Banco Santander has put IT at the heart of its acquisition
strategy and is in a strong position as the turmoil in financial
services serves up bargain acquisitions.
The bank's £612m acquisition of
Bradford & Bingley's savings division was the latest
chapter of the financial services consolidation.
The
credit crunch is putting pressure on financial services firms
and banks have been called on to rescue their troubled competitors
through acquisition.
Banco Santander already had a strategy to grow by acquisition
and integrate the IT operations of the firms it buys to its own
in-house platform, known as Partenon, which uses in-house
middleware called Banksphere.
As well as rationalising IT this creates cross-selling
opportunities, improves customers satisfaction and operational
performance. The platform uses a single database so all of a
customer's relationships with the bank are automatically linked
through a single view of customers.
Partenon was a differentiator during takeover negotiations with
Abbey in 2004 because of performance improvements it offered the UK
bank as well as expected cost savings of £300m.
Ralph Silva, analyst at Towergroup, expects Banco Santander to
make further acquisitions. "It is highly likely it will continue on
its spending spree and Partenon could be a differentiator," he
says. "Because of its previous investment in Partenon it has the
ability to grow very quickly because it is easier to integrate the
IT of other banks."
Partenon, has already enabled Banco Santander to integrate Abbey
in the UK, which it acquired in 2004 for £9.5bn. The bank targeted
£300m in savings through the integration with a large slice from IT
rationalisation.
During
the integration of Abbey, Banco Santander consolidated all
customer records on to a single database, by replacing 30-year-old
legacy systems.
Banco Santander will integrate Alliance and Leicester after
agreeing to acquire the company for £1.2bn in July. It has targeted
efficiency savings of up to £50m for this acquisition.
But integrating the systems of two banks is risky because of
their complex nature and the fact that they are business critical
for 24 hours a day. If it goes wrong customer confidence can be
damaged.
Peter Redshaw, an analyst at Gartner, says Banco Santander's
real advantage is that it has been through this process before.
He says the integration of core banking systems is just a part
of what is required if banks are to make large savings through
integrating IT. "You can only make the huge savings if you can find
cost reductions in every part of IT," he says. "This includes
things such as software licensing, software maintenance,
datacentres and communications."
In November last year services for customers were disrupted when
staff struggled to cope with new ways of working. Chris Skinner,
CEO at financial services think-tank Balatro, says integrating
acquisitions to Partenon is only an advantage if it is done well.
"It has big IT challenges ahead and hopefully it has learnt lessons
from the IT integration of Abbey, which damaged customer
confidence."
Integrating the business of one bank onto the existing IT system
of another bank is the challenge facing CIOs in the banking sector
as consolidation takes grip. IT is one of the biggest fixed costs
that banks have and an investment made in a standardised IT
platform by Banco Santander is enabling it to acquire banks and
rationalise IT.
Banco Santander UK Acquisitions
October 2004: bought Abbey for £9.5bn planned to reduce costs by
£300m
July 2008: agrees £1.3bn takeover of Alliance and Leicester and
expects to make efficiency savings of between £30m and £50m
September 2008: £612m acquisition of Bradford & Bingley
agreed.
What Abbey's integration to Partenon
involved
All customer records moved onto a single database, reducing the
total number from 52 million to 20 million.
Abbey moved ten million savings accounts, four million current
accounts and eight million card accounts to Partenon.
Renewed entire branch communications network.
Built more than 45,000 portals for staff and third-party
organisations
Created a back-up datacentre infrastructure
Provided face to-face and e-learning, about new ways of working,
to 25,000 staff