Janey Place is candid in describing Mellon Bancorp's building of an electronic commerce infrastructure. "The complexity of it is the biggest risk," she said calmly, now that the biggest and most potentially troublesome part of the two-year project is over.

The Pittsburgh banking company did not take the easiest route when it began preparing for electronic commerce. In her 55th-floor office in New York's MetLife Building, a pickup from Mellon's Dreyfus acquisition, Ms. Place, group executive vice president, drew a sketch to illustrate the complexity of the plan.

Rather than have its business units - the usual action centers for electronic commerce development - handle their own Web applications, Mellon created a set of systems - a technology layer unto itself - that each unit must tap.

This "shared services" layer is Mellon's answer to a question that has dogged senior managers for as long as the Internet has been part of their jobs: How do you organize around electronic commerce?

Initially, the concept of separate Internet incubation units, along the lines of Citigroup Inc.'s now-downsized e-Citi unit, was hailed. Then banks began to see the value of having their business units get directly involved, a good example being FleetFinancial Group's e-catalyst initiative to push more Internet decision-making to individual units.

In Mellon's case, Ms. Place's electronic commerce group, working closely with Mellon's information technology division, dictates major aspects of the technology to support applications that are developed with the business units' help. "I haven't see anyone do it," she says of the regimented shared services approach.

More important than its uniqueness is the healthy payback Mellon is reaping after about one year into the $30 million project. In hard dollars, Mellon has recouped "in the high single-digit millions," Ms. Place said, with bigger benefits yet to come.

The story of how Ms. Place got the chance at Mellon to test her strategy is one of "stars aligning," she said.

Ms. Place came to Mellon in May 1999 after a four-month stint as chief executive officer of DigitalThinking.com, a consulting firm she founded after leaving NationsBank when it merged with Bank of America. At DigitalThinking, she said, she did, well, a lot of thinking about the Internet and how traditional firms should use it.

She came to believe that electronic commerce should not be segregated in a strategic plan and that if used correctly, the Internet can help a company aggregate all products and services, regardless of which business line promotes them.

These views clicked with a new Mellon management team headed by chief executive officer Martin McGuinn that had taken over five months before Ms. Place's arrival. Mr. McGuinn wanted to accelerate Mellon's growth by seizing business-line synergies.

Though it had online banking and bill payment, Mellon had not used the Web aggressively. In this respect it differed from many other financial firms, which tended to have one or two business lines that had carved a deep path down a particular electronic commerce route, Ms. Place said. She said such firms may struggle to bridge gaps in Internet capabilities between their business lines.

Allan P. Woods, a Mellon vice chairman and chief information officer, recruited Ms. Place after meeting her through the Banking Industry Technology Secretariat, a high-level group affiliated with the Financial Services Roundtable. She and Mr. Woods saw Mellon as a "slick opportunity" to create an e-commerce foundation at the enterprise level rather than at the business-unit level, Ms. Place said.

"Janey understood that electronic commerce was about new business models, not about technology," Mr. Woods said.

Mellon's private asset management group was the first to build an Internet application on the new shared-services layer. "It would have been a lot easier if we just worried about having the application speak directly to the mainframe," Ms. Place said.

Instead, teams brainstormed for about seven months to set standards for things like security and report writing, which would work not just for the asset management group's application but for all Internet applications to come.

Mellon's software engineers needed to coordinate with the bank's information technology services group, the electronic commerce infrastructure group, and the third-party application software provider, Destiny Inc. Naturally, with more teams contributing input, more time was needed to reach accord on strategy.

In all, "it was a little rocky, but it worked," Ms. Place said. "We developed an incredible amount of learning and experience."

Now, Mellon is on course to add Internet applications from other business groups every four to six weeks. It already has added an "executive workbench" application for the Global Securities Services group, which lets clients access accounting and custody information online. Under way is an effort to automate the processing of "corporate actions," such as a stock split, that may affect a shareholder's position.

New applications are going up much faster because Mellon is using the same testing routines, quality assurance programs, and production environments that it had created for the private asset management group. "We would have had to start all over again if we hadn't already done" the private asset group, Ms. Place said.

David Lamere, president of private asset management, said he did not fully understand the shared-services concept when his group was identified as the first to try it out.

"If we were seven years into an Internet strategy, then there may have been a more in-depth conversation" about the approach, he said. "The reality is that we were in the midst of creating our strategy, so the timing of it made good sense. It was pretty obvious this was the right way to go."

Now that it looks like a winner, other lines of business are "knocking at our doors" and asking to be part of the shared-services infrastructure, Ms. Place said. The bank's technology executive council, which meets monthly and includes Ms. Place, Mr. Woods, Mr. McGuinn, as well as other high-ranking executives, decides which businesses are technologically ready to go online.

"We are constantly looking at what applications are next, and trying hard to strike the right balance between planning and prioritizing," Ms. Place said. "One of the big goals here is to become more flexible in determining the most urgent next need."

Mellon is looking forward to long-term benefits. For one, buying and licensing technology for the entire enterprise is cheaper than replicating the same services within each business unit, Ms. Place said. The "soft-dollar" paybacks, which cannot be quantified as easily, are even greater, she said.

These benefits include saving time in training and development, having the ability to bring online products to market more quickly, and being able to integrate Internet functionality across business lines. Mr. Woods explained that the shared-services layer will let customers easily access services that reside in different line-of-business silos. For example, a global fund manager could use the same security routine to access online information from the both the foreign exchange and trust departments.

Mellon's relative slowness in getting applications on to the Internet a few years ago is aiding its cause now. "Two years ago, everyone was paranoid about proving that they 'get' the Internet," Mr. Woods said. At the time, "the most important thing was to get stuff on to the Web. Now, they've got disparate architectures" to show for it, he said.

Ms. Place, who has PhDs in systems theory and in business from UCLA, says she has always been skeptical of the "first-mover advantage" concept.

In a speech this month at Bank Administration Institute's Retail Delivery conference, Clyde Ostler, group executive vice president at Wells Fargo & Co., described how being a first mover has been a disadvantage.

"Our brokerage site and our banking site came up early, and now they don't talk to each other," Mr. Ostler said. Similarly, he said, accessing different services - such as foreign exchange, automated clearing house, and wire transactions - requires separate sign-on routines.

Many banks are striving for uniformity to support their Internet businesses, but Mellon has brought unusual scope to that effort.

Lawrence Baxter, executive vice president at Wachovia Corp., said, "We do not have shared services on a comprehensive basis, but in a number of areas." For example, the corporation sets security standards and privacy policies, he said, while public-key infrastructure security technology and directory services "are heading in the direction of shared services."

"It's a delicate balance," Mr. Baxter said. "You've got to be careful not to take too much away from the business units."

Rick Sellers, an executive at Arthur Andersen in Chicago and the former chief information officer at Huntington Bancshares, said, "I believe 100% in Mellon's approach."

Mellon's strategy gives corporate guidance to the units without stifling their creativity, Mr. Sellers said. Meanwhile, Mellon "is optimizing its technology spend because it's not creating a separate interface for each business unit," he said.

Ron Shevlin, a research director at Forrester Research, pointed to a possible flaw in Mellon's centralizing. "You're running back into the old problem of having to prioritize the needs of different business units," he said. "The last thing a bank needs is another shadow IT group."

Though Mellon is focused on infusing what it calls a "dot-corp" sensibility enterprisewide, it also is creating a lab, to be announced this month, that will test Internet innovations.

Right now, Mellon is funneling most of its attention, money, and risk into its shared-services Internet infrastructure. "It's not easy to do," Mr. Woods acknowledged. "It requires technology vision, line-of-business vision, and lots of different parts of the organization working in partnership."

The payoff may not be long in coming, the Mellon execs say.

"We're not way ahead of the pack now, but we're not behind," Ms. Place said. "But with the way we're doing what we're doing, and with the speed and flexibility, I think we'll be ahead within a year."

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