When Paul Johnson proposed an ambitious plan for transforming BB&T Corp.'s IT organization to the Winston-Salem, N.C.-based financial services company's executive management team in 2007, he had some very specific goals. The projected three-year program would not be about just systems and infrastructure; it also would drive what Johnson, the company's executive vice president and CIO, describes as a "mind-set shift" in terms of how IT views its role, and in how IT is viewed throughout the bank.
"The concept behind the transformation program was to change the way the IT organization operated - and, quite frankly, how it was viewed - from an organization primarily focused on cost reduction and efficiency to one actually being able to create value," relates Johnson, who joined BB&T in 1999 and became the company's first CIO in 2001. "We needed to do something fairly substantial - we were not going to be able to get there with incremental small steps or incremental investment," he adds.
The initiative also was a response to BB&T's strategic shift about five years ago from pursuing growth by acquisition to an organic growth plan. "We had an IT organization that was actually built for a different purpose," Johnson says. "We were built as an M&A machine and [to handle] back-room operations. We were very good at that [but] needed to evolve to that new operating environment we were in."
Adding to the pressure was an increasingly challenging regulatory climate, client demands for real-time capabilities such as self-service, and the shift from paper to electronic communications reflected in developments such as 2004's Check 21 legislation, according to Johnson. Further, BB&T's competitors "were increasingly utilizing technology to drive value as well as differentiate themselves in the marketplace," he adds.
Vision of equality
Three years later, as the formal program nears completion, has Johnson realized his vision? "My goal is to have IT viewed no differently than any other line of business at the bank, in that we have value we produce at some level of cost. We should be held accountable much like other lines of business in the corporation," says Johnson, whose primary areas of responsibility include managing the IT services organization (which includes IT business services, IT risk management, IT operations, IT organization strategy, the BB&T project office, IT strategic planning and optimization, and IT application and data services) and overall IT governance responsibilities for BB&T Corp. ($155.1 billion in assets).
"From an executive management perspective," he says, "that's very attractive. Now they can take the value proposition we bring to the table when they do prioritization. It becomes much simpler for them to make tradeoffs."
For example, BB&T has implemented enterprisewide prioritization practices that involve managing resources from a portfolio perspective rather "than from an individual perspective, as we have in past," reports Johnson, who started his financial services career 30 years ago as an entry-level programmer. "We made substantial changes in our funding model and chargeback model [to provide] more transparency, and we made substantial improvements in our vendor management program," he adds.
Within the first two years of the transformation program, a newly created IT Center of Business Optimization and Excellence had identified and executed on more than $230 million worth of expense reductions, Johnson reports. "We are on track to exceed the value targets [we placed] out there on the original program," he says. At the same time, he adds, management has approved IT investments "at double-digit increase levels … throughout the transformation timeframe."
Johnson also has overseen consolidation of risk management capabilities under a single head, as well as the creation of an IT risk management program "whose job it is to make sure we are managing - in a more holistically disciplined manner - all IT risk across BB&T," he explains. Additionally, the company's data centers and telecom and network environments have been upgraded. "The net result," Johnson says, is that, "We have substantially improved our availability, across our client-facing channels and internal primary support. The conversations we're having now related to these channels are not so much, 'Can we make it any better?' but, 'Does it need to be any better?' That's a significant shift from where we were."
Now, with the formal aspect of the transformation program nearing completion, what are some of the lessons Johnson has learned from the experience? "The No. 1 lesson is, pre-positioning really matters," he reports. "In particular, it matters with the executive management team. We have been particularly blessed to have an executive management team that has supported us and this program in particular through a financial crisis, where everyone has been looking to reduce expenses everywhere they possibly can."
In terms of getting buy-in from the IT organization itself, Johnson acknowledges that, "One of the surprises was how much and how deep we needed to communicate, and re-communicate, what we were doing in transformation. This is a real leadership challenge. It is not a spectator sport."
Effective governance also was critical to the program's success, "because [the transformation] is where investment is occurring," Johnson says, explaining that there is a natural tendency to try to "put other things in the program so they get approved." As a result, he stresses, you need "real good scope containment, very strong project management - you need to really track your benefits very closely."
Today, BB&T's IT organization not only excels at the "table stakes" core competencies, but also in the areas of business optimization - "anything we can do to actually enable the business BB&T provides to be more successful, [such as] speed to market and cycle time reduction," Johnson says - and IT optimization, which "is about getting as much value as we can out of [the] dollars we spend," he explains. "We do that through numerous different avenues: simplification, standardization, consolidation types of activity, and leveraging our spend in every way you can."
Johnson points out that, while the transformation program officially will be completed by year-end, the reality is that transformation is never off the table for an institution such as BB&T, especially in the current financial services environment. "We will always transform," he asserts.
"IT organizations in particular have to continue to evolve to meet the needs of the business," he continues. "We will have made large investments [in IT] to get us to a very competitive state. We will continue to evolve as we need to from that point forward. Transformation never ends from an evolutionary perspective, but it will be the normal way we conduct business."
Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio