thing is that both Wells Fargo and Wachovia have constantly been among the highest-rated financial institutions when it comes to customer satisfaction. When you bring together two companies with such similar cultures in this respect, it makes it easier to bring the network systems together.

How did the merger affect ongoing IT initiatives?

Davis: When you’re going through the planning and execution stages, that becomes your first priority. But we’re well aware of the need to keep developing better business platforms along the way. We’ve increased video conferencing, SharePoint sites and portals to keep our employees from constantly jumping on planes to get business done. We’re not yet at the stage where everyone has unified messaging all on one device, but we are getting more collaborative in the way we do things.

How has the merger affected your data centers?

Davis: Wells Fargo was in the planning stages of a data center expansion at the time of the acquisition, but Wachovia had already opened a new data center. That allowed Wells Fargo to put off plans for its data center, because the Wachovia project is serving that need. This has resulted in significant cost savings.

When do you think you’ll be finished?

Davis: We expect to have most of this done by 2011, but we’re not going to rush anything to meet that time frame. There are multiple stages, all of which require analysis, planning, testing and release. There’s constant code-testing that needs to be completed for every stage, and there are more than 4,000 systems out there that need this.

There’s no magic cookbook for a major integration. Every project is different and requires different approaches and analyses. And there’s a human component, too. We don’t break everything down into technology terms because it’s really about the people using the technology and the customers served by it.

Do you wait until it’s all over before celebrating?

Davis: We celebrate the small successes along the way, but we do it realizing that the next challenge is right around the corner.

Company: Wells Fargo & Co.
Headquarters: San Francisco
2008 Sales: $1.3 trillion
Number at Wachovia at the time of the merger: 114,196
Number at Wells Fargo at the time of merger: 167,209
Number of current employees, post-merger: 286,000
Business: Financial services—including mortgage loans, refinancing, investment services and traditional banking—for 70 million customers throughout North America
Estimated number of locations: 10,400 branch and office locations and 12,300 ATMs in North America