Through mergers and acquisitions, process overhauls or new services, all banks seek competitive advantage - and all of these initiatives require technology support. Working on both sides of the banking technology arena, Tim Shack, CIO of PNC (Pittsburgh, more than $70 billion in assets) and CEO of processing and technology solutions provider PFPC (Wilmington, Del.), has experienced changes in both the banking and technology industries. BS&T Associate Editor Cynthia Ramsaran recently spoke with Shack about his dual roles and how PNC leverages technology to stay ahead of the competition.
BS&T: How does your role as CEO of PFPC contribute to your position as CIO of PNC, and vice versa?
Shack: I've been involved in technology at PNC since first coming to the bank in 1976, and I wore many hats along the way before being named chief information officer of the PNC enterprise in 1997. Over all that time, I've been fortunate to work with an executive team that always realized that superior technology is absolutely essential to the success of the PNC businesses. Close partnerships between the businesses and the technology organization are a hallmark of the PNC organization.
So the transition to chief executive officer of PFPC in 2002 was not as dramatic as you might think because the technology that is so vital to our mutual funds processing operation was very familiar to me, and I had a lot of good ideas patterned after similar ones from our other business units that I could bring to bear at PFPC. I also really understood the PNC shared-technology infrastructure and how to leverage that effectively for PFPC's benefit. But even though I'd been around a long time and thought I had a very good understanding of what my business partners wanted and needed before I assumed revenue responsibility myself, there were still some surprises waiting when I assumed the new role.
Ultimately, I think wearing both hats has helped make me more flexible and more determined to find the right balance between realistic expectations and stretch goals. As CEO, I probably have a better-than-average understanding of technology's promise and limitations. And back in my role as CIO, I have a better understanding now of how urgent it is for a technology organization to overcome those limitations and go above and beyond to deliver for the customer and for the business.
BS&T: How can banks leverage technology to gain a competitive advantage?
Shack: You gain a competitive edge by understanding your customers' wants and needs, and by addressing those wants and needs faster, better and/or cheaper than the next guy. Technology can be a powerful competitive tool, but you have to be very clear about its use. That's why I've always felt that the true key to winning is a deep and abiding partnership between a company's technology organization and its business partners. Technology organizations need to understand the business, and line management needs to understand the power of technology. When that happens, you get strong, customer-focused strategies that intelligently employ technology as an enabler.
To build this kind of strategy at PNC, we've created an organizational structure that places systems development personnel close to the business and centralizes other technology functions into a shared services unit. For each of our PNC businesses, we have dedicated CIOs with dual reporting relationships to me and to their respective business. They are charged with understanding the business, anticipating business and customer needs, and managing the relationships with the technology organization.
BS&T: What are some emerging technologies that will help banks stay ahead of their competition?
Shack: Evolving Web technology is going to continue to change the way we do business for a long time to come. The Web has helped fuel a trend toward customer enablement - putting more and more functionality in the hands of the customer. On both the B2C and B2B sides of our business, our customers are demanding ubiquitous, anytime access and the ability to customize so they get what they want, when and how they want it. To be competitive, we have to build products that give them access and flexibility without exposing them or us to inappropriate levels of risk. Web technology is also moving the industry more and more toward open systems and reusable code, making application development much quicker and more efficient.
BS&T: What is technology's role in banking M&As?
Shack: The scalability of a bank's technology is obviously at the heart of a successful merger or acquisition. When you have a platform that's readily scalable and you can add customers with a minimal increase in costs, that's when you really realize the benefits of a merger or acquisition. If M&A is part of your ongoing strategy, as it has been part of ours for some time, then a key role for the technology organization is planning ahead so that you have the systems in place that will support successful mergers and acquisitions. In fact, your systems can be a reason why another financial institution wants to join yours.
A second critical role for the technology organization is to minimize the impact of the transition on customers and on the business. The key here is excellent project management and sound methodology - two technology core competencies - applied to all aspects of the integration process. Formation of a project management office (PMO) is essential to align all aspects of the conversion, including technology, operations, human resources, marketing - all the functions that must coordinate to assure a smooth changeover. We as technologists have a lot of expertise we can offer in these situations.
Take our acquisition of United National Bancorp (UNB) in Northern New Jersey, which we just completed this spring. We were able to bring UNB's 40-odd branches on board very cost effectively because we had invested in systems and infrastructure designed to be readily scalable. We had a well-defined and very detailed acquisition methodology in place, as well as a technology team whose specific responsibilities include the M&A function. They were deeply involved and helped lead the PMO that oversaw the very successful integration of UNB.
BS&T: What are some technology strategies that PNC is aiming to achieve in the near future?
Shack: First, job number one is always to create a differentiated customer experience, then to leverage that differentiation to deepen customer relationships, attract new customers and expand into new markets. That's what we're doing on the PFPC side, where we're currently using a global enterprise platform (GEP) to expand our sub-accounting business internationally and working on the launch of a global transfer agency platform.
We've also recently expanded our managed accounts capabilities by acquiring ADVISORport (Philadelphia). Integrating ADVISORport with our own technology gives us a great set of capabilities in a market that is growing rapidly. Technology investments and enhanced capabilities have fostered tremendous growth in offshore operations and hedge fund assets, both up over 50 percent in the last 15 months. Our open technology platform also facilitates integration of industry-leading products, which we are combining within our own proprietary software to provide clients with best-of-breed services, most notably in the hedge fund arena.
Second, technology continues to offer great potential for driving efficiencies. For example, we're just now kicking off an enterprise-wide effort in the operations arena to look at best practices across our several operations units. We think we already do an excellent job operationally, but we are challenging ourselves, asking how we can better leverage systems and processes to take our overall efficiency up to an even higher level.