OUTSOURCING AND ITS VARIED ADVANTAGES

In renovating Bank Hofmann’s Haus Metropol ahead of its reopening this year, engineers used 310 tonnes of steel to reinforce and earthquake-proof the superstructure, removing 120 containers of debris. Rebuilding the landmark on the bank of Zurich’s Limmat River took 2 years and 150 workers, tasked with �modernising its infrastructure and proofing it against the ravages of time, while maintaining its appearance. Challenging times It was a similar challenge that the building’s new inhabitants, Clariden Leu, also faced. When the merger of five Credit Suisse private banking �subsidiaries was announced in April 2006, Clariden Leu’s COO, Roland Hermann, already knew the magnitude of the task ahead of him. “We started preparing ourselves at the end of March. We built the organisation, we built the operating model and then, at the end of November, we had to have all of the IT specifications,” he says. “So we had about six months from starting to build an organisation to being able to specify IT requirements.” On 27 April, Clariden, Leu, Hofmann, BGP Banca di Gestione Patrimoniale, and the securities dealer Credit Suisse Fides, announced that they would be merging to form Clariden Leu, an �independent private bank with SFr133bn (e80bn) of assets under management. Headquartered in Zurich, the new bank has 20 locations �worldwide, with a large presence in Singapore and in Nassau, the Bahamas. Mr Hermann’s task was to bring the five different organisations together into a single operating model and �technology platform. In its home city alone, Clariden Leu had to shed nine of its 15 locations and consolidate its business into the remaining six. “It’s a five-way merger and it’s an integration of the businesses, but at the same time it’s a large-scale �outsourcing exercise,” says Mr Hermann. Leu, Hofmann and BGP already used Credit Suisse’s Swiss Banking IT platform, but all three were on different versions of the system. Clariden and Fides were on different platforms altogether. The �differences in IT then sat on top of �differences in the way the firms operated. “There were five different operating models which we then had to bring together into one. And out of that we developed the future functionality of the platform we’re going to be on.” The only cost-effective way to push this level of consolidation through in such a short period of time was to �outsource the entire infrastructure to Credit Suisse, using the parent �organisation’s scale and resources to create a single platform for the new entity. “Basically, the entire IT of the bank, with the exception of certain bespoke systems, is outsourced,” Mr Hermann says. “So everything from mainframe, to core banking system, to end-user platform, to networking to �desktops – that’s all outsourced. Out with the old “We also outsourced standard �operations, payment services, �transaction services, transaction �settlement, that’s outsourced. So we’re profiting basically from the �scaling capabilities of Credit Suisse in these areas,” he adds. The only in-house IT functions remaining are those that support �specialised functions in the funds and structured products’ �business lines, Mr Hermann says. The integration and migration process began in January and was divided into five major steps. “The first big one was when we integrated the three entities which were on the Swiss Banking IT platform,” says Mr Hermann. “That was Leu, former Hofmann and �former BGP. They were working on the Swiss Banking IT platform, but they had an old setup.” Before doing this, �however, the bank had to decide on what future �functionality it would need. Simply standardising the platform would not be enough. The Swiss Banking IT platform was quite advanced, but Mr Hermann says, “It was not as broad in scope as what we [now] have. It was also not as scaleable. It was not allowing us to implement the [new] operating model.” First things first The first step was completed at the end of March, paving the way for �similar integrations of Leu, Hofmann and BGP platforms in the international �operations. All three used versions of Globus, the Temenos banking system, but, as in Zurich, all were on different releases. The three implementations in Nassau were completed in Q2. The Singapore offices were running remotely from Zurich, so Mr Hermann’s team had to build a new Globus �implementation in Asia to support the combined business. This was �completed by the end of June. Within three months, the bank had moved the former Clariden and Fides operations onto the reconstructed �platform in Switzerland and internationally. In total, Mr Hermann says, “We implemented about 1,200 change requests. That’s the magnitude of change necessary to consolidate the businesses and go �forward with the business model we developed. It was a major IT development exercise.” Given the limited timescale, it was also a drain on the bank’s resources. “It was basically shouldered by Credit Suisse staff and staff of Clariden Leu. There was no large-scale reliance on external consultants; they were just used to basically fill holes where we didn’t have enough staff. It put massive �pressure on people. Many of them still had their operational roles and had to shoulder all the rest as well,” he adds. Fortunately for Clariden Leu, the �migration and integration incorporated scaling and rebuilding areas that �needed attention before the merger, so there were no significant projects that were shelved in the 18 months since the deal was announced. “From our perspective, we didn’t have any major things we had to put on the back burner because we defined what we want to be as a bank, how we want to operate as a bank, and we have now built that �system to help us get there.” Looking back on the migration process, Mr Hermann believes that the outsourcing of operational functions is likely to become the predominant model for private banking. “I’m convinced that value chains in private banking will break up and, if you have a certain size, this will be the way to go. From my perspective, there will only be a limited number of large-scale players who basically do the entire value chain themselves, and there will be some small niche players doing the same thing in their niche. We’re too big to be a niche player, with 100 or so people in some corner doing our own thing from A to Z, so outsourcing IT, mass-volume transaction processing and logistics processes is clearly the way to go. “And being on a scaleable platform now allows us basically to go forward and not care about these things in terms of growth restrictions.”