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Bank of America this month agreed to buy Merrill Lynch for $4 billion. But the Merrill Lynch integration isn't likely to begin until 2010. When it does, BofA will be looking to achieve $7 billion in savings, creating winners and losers on the technology front.
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By Mel Duvall
The primary job of sorting out the increasingly complex technology puzzle at Bank of America will fall on the shoulders of Marc Gordon.
Gordon was promoted to the role of chief technology officer (CTO) in May of this year. He took over the job from Barbara Desoer, who became president of the company's consumer real estate operations, including the newly acquired Countrywide business.
Gordon brings considerable experience into the role. He joined the bank in August of 2004 and served as CIO of the consumer banking division. Prior to joining Bank of America, he served as CIO and executive vice president of supply chain for Best Buy, the $24 billion consumer electronics retailer. Previously, he served as CIO for Timberland Company and West Marine Products.
In conjunction with Gordon's appointment in May, Bank of America announced a new IT structure. Business lines, such as the retail bank, mortgage, and credit card operations, would now be assigned fully dedicated technology and operations organizations. In so doing, the bank said this would allow a more focused end-to-end management, by better "aligning business strategies with core supporting operations."
However, above the business lines, technology activities which support the entire company—such as network computing, information analytics, global delivery, information security and business continuity—would now fall under Gordon. Gordon in turn, reports to Chief Financial Officer Joe Price.
At Merrill Lynch, the top IT job belongs to Tom Sanzone, who also only assumed the role a few months ago. Sanzone was CIO at Credit Suisse until late February, before moving down the street to Merrill Lynch to assume the new title of executive vice president and chief administrative officer. As part of that role, Sanzone was handed responsibility for all of the firm's technology, operations and corporate services. He oversees a multi-billion budget and about 15,000 employees.
At Credit Suisse, Sanzone was credited with leading a challenging "OneBank" integration project to bring together the firm's investment banking, private banking and asset management divisions. Those integration skills could come in handy, but Bank of America has a history of choosing its own people for top postings over those from newly acquired companies.
Desoer, who was Bank of America's CIO, was tapped to run the mortgage business after the Countrywide takeover, despite speculation that the job would be given to David Sambol, the No. 2 executive at Countrywide.
Similarly, when Bank of America took over FleetBoston in 2003, it was speculated that then Bank of America CIO Tim Arnoult and FleetBoston Vice Chairman of Technology Joseph Smialowski, might share the CIO duties. However, it wasn't long before Smialowski left the bank, becoming vice president of technology for Freddie Mac.
When the dust does settle, near the top of the tech winners list is likely to be consulting firm EDS. In early 2003, EDS signed a 10-year, $4.5 billion contract to modernize the bank's nationwide voice and data infrastructure. Over time, the bank has brought EDS in to extend the services to its acquired units, including a six-year, $700 million deal in 2006 to integrate the communications infrastructure of the then recently acquired MBNA credit card business.
Also on the winners list is likely to be enterprise resource planning (ERP) software vendor SAP. In April of this year, Bank of America selected SAP ERP to serve as its global financial reporting system. The selection followed an extensive vetting process comparing SAP against rival Oracle.
The Merrill Lynch acquisition could be more bad news for Oracle. Merrill Lynch uses a wide range of Oracle products in its core operations, including its ERP suite for such functions as general ledger and accounts payable, as well as such Oracle products as Hyperion Essbase, Oracle Human Resources Management and Oracle Business Intelligence.
As Rod Nelsestuen, a research director in the financial service practice at TowerGroup, points out, Bank of America will likely be content to leave Merrill Lynch's IT operations intact for now as it addresses other priorities. In time, however, it will turn its sights to reducing the complexity of its IT operations and achieving efficiencies to gain that $7 billion in forecasted savings.
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