Merrill's Outsourcing Strategy
The platform Merrill is replacing, TGA, was a giant, monolithic application that required tons of bandwidth and demanded an incredible amount of testing before every new application was added. "It was brittle technology, old technology, that was expensive to maintain and support," says the GPC's Vielehr. Plus, the world was moving away from client/server to the Internet. And TGA didn't have any CRM capabilities.
In addition, it was difficult to integrate Merrill's online sites (where clients could do transactions) with TGA. That led to a mismatch between the information clients saw on the Web sites and what FAs saw on their screens.
So Merrill began exploring options as the mind-set among Merrill executives, led by chairman and CEO Stan O'Neal (then head of the GPC), shifted from the IT macho of "build everything yourself" to the more conservative "build whatever can differentiate you from your competitors, but buy the rest".
"Our core competence is helping people manage their financial affairs," not CRM or trading systems or networks, says James Gorman, executive vice president of the GPC.
Or, as Mark Greenberg, first vice president and program manager for the wealth management technology platform project, says: "I'd rather be working on some really neat analytical tool and understanding the mind of an analyst than banging out some account maintenance type of thing."
According to Vielehr, this shift in the GPC's thinking "was probably the largest transformation of a technology shop in the United States". And a big shop it is, with an IT staff of 1800 that supports 35,000 desktops. The GPC itself is the leading issuer of debit cards in the world, the seventh largest bank, and it has major insurance, mortgage and 401(K) businesses. With all those silos, a lot of uncoordinated IT activity was going on.
Looking for Mr Good Vendor
At first, GPC's execs leaned towards having one vendor manage the whole project. But, given its size and complexity, they concluded that no one could do it all - manage the desktop, the networks, the hardware and the integration issues. So they decided to hire one vendor to help with the integration and act as a general contractor. "We wanted someone to have responsibility for the [desktop] all the way back, manage the subcontractors and have responsibility for the SLAs," Vielehr says.
The company tried out three vendors - Bloomberg, Reuters and Thomson Financial - in a few branches. In November 2002, Merrill announced that Thomson had won the bidding. "The most important driver was the comfort level Merrill execs had with Thomson execs, and Merrill's belief that Thomson's senior management team would stay intimately involved in the project," says Vielehr, also citing the company's strong background in retail, its financial market data feeds and its other wealth management applications. Merrill also valued Thomson's e-learning expertise. During the pilots, Vielehr says, "it became obvious how critical training was". He liked the fact that Merrill's FAs would have access to Thomson's e-learning product on the new workstations.
Merrill hammered out a contract with Thomson that included SLAs, set out performance bonuses, established penalties and covered more than a few other details. "There's a whole bunch of SLAs around network availability and latency," says Vielehr. There are others addressing response times on the client Web sites, and bonuses are attached to how well the Web sites score on user surveys. Similarly, there are SLAs in place for the FAs' desktops - response times, uptime in branches and training satisfaction. Taking into account user feedback - such as Web site response times and training satisfaction - is a new wrinkle for Merrill, says CIO Cummings. "For us, that's a unique series of SLAs that aren't driven just by delivery times and metrics, but are also driven by the users' end view of what's being provided."
Jim Alberg, who works with Murphy as a partner in the technology group at Shaw Pittman, says that good outsourcing deals should measure customer satisfaction and tie it to compensation. "It's something that should be done, but not everybody does it," he says.
Even though Merrill's contract with Thomson eventually reached 1500 pages and covers as much ground as possible, some flexibility is built in. For example, execs decided after the fact that it made more sense to have Thomson deliver alerts to FAs on the desktops rather than Merrill. So, without ruffling any feathers, they changed the contract.
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