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