Systems advice: throw them out and start from scratch.

Systems Advice: Throw Them Out and Start from Scratch

ORLANDO - A slash-and-burn approach to systems development was a dominant theme at the Bank Administration Institute's conference on retail delivery systems, held here this week.

Presentations by technology management consultant Michael Hammer and officials of the technology unit of Columbus, Ohio-based Banc One Corp. centered on "reengineering," which Mr. Hammer defined as making dramatic rather than gradual changes in the use of technology.

|You Can't Just Fix It'

Banks will have to make such dramatic changes to compete in a rapidly changing industry, Mr. Hammer said.

To keep pace with emerging operations needs, bankers have typically made patchwork renovations to systems.

But "you can't just fix it anymore," Mr. Hammer said in his keynote address.

"There has got to be a fundamental change in the way the technologies are organized and implemented."

An End to Mere Tinkering

Bankers are not realizing the full cost-saving potential of technology because they are automating antiquated processes that are intrinsically inefficient - often merely tinkering with systems that need to be entirely overhauled - Mr. Hammer said.

The solution lies not in adding new layers of applications but in scrapping old systems altogether and starting from scratch, said Mr. Hammer, president of Hammer & Co., Cambridge, Mass.

"This is not about changing things 10% but by 10 times," he said. "And to get those kind of results, there is going to be some pain."

As a case study, Mr. Hammer cited a client, IBM Credit Corp., the finance arm of International Business Machines Corp. A reengineering effort there reduced the average processing time for credit requests from more than 10 days to six hours.

Similar improvements are possible in many areas of the banking industry, he asserted.

As if to validate that claim, H.R. "Tim" Rosenbusch, manager of electronic banking at Bank One Services Corp., gave an update on the process of companywide reengineering effort that began in 1986.

The plan is to consolidate about 15 disjointed data systems - which handle everything from demand deposits to loan processing - into a homogeneous network that allows virtually all the bank's computers to speak to one another.

At the front end, the system will be easier to use than at present, while giving users access to six times the amount of information they could tap into in the past.

"It's 100% reengineering that allows us to use the information that used to bury us," said Mr. Rosenbusch.

Conversions Held Easier

The seamless nature of the Banc One system accommodates the bank's rapid growth through acquisition. Bank officials said they can convert acquired institutions to the common system in under 180 days.

Banc One officials declined to estimate the overall cost of the reengineering project, but said it has formed strategic alliances with vendors including Dallas-based EDS Corp., a General Motors Corp. subsidiary, to defray development costs.

"Reengineering is a Pandora's box - if you do it right, the organization will look nothing like it did before," Mr. Hammer said. "But it will meet with substantial resistance, and therefore must be driven from the top down."

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