Wells Fargo & Company Managing Information Essay

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An effective integration process meets managers’ objectives. What were these? Regional commercial banks merged and acquired to remain independent in an industry increasingly dominated by large players. The erosion of regulatory restrictions on pricing, products, and geographic expansion in this region.

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To survive in this ‘bank eat bank’ world, institutions found they had to grow and remain relatively efficient to position themselves to be the buyers rather than they bought. Therefore, regional banks integrated the information systems of merged and acquired institutions to gain economies, leverage standard product lines across an expanding distribution network, and bring their disparate parts under control.

The institution under analysis is Wells Fargo & Companies. In the case of bank mergers, such as that of Wells Fargo & Company’s acquisition of Crocker National Bank, or the Bank of New York’s acquisition of Irving Bank Corporation, asset preservation and keeping key personnel and customers is crucial to their strategy. But cutting overhead and integrating operations is equally high in importance to keep costs down and improve profit margins (Bank of New York’s 2008).

This is especially critical since banks tend to have similar assets, resources, and product areas. Thus, many areas needed to be consolidated, such as closing down overlapping offices, integrating the back-office systems, and merging similar operations. These performance objectives are not unrealistic per se (Carr, 2004).

The nation’s largest banks are, on average, slightly less profitable than mid-sized institutions, but some large banks earn considerably better returns than the average. It is intended to provide savings in its own right and is an essential precursor to operational cost improvements. Some managers also recognize its dominant influence in creating administrative coherence–in digesting a merged or acquired firm (Baschab et al 2007).

Bankers described two ideal processes they use for accomplishing integration-one for acquisitions and another for mergers. Acquisitions often involve a large, experienced firm integrating a smaller bank. Managers outline a cooperative process in which one partner dominates the other and assert that its information systems and operating procedures be adopted by its junior partner.

The acquired firm accepts this directive because the other firm’s managers are ‘in charge. The integration effort us implementation- rather than design-intensive as the smaller bank adjusted its practices to conform with its new parent, eliminated jobs, and consolidated options. Ideally, the acquiring bank’s systems are technically and functionally superior to those of the acquired institution. If the latter have systems that were unique or innovative, these are adopted for the entire firm.

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New systems development, however, is avoided during the integration period to minimize technology-related risk. New technology from the viewpoint of users and systems developers is associated with technical problems in the project and greater time taken and higher cost over-runs. However, overall the newness of the technology in itself has a small positive association with project success.

Thus there is little evidence that the newness of technology itself has a major impact on the overall success and failure of information technology innovation. Rather, it appears that the benefits from projects which pay off are substantial relative to the technology costs and come from the business change that technology makes possible. Achieving these benefits requires both targeting the business areas where cost and revenue gains would be highest and successfully managing business change.

The clearest factor to emerge from the research is the existence of successful projects of a project champion in the relevant function within the business. In almost every fail project the lack of a champion is evident, or there is moving of a project champion in cases where the new incumbent does not take over the champion role (Laudon & Laudon, 2005).

The main sources of information required for this merger are financial reports and accounting reports, the structure of the company and its market analysis, HR analysis, and employee relations. Reality differed dramatically from this ideal view, in most of the episodes reviewed for this research. The financial results of both corporations’ mergers and acquisitions were mediocre.

The savings produced by IT integration did not flow quickly or smoothly to the bottom line. On average, 17 percent of the deposit share held in 1981 or later acquired by the study participants was lost by 1987, and the loss of income share was even more substantial (Baschab et al 2007).

Just as financial results failed to match expectations, the actual process of integration bore little resemblance to the ideal described by managers. Most acquisition integrations failed to achieve the positive, cooperative process that executives sought. The acquiring firm’s systems were neither technically nor functionally superior to those of the acquired firm, yet they were usually adopted.

On-line systems were removed and paper-based processes installed. Integrated systems were dismantled, and fragmented, stand-alone applications were implemented to replace them. The training was insufficient to prepare branch and lending staffs to face customers competently. The integration was not transparent to the customers. Errors were made in accounts. In one telling example, a respected dentist’s account statement was mailed to his office with the label (Laudon & Laudon, 2005).

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The main types of information gathering are background data and test-related data. in this case, information technology is becoming recognized as an important business weapon. As well as traditional data processing applications designed to increase business efficiency through cost-reduction, information technology is being used to improve effectiveness, for example, through improved information for decision-making and faster speed of response to the customer (Snyder 2007).

More radically, IT can be a key component in doing business in new ways and even transforming a business or sector. It is clear that while developing IT systems is a necessary condition for success in such cases, it is by no means sufficient. The question, therefore, is how new products, services, processes, and ways of working involving IT can be managed to obtain business benefits.

Today the availability and cost of information technology are not the major constraints on its effective application in business. The potential applications of information technology which can be cost-justified and are technically feasible far exceed the capability of organizations to exploit these opportunities.

IT executives with responsibility for multiple lines of business face a similar generic vision problem. They may believe that IT can play a significant role in the businesses for which they are responsible, but lack the time and the knowledge required to formulate a specific vision for each business.

To address that problem, Malcolm MacKinnon, head of information systems at Prudential Life Insurance Company of America, tried a unique method of presenting IT. He pulled together a traveling roadshow that wove several dozen advanced technologies into a vignette involving a potential insurance client.

Much of the demonstration was life, with the remainder simulated or videotaped. MacKinnon’s audience, senior insurance managers, we’re able to see new technology in a familiar business setting and have a better opportunity to formulate their own IT visions (Laudon & Laudon, 2005).

Using analytical techniques will help to analyze market potential and market share. It is expected that there could be technical hurdles to overcome when integrating banking operations. So strong are these obstacles that the Bank of New York has to assure the Federal Reserve Board that they would operate the two units independently for as long as the Board deems necessary.

However, the Bank of New York faces considerable cost-cutting pressures to get the two units to merge as quickly as possible to consolidate resources. Thus, an equitable analysis of each bank’s resources becomes crucial. How these resources are allocated, reallocated, or eliminated determined the overall organization’s future viability. It is the successful integration of the two firms’ resources and assets that is a key element to the merger’s success. Most mergers fail as a result of internal conflicts.

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These conflicts, moreover, arise as a result of power struggles from within the organization. With any human endeavor, personalities play a key role in either its success or failure. If a merger has the backing and full support of its employees and management, the chances of success are greatly improved. Although there are fewer obstacles than in the case of a hostile takeover, gaining support and trust is always a difficult endeavor (Carr 2004).

A key ingredient to success is to make certain that authority is evenly distributed within the newly organized company. If this is not the case, then power struggles will result between the management of the two companies, and a true merging will never take place. There consequently will always be an “us-versus-them” attitude prevalent within the organizations. Plans must be in place to utilize the managerial talent available within each organization. The upper management of each organization must achieve a very good working relationship with the other from the onset

The ability to understand business problems and hence develop information-technology-based solutions depended on the nature of the development team. In particular, success depended on bridging the gap between

  • business managers who often knew little about information systems and had not been involved in previous projects, and
  • information systems professionals often unaware of detailed business needs.

In successful projects this gap was bridged within the development team–there had to be no significant gap in understanding and communication between those involved. The most critical area was converting business needs into functional specifications of information systems requirements, for example, a production manager specifying the information needs to analyze plant performance.

Her experience as a project champion was useful in some of the projects–though they were regarded as tough customers to please by the information systems function.

Where this was not the case someone had to fulfill this role–typically either someone from the business area being moved into information systems in mid-career or information systems professional with a long working relationship in the business area. So, in the early stages of a project, the quality of the staff in the development team is truly cross-functional rather than being essentially from the information systems area (Carr 2004).

The different audiences have two requirements for information: a hard copy format and digital format. the hard copy format will be required for Board of the Directors and stakeholders’ meetings while the digital format will be necessary for managers and those personal working with data. Many strategic systems are developed iteratively, based on close contact with users and–frequently–with outside customers instead of on formal specifications.

A separate group unfettered by procedures and standards intended for more traditional kinds of applications will probably do better at this kind of development than a group that must change its style from project to project. In addition, a smaller group will find both internal and external communication faster and is likely to be more responsible about maintaining the security that can be vital to achieving that important initial advantage over the competition.

An SIS group outside the main IS area can be staffed, managed, and controlled in ways designed specifically to encourage innovation. Nontechnical people from user areas find it easier to join such a group for a time, then rotate back to an area outside IS. Similarly, technically oriented individuals may view an SIS group as an excellent bridge to a position in a user area.

Focus on customers, both internal and external appears extremely important to SIS success and is easier to maintain in a group-oriented solely to strategic systems Laudon, K. C. & Laudon

At some point, this mutual learning can bring the ‘user’ and the ‘developer’ so close that these terms distinguish prior roles rather than current activities. The devolution of information systems to line organizations has similarly blurred these distinctions. Some of the companies we have studied already have reached the point where the majority of new information systems–and all systems of strategic significance–are being developed by user groups (Carr, 2004).

Organizations are using both technical and organizational approaches to promoting user development. On the technical front, the phenomenal spread of low-cost end-user computing has put powerful technology on the desks of many middle managers. Easy-to-use tools, such as Apple’s HyperCard, various expert system shells, and the armory of software that comes with today’s personal computers, have made user development technically feasible as well as affordable.

John Hancock and Hewlett-Packard were among the companies who were early in encouraging user development, based initially on off-the-shelf building blocks. Some of these components are simply commercially available software packages; others are applications based on packages, such as Lotus 1-2-3 worksheets; still, others are programs written from scratch by one user and then shared with others (Laudon, and Laudon 2005).

Given the appropriate incentives and a reasonable tracking mechanism, end-user tools and reusable building blocks can significantly promote user development. IS managers are generally aware that user-built software tends to lack many of the features promoted by professional training and experience with the technology.

User-written code may be without structure and full of bugs; the software may make inefficient use of the hardware and will almost certainly be without documentation and adequate provisions for backup or other security mechanisms. Sometimes only the IS manager’s sense of propriety is at risk; the system will then be used in a specific, perhaps one-time, situation and then discarded.

In other circumstances, a system is intended for ongoing use and should be improved with the features common to professionally-developed software. The key is recognizing which systems will be used often enough to justify further attention, then convincing users to participate in an improvement process that may bring few immediately obvious benefits. Since users typically feel pleased and proud about the software they have designed, some sort of incentive-based control is appropriate (Carr, 2004).

A champion in the business rather than the information systems function can coordinate the project and guide it towards relevant business goals. This increases the chances of success for two reasons:

  • by influencing the design of the system to make it meet user and business needs more closely; and
  • by providing impetus for the implementation of the project.

Such a champion, therefore, manages the project in a way more likely to achieve business objectives than one which either is championed from within the information systems function or has no clear leadership. In the event of problems during the development of the project, a champion can gather support for the project if he or she believes it to be viable.

However, some champions are not at a sufficient level in the organization to be able to allocate adequate resources on their initiative. The second role of a sponsor is important here–a senior manager who takes an interest in the project makes some commitment to it and reviews its progress.

Two patterns emerged which were associated with successful project development: first, a relatively senior champion, and secondly, a more junior or less enthusiastic champion backed by a more senior sponsor. So, while sponsors were important, they are not a substitute for a champion actively involved in a project. Thus the existence of a champion, combined with a sponsor where appropriate, was the single most important factor for success.

This confirms the findings in technical innovation research–as well as the experience of many companies in implementing both IT strategies and other programs such as quality initiatives. However good the technology or strategy methodology, it is a business commitment to change that has the greatest influence on business success or failure (Laudon and Laudon 2005).

Thus commitment is built on both sides over time and deciding not to pursue the idea does not count as a ‘failure’ as it is less visible. In such projects it is also easier to change the approach: for example, the focus of the project or the information technology tools used. Such changing of approach was associated with project success.

Thus the problems and management requirements for successful IT projects differ during their development. Two broad phases can be distinguished: a development phase lasting from the initial idea generation to the development of an initial working system, and an implementation phase in which a system is implemented fully within the business. Between these, there is often a period of refocusing to clarify the business goals which can be achieved and the technology and organizational change which will realize these benefits (Baschab et al 2007).

In sum, the merger between two banks requires financial and accounting information gathering and analysis. The analysis above suggests that for the successful development of an information technology project from an initial idea to a working system, a prototyping approach with a small, high-quality cross-functional team probably works best.

In addition, there is a need to be prepared to stop or change the approach towards projects in which initial ideas do not work out. However, in the study, there were several cases in which projects reached an initial working system but did not achieve the commercial use or business benefits foreseen by their initiators. Five factors appeared important in implementation. During a clerical strike, the service center was staffed temporarily by IS employees.

Appalled by the center’s inefficiency, the IS employees returned to their normal jobs with the determination to improve customer service by automating the service center. On their own, the IS group developed an easy-to-use system, complete with color graphics and pull-down menus, that accesses the tariff information online. The new system can also access databases of service information stored in several locations across the country.

Bibliography

Bank of New York’s. 2008. Web.

Baschab, J., Plot, J., Carr, N. 2007, The Executive’s Guide to Information Technology. Wiley; 2 edition.

Carr, N. G. 2004m Does IT Matter? Information Technology and the Corrosion of Competitive Advantage. Harvard Business School Press;.

Laudon, K. C. & Laudon, J. P. 2005, Management Information Systems: Managing the Digital Firm, 9th Edition.

Snyder, L. 2007, Fluency with Information Technology: Skills, Concepts, and Capabilities (3rd Edition). Addison Wesley; 3 edition.

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