Reengineering is touted as a highly structured process to cut costs and gain efficiencies in order to boost profits.
But, say some bankers who have recently undertaken reengineering projects, there can be less predictable elements to revamping business processes. Things like luck, for instance.
"Reengineering is grounded in the profit motive," said Mary Vogan, a senior vice president of capital markets operations with Richmond, Va.-based Signet Banking Corp., which recently reengineered its capital markets systems and operations.
"In 1991, we made the decision to migrate from a service bureau to an in-house technology," said Ms. Vogan. "In many ways, it was a leap of faith."
While Signet points to a successful restructuring of its capital markets operations, some industry experts say that banks can encounter unexpected pitfalls when they set out to reengineer.
"I see very few projects that fail because there is some severe technical issue that nobody was able to overcome," said John H. Deane, a partner with Price Waterhouse in New York. "Predominantly it's human issues. It's wrong people on the project team, wrong definitions, and different people with different mind sets about what they are building."
Those cultural issues, said Mr. Deane, have contributed to the some failure of reengineering. At a presentation at the Bank Administration Institute's Treasury Operations and Systems Management Conference in New York, Mr. Deane offered a number of examples, but declined to name the companies.
In the most dramatic case, he said a major broker-dealer had invested more than $180 million on new technology over five years but realized no benefits in the number of trades processed per staffer.
At the conference, executives from Signet and NationsBank Corp., which also undertook a revamping of its capital markets group, offered dispatches from the reengineering front lines.
"In our shop, we own all our data," Ms. Vogan said, admitting that even though the $12 billion-asset institution was happy with its new system, there was still an element of luck involved.
At Signet, the bank used client-server technology operating under a UNIX system. Ms. Vogan said Signet is now realizing the benefits achieved from going in-house.
"We rely less on the vendor and more, on ourselves for daily support, which, coming from me, is a miracle because I thought I'd never leave the safety and comfort of a service-bureau environment."
Jay J. Butler, senior vice president, detailed Charlotte, N.C.-based NationsBank's successful systems reengineering projects. Mr. Butler is responsible for the capital markets group at the $164 billion-asset bank and heads the consolidation of the many banks that have been acquired.
"What we have done for reengineering is we've instituted a process called |understanding the business,'" Mr. Butler said. "That is simply trying to sit down and understand who the customers are, who touches the customer, and how that touch point follows all the way through our trading activities."
Mr. Butler said those processes were be very fragmented, especially on capital markets. NationsBank found customers separated down the "customer value chain" by as many as five levels, including various middle and back offices, settlements, and accounting.
"By then," Mr. Butler said, "they don't understand what the customer wants and they don't understand the products and services we are offering.
Mr. Butler said that as of a year ago, NationsBank had six foreign exchange operations, each with its own operating system, and in some cases, trading amongst themselves.
"It didn't make a whole lot of sense," Mr. Butler said. "It's certainly not the most profitable thing to do when you are getting quotes from yourselves and just moving money around."
In support of its traders, the bank came up with the concept of a middle office and put back-office operations associates on the floor with traders to exchange information.
"We did that for two purposes," Mr. Butler said. "One is to make sure we process the deal correctly, and the second is to close that customer value chain."
One of the most important ideas raised at the conference, and agreed upon by both Ms. Vogan and Mr. Butler, was that people in systems and operations need to be on the same wavelength.
"Successful systems development requires business people to understand systems and operations, and operations people need to understand the business," Donald H. Layton, senior executive vice president at Chemical Banking Corp., said in an address. "It takes involvement by both sides."
