| M&As call for redesigning of IT Strategy in Banks
By Sandeep Bhambure, National Manager – BFSI, EMC India
The Indian Banking industry is presently witnessing the consolidation phase growing and mergers & acquisitions (M&As) are the order of the day. The M&A scenario in the banking industry brings along huge opportunities for growth as well as challenges in terms of integration. Smart acquirers realize that failed synergies from bank mergers result from unfamiliarity with the operational considerations that should have been examined pre-merger. Pre-merger planning is particularly important in areas like ensuring compliance with current regulatory, legal and accounting requirements, upgrading technology (if the IT system is not current), and building up capital.
Never before has the process of merging two banks been more complex, and acquirers must balance a multitude of strategic issues during the planning, due diligence and post-acquisition phases.
As one of the most highly regulated industries, banks must stay compliant and proficient in all regulatory, legal and accounting issues. The compliance issues the complexity and number of business lines, geographic locations, system constraints, the limited number of experienced skilled employees and the challenges abounding in today\'s complex banking environment and you understand why layering together two banks will be the solution to some problems and the creation of others. Even so, it goes without saying that a company that is well equipped to understand and comply in these areas will increase the chances of a successful merger/acquisition.
With the reliance on IT systems to handle everything from in-branch transactions to online banking, technology is central to today\'s modern banks. Resolving IT issues after a merger is a big exercise, and the identification of numerous, sometimes countless systems for accounting, operations and servicing, for example, can lead to unwanted surprises.
Therefore, it is imperative that companies immediately address inventorying systems addressing the compatibility of their technology platforms, identifying the number of system redundancies and estimating integration costs. Although a target that is technologically advanced can offer IT expertise, the challenge remains whether existing infrastructure in either company has sufficient scalability to handle the integration and growth of the combined entity for the foreseeable future.
There are a number of cases where the failure to integrate IT systems has results in lower customer satisfaction and loyalty, which in turn substantially dropped the number of expected customer accounts of the merged banks. Being a bank it is also critical that the customers of both banks should enjoy an uninterrupted experience. Not only do they have to be able to do all their banking activities as they had all along but at the same time they need to be in a position to access banking services from the other bank’s branches as well.
Compliance is a huge challenge in addition to fraud and operational loss risk in case of M&As. Banks must ensure that financial data is transparent and traceable down to the transaction level. Some compliance mandates require banks to reconstitute all point-in-time data associated with a financial transaction. Unstructured information also factors into the compliance process: Key data must be pulled from a sea of free-flowing text within and outside the bank, including an average of millions of e-mail interactions with customers every day. Monitoring and auditing unstructured information is beyond the ability of conventional systems and has given rise to advanced tools and techniques to perform intelligent searches and information discovery. A robust transaction monitoring capability not only is necessary for compliance but also brings immediate opportunities to save on fraud and operational losses.
Banks undertaking merger or acquisition activities must integrate separate and potentially highly redundant infrastructures. There are three principal challenges:
- Data Center consolidation: to reduce facility costs by eliminating excessive data center capacity.
- Interoperability of infrastructure components: As the banking operations and business gets consolidated, data also needs to be consolidated. Systems and applications have to interoperate seamlessly and have a significant impact on the cost of merging businesses.
- Availability and uptime of applications: Companies undertaking migrations from legacy architectures to new Service Oriented Architectures need application visibility to ensure the migration process is not affected and all information is accurately represented within the new architecture.
The best practices for storage and information management for effective integration of two banks include the following:
- Understand the existing infrastructure (Application Discovery) of both banks: It is important to understand the complex web of relationships that exist between their business processes and real-time infrastructures. The challenge is that most banks post mergers and acquisitions have to rely on manual application discovery and mapping tools which reduces efficiency and productivity. The only successful way to manage business services is to leverage smart technology tools that are able to dynamically and automatically monitor, learn, and report about the environments being managed. In addition, Data Center migration projects require an understanding of how servers and applications are being consumed to determine the best candidates for consolidation, retirement, or repurposing.
- Identify the gaps and redundancies: Form a task team for consolidation or migration initiative with the right domain and technology skills.
- Migrate and Consolidate: Consolidation & Virtualization at Servers, Storage and Network level is crucial and this can be achieved with the right tools and skilled technology and domain skills. Virtualization and Information Lifecycle Management (ILM) can form the basis of storage and information management during merging of both bank\'s data centers and also help in lowering costs.
Going forward, as the banking industry heads out to achieve new milestones of growth and consolidation, they need to rethink their IT strategy to compete and succeed in the marketplace. | 
