Rescue bid launched for City integration project

Accenture called in as clearing house struggles to pull off system merger

Accenture called in as clearing house struggles to pull off system merger

Clearing house LCH.Clearnet has called in consultancy Accenture to help rescue one of the City of London's largest IT projects.

The organisation ordered an external review into a project to deliver a new trading platform following the 2003 merger of London Clearing House and its Paris-based counterpart Clearnet. The project was intended to reap "significant savings" for the merged business.

The Generic Clearing System (GCS) project, costing tens of millions of pounds, was intended to replace the two organisations' 30 legacy systems with a single system based on Java and Oracle.

The three-year-old project has missed a series of internal milestones and failed to meet its publicly announced go-live date in October 2004.

LCH.Clearnet suspended work on GCS on 5 May, reducing the number of staff on the project from 140 to 40. Nearly 70 contract IT staff were laid off and 30 permanent IT staff were moved to other projects.

Staff were told of the changes in an e-mail from LCH.Clearnet chief executive David Hardy.

"Although the system is fundamentally sound, it has become over-complicated in its implementation," he said.

"As a result we have decided to step back and conduct a rigorous assessment of GCS development to date and identify our future systems needs to ensure we create a platform that will meet our short and longer-term goals."

"We have therefore decided to significantly reduce the size of the GCS project team. The majority of consultants/contractors will be released from LCH.Clearnet today, with most permanent staff returning to their 'home' structure."

LCH.Clearnet said it had temporarily transferred responsibility for IT to chief operating officer Peter Rowland, and was seeking a new chief information officer.

The project was suspended following difficulties in testing which revealed that integrating different business streams was more complicated than the clearing house had anticipated.

"We have recognised that it has become overcomplicated and, rather than just driving ahead, it would make more sense to ensure we assess what we have, so we can use that to deliver a more streamlined, effective system," a spokesman said.

LCH.Clearnet handles trades for the London Stock Exchange, Euronext, Liffe and the London Metal Exchange. It processed business worth £10.9 trillion in the first quarter of 2005.

Accenture will look at ways of simplifying the scope of the project, but LCH.Clearnet was unable to say when it would go live.

The project was intended to help LHC.Clearnet achieve savings by eliminating duplicated systems and helping it meet regulatory requirements.

Hardy first drew attention to potential problems in the clearing house's financial report last month. "At the time of the merger, LCH.Clearnet expected to generate various potential cost savingsÉ by 2007. The process of integrating the two businesses has not been as rapid as expected, with a consequent impact on the delivery of synergy benefits."

LCH.Clearnet said this week that although the delay in the project was a disappointment, the clearing house's members would be able to continue conducting trades using existing IT systems.

"Any delay in the delivery of a system is a disappointment, equally our members are grown-ups and recognise that there are very few financial institutions that have a trouble-free IT investment," said a spokesman.

 

Post-merger integration difficulties     

Integrating IT systems following a merger is fraught with difficulties, unless firms invest heavily in planning and preparation. 

Between 60% and 70% of integration projects fail to hit budgets and deadlines, and up to 40% are outright failures, said Robert Morgan, chief executive at advisory firm Morgan Chambers. 

Businesses often do not have the track record and experience to manage large, complex projects and overestimate their ability to deliver.  

Cultural differences can also act as a barrier when organisations merge, said Morgan.  

"There will be disaffected people who do not put their best effort into the work," he added.

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