Standard-Issue Merger Problem: What to Do with a Brand-New System

Not long after Fleet Financial Group Inc. announced last week that it intends to buy Shawmut National Corp., Shawmut officials said they had just finished installing an imaging system for the corporate trust department.

While one Shawmut executive said the nearly $500,000 contract with Wang Laboratories Inc., which was signed at the end of last year, would be unhindered by the pending merger, he also acknowledged that more "questions than answers" remain regarding the future of the merged banks' technology operations.

It's far from clear, for example, whether the Wang system, which is designed to improve claims processing for corporate trust clients, will be expanded across the new bank.

While the timing of the Shawmut-Wang press release was somewhat odd, the issues it raises will be increasingly common as the expected consolidation of the banking industry continues.

Michael Mullins, president of Comtex Information Systems Inc., New York, said the future of technology in post-merger institutions depends on the philosophy of the acquiring bank.

"If an acquiring bank thinks the type of technology being used is not up to par or is inconsistent with its technology architecture, it will be changed," he said. "But in some cases, the banks use a 'best of breed' approach to technology and keep the systems which they believe to be the best regardless of which organization the system comes from."

In the merger of equals last year of Keycorp and Society Corp., for example, Society's more centralized technology strategy won out. But Society's mortgage operations were folded into the systems used by Keycorp, which had a strong reputation in that area.

Andrew Mayer, a consultant at Ernst & Young in New York, said that, when it comes to technology, the various systems and contracts are meticulously reviewed and analyzed during the merger process.

"There can be a severe problem if the technology end of the merger or acquisitions cannot be worked out," he said.

Shawmut is using Wang's Open/Image software to give corporate trust clients faster access to information and to improve claims processing and customer services response time.

"The system provides us with the platform to build new imaging applications," said Thomas Few, a systems specialist at Shawmut. "We are planning to go forward with this technology and plan on continuing to use it."

Currently, the system is being used to process bankruptcy claims in Shawmut's corporate trust department, as well as for the Massachusetts Education Finance Authority college tuition savings program.

"By having the system in place, we are able to access information a lot faster while improving claims processing and customer service response time for clients," Mr. Few said. "We chose Wang because it offers us the ability to get all of the software and service we need for the application from a single vendor."

Wang sees the merger as an opportunity to work with a much bigger institution.

"We see this as a major beginning at creating the opportunity to work with a large organization to build a very strong business relationship," said Paul Moeller, vice president of marketing at Wang.

"The most important part for us is to make sure the technology meets and exceeds the bank's expectations," he said, "and then we will look to expand our relationship."

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