The merger of Bank of America Corp. (Charlotte, N.C.) and FleetBoston Financial Corp. (Boston) will test the abilities of IT executives to plan and execute on a grand scale. The companies face formidable obstacles on their way to an anticipated $1.1 billion in savings.
In the process of creating the planned $933 billion-asset-plus institution, Bank of America needs to assimilate FleetBoston's technology and systems, along with its 18 million customers, quickly and without customers being inconvenienced. Its executives need to map out which of its infrastructure and applications FleetBoston will migrate to, then methodically move Fleet's systems over.
The strategy differs from the one used by NationsBank when it acquired Bank of America in 1998. It mixed and matched applications and platforms from the two companies. This time, most of FleetBoston's major systems, with the exception of its branches, are likely to be scrapped or migrated to Bank of America systems, says Dennis Rygwalksi, former director of IS at FleetBoston, now general manager of finance industry solutions at Exigen Inc. (San Francisco).
The merger also is a cultural challenge for Fleet. After years of gobbling up other institutions to become the largest bank in New England, it will have to adapt to someone else calling the shots. In fact, according to Octavio Marenzi, president and CEO of Celent Communications (Boston), "Fleet has historically done a better job," in terms of managing the technology aspect of M&As. "They went through a series of acquisitions in the '90s that they did very effectively" (the much larger 1999 BankBoston merger being the exception, Marenzi concedes).
The companies need to focus on melding business processes as well as technology, says Chris McLaughlin, director of financial services marketing at FileNet Corp. (Costa Mesa, Calif.), which supplies back office processing software to both institutions. Many of their business processes are hobbled by older legacy systems, he says.
From a technology standpoint, "the strategy should be to merge to a common platform as quickly as possible," Celent's Marenzi advises. "Speed is absolutely the essence of these things. It all comes down to the core systems-that's the crux of the whole merger, whether BofA realizes it or not," Marenzi says. "That has to work, and work well or the whole merger is worthless."
The best-of-breed approach has been a bugaboo for some of the banks formed in the merger wave of the past several years, including Citigroup (New York), J.P. Morgan Chase (New York), and Bank of America. Many of these mergers fumbled technology integration, with major systems decisions being made by fiat instead of through planned deliberation. Integration "is not just a matter of smashing two systems together," says Jim Eckenrode, research director at TowerGroup (Needham, Mass.). "That's why [these banks] are still cleaning up from old acquisitions."
During the NationsBank-Bank of America merger, for example, most of the shots were called from NationsBank's headquarters in Charlotte, but Bank of America executives successfully pressed to retain systems developed for their California operations, including Internet banking, branches, and core-transaction processing. Those duplicate systems remain in place today. "Bank of America has been less disciplined about making hard calls to force people to adopt a single platform," says Eckenrode.
FleetBoston had its share of problems, some self-inflicted, when it merged with BankBoston. Fleet's policy was to rip out BankBoston's infrastructure and replace it with its own, including the branches, which BankBoston had just revamped. "[FleetBoston] pulled out contemporary technology and put in older technology, with adverse consequences for customers," Eckenrode says.
At press time, Eugene M. McQuade, a BofA executive, had been named president of the corporation, with responsibilities including technology and operations .
KATHERINE BURGER contributed to this article.