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Denis O'Leary: Chief Of The Year

The high-energy CIO of Chase Manhattan is guiding the merger of two technology infrastructures while implementing Internet, groupware, and data mining initiatives
By Bob Violino
Issue date: Dec. 23, 1996

There was no escape from the heat. On a stifling July weekend in New York, executive VP and CIO Denis O'Leary of Chase Manhattan Bank found himself hailing cabs and hoofing it between a Park Avenue command center and six IT sites around the city. O'Leary was overseeing a crucial aspect of the country's largest-ever bank merger, between Chase Manhattan and Chemical Banking Corp. The newly merged bank, which was to keep the Chase name, was integrating two critical operations--general ledger and funds transfer. O'Leary wanted to make sure all was going according to plan.

The frenetic weekend pace suited O'Leary well. "I've never looked for a stress-free environment," he says. The stakes were certainly big, says Bill Moran, executive VP and general auditor at Chase, who was with O'Leary on his tour of sites. "If we didn't successfully convert money transfer--and we're talking about almost $2 trillion a day--it could have created chaos in world financial systems." With all the heat, O'Leary "didn't even break a sweat," Moran recalls.

For O'Leary's cool leadership under intense pressure, InformationWeek is naming him its 1996 Chief of the Year. Not only is O'Leary a key player as two massive infrastructures continue to be melded, but he and his colleagues also continue t o push the company on to new technology frontiers. O'Leary, his IS team, and Chase's business units are rolling out key projects in high-speed imaging, data mining, electronic commerce, intranets, and Web services. O'Leary also formed the Technology Leadership Council, a Chase business-technology committee that promises to transform the way the bank, with $323 billion in assets, uses IT.

O'Leary, who at 40 is one of the youngest high-level executives at Chase, also has emerged as a powerful player where banking and technology intersect. He oversees half of a technology budget of nearly $2 billion, giving the new Chase control over roughly 10% of the $19 billion spent on IT resources by all American banks. "It's hard to think of a single area that is more important than information technology," says Walter Shipley, chairman and CEO of Chase. "It's integral to every one of our businesses."

That IT component is everywhere as Chase builds its brand identity and continues growing while the banking industry consolidates. William Bradway, a consultant at Tower Group, a bank technology advisory firm in Newton, Mass., says that, compared with other "megabanks," Chase uses IT to improve faster in several important areas, including return on average assets, return on equity, and efficiency.

The Chase-Chemical merger provided a classic environment that allowed consolidation in part through technology. "IT cost savings could easily exceed $100 million a year," says Bradway. "Chase can invest the savings in new technology to take them even further."

Under Construction
That's just what Chase is trying to do. For instance, the company is making a major push into data mining and warehousing to learn more about its customers and which services they're likely to want. Under a $5.4 million consulting agreement with MCI Systemhouse, Chase is creating a 500-Gbyte enterprisewide data warehouse to store and analyze profitability information. The system will use data-mining tools running on Sun Microsystems U ltra Sparc 5000 and 6000 servers and the Oracle7 database.

Another hot technology for Chase is high-speed imaging for check processing. The bank, which processes 16 million checks nightly, has begun to rollout IBM's High Performance Transaction System, a mainframe-based process that should eventually reduce by 80% the number of people Chase needs to process checks.

Chase also is moving aggressively onto the Internet. In July, it began a program to process auto loans online, with plans to install the system in 200 car dealerships by year's end. The system helps reduce turnaround time for loan applications from weeks to minutes. Earlier this month, Chase--along with AT&T, MasterCard, and Wells Fargo--announced the formation of Mondex USA, a group that will use an electronic cash-card system from U.K.-based Mondex International.

Chase also is developing a corporate intranet that uses Lotus Notes groupware as an E-mail backbone. Since the latest version of Notes also includes a Web browser, Chase will use the technology to provide employees with Internet access and links to information such as human resources and benefits. A few employees are likely to use network computers to access the intranet and to perform routine tasks, such as opening accounts.

Big Spender
Chase spends heavily to support these IT initiatives and the security, redundancy, and disaster-recovery systems needed for seven-day, 24-hour global processing. The bank's 1996 IT budget was $1.8 billion. O'Leary is directly responsible for half that amount; the other half is under the control of the business units. Among other U.S. banks, only No. 2 Citicorp is close, with an estimated $1.3 billion in 1996 technology expenditures.

How does Chase justify such spending? "We have to break it down project-by-project and business-by-business and calculate rates of return," says chairman Shipley, who with other members of the board of directors approves IT spending.

Key to the relationship between IS and the business unit s is the Technology Leadership Council, which includes 150 Chase technology and operations executives. Formed by O'Leary in October, the council is designed to help each Chase business take advantage of existing expertise. It tackles issues ranging from basic infra- structure computing to objects and application development, from call centers to enterprise platform management and workgroup computing.

The group also helps Chase spread technology knowledge throughout the company and avoid over-reliance on outside consultants. "We wouldn't know who the experts were for high-speed imaging, for example, if not for the council," says Lori Hricik, senior VP of technology and operations for global payment and treasury services at Chase.

In many respects O'Leary is emblematic of an emerging breed of CIO: First came a solid business background, then a strong dose of technology.

O'Leary's inclination toward business and banking began while growing up in Scarsdale, N.Y. He bought his first car, a black 1966 M GB, for $250 when he was 14, then leased it to his older brother before selling it a year or so later for $875. That was the first of many profitable transactions that gave O'Leary spending money in his school years.

Later, he earned a bachelor's degree in economics from the University of Rochester. He joined Manufacturers Hanover Trust Co. as a loan officer in New York in 1978, soon after graduating. O'Leary got his first taste of IT while working in Manufacturers' credit policy department. In 1983, he earned an M.B.A. from New York University, and promotions came rapidly as he learned more about banking and business. By 1991, O'Leary was named chief of staff for Manufacturers' vice chairman, overseeing check processing and funds transfer. "That's when I began to see future opportunities in IT," he recalls.

When Manufacturers merged with Chemical in 1991 in a $2 billion stock transaction, forming what was then the country's third-largest bank, O'Leary was tapped by Chemical president Ed Miller to com bine the two banks' IT systems. Two years later, to the surprise of many, Miller named O'Leary CIO of Chemical.

"Everyone assumed I'd choose an expert in technology," recalls Miller, now senior vice chairman at the new Chase and still O'Leary's boss. "But I wanted someone who had an excellent business perspective, knew banking, and had a general understanding of operations and technology."

O'Leary's skills were put to an infinitely more rigorous test this year, when Chemical merged with Chase in a stock deal valued at more than $10 billion. The merger doubled Chemical's assets and added 35,000 employees to its 40,000-strong payroll.

O'Leary, who has kept the title of CIO with the new Chase, was handed the gargantuan task of melding thousands of systems and applications, while making sure both IT teams kept data centers, networks, and telecommunications operating without interruption.

Hard work has its rewards. At the end of that hot July weekend, O'Leary brought in champagne to celebrate with many of the people who helped make the merger work.

"This really is a team effort," says O'Leary of the merger and, by extension, all Chase technology initiatives. "This [Chief of the Year] recognition is an award for all of Chase." O'Leary adds that he has been successful in large part because of the efforts of colleagues, bosses, and most of all, the technology team he leads.

Still, the merger won't be complete until early 1999. Chase plans to consolidate its six major data centers into an undetermined number. But most key hurdles have been overcome, and it astounds banking experts and competitors alike that Chase pulled off the merger with minimal impact on its 25 million customers.

"Having gone through something like that myself, I know that since we haven't heard anything negative, it's a very good sign," says Martin Stein, vice chairman at BankAmerica Corp. As head of IS operations at Bank of America, Stein lived through that bank's 1991 merger with Security Pacific Corp.

Craig Goldman, former CIO at the old Chase and now president of Cyber Consulting Services, an IT consultancy in Washington Township, N.J., says O'Leary deserves much of the credit for how smoothly the merger has gone.

The merger touches every system at Chase. The bank is standardizing core mainframe applications, such as general ledger, consumer deposits, and commercial lending, on homegrown or commercial products, says Steve Sheinheit, senior VP of corporate systems and architecture, who reports to O'Leary. Chase uses Dun & Bradstreet's MSA for general ledger, Alltel's Systematics for consumer deposits, and a Chase-developed MVS-based system for commercial lending.

"They're selecting common platforms and applications for each line of business and avoiding the temptation to leave in place multiple versions of the same applications," says Tower Group consultant Bradway.

These core banking applications are linked to client-server networks through a middleware architecture that includes routers and communicatio ns processors and uses IBM's Systems Network Architecture protocol. Chase plans to migrate to IBM's version of the Distributed Computing Environment (DCE) to improve platform-to-platform links.

Staying The Course
While these high-level systems were being merged, Chase continued developing new systems such as client-server applications in commercial lending, credit processing, and financial systems. It also continued standardizing on Microsoft Windows NT servers and Windows 3.1 and Microsoft Office for most desktop PCs, keeping Unix and IBM's OS/2 for functions such as application development and as a trading platform. Chase also is in the midst of a massive Notes rollout, expanding from 39,000 seats to 50,000 by the end of 1997.

Organizationally, Chase is a hybrid of the centralized-decentralized IT management philosophy. O'Leary centrally manages shared infrastructure such as global networks and telecommunications, large processing environments, and applications or operating platforms tha t support many users. He's also responsible for PC purchasing, security, and overall IT standards.

But IT for specific business functions such as retail banking and global investment services is managed directly by senior business executives. "They're getting more savvy about technology, and the IT executives are getting more savvy about business," O'Leary notes. "That is creating effective partnerships."

The result is that the technology managers who operate in these businesses report to O'Leary only on a "functional" basis. O'Leary directly oversees some 7,500 employees in central IS.

Colleagues and subordinates alike describe O'Leary as an effective manager who can win approval for key projects. Before the Chase-Chemical merger, Jim Mayer, senior VP of technology infrastructure, recommended that Chase improve key infrastructure and business recovery technologies to insure against outages that might affect customers. O'Leary went to the Chase executive board and quickly got approval for a $63 mi llion investment to add storage and telecom capacity.

Knowing The Business
Marc Shapiro, the chairman and CEO at Chase subsidiary Texas Commerce Bank, says O'Leary has helped his bank make "significant investments in distributed processing. He's taken a very fair approach in terms of understanding the needs of our organization."

O'Leary is also a demanding manager, say colleagues. "I've worked with him for 15 years, and even when I wasn't reporting to him, he asked the toughest questions and always had high expectations of people," says senior VP Sheinheit. "But he also provides tremendous support and spends the time and energy to know everything that's going on."

Those who worked at the old Chase before O'Leary arrived say his high energy level has helped motivate people. "He has a commitment and passion for excellence that make it exciting to work here," says Wendy Belsky, who reports to O'Leary as senior VP of human resources for IT and operations.

Balancing Act
Bu t O'Leary is most demanding on himself. He'll often arrive at Chase's Park Avenue office by 7:45 a.m. and won't leave until the end of a meeting or reception at 10 p.m. Still, he's uncomfortable with the long hours, which include time spent checking E-mail on a Digital Equipment PC in his home in Scarsdale. All that work means time away from his wife and three children, ages 5, 7, and 9. "It's not something I'm proud of," he says of his long schedule. "I try to keep a balance."

Senior VP Belsky says O'Leary's willingness to hear people's concerns--he takes part in regular breakfast and lunch meetings with hundreds of Chase employees--helped ease the tension in IT peoples' minds during the merger.

One thing clearly on their minds is keeping their jobs. The merger will result in layoffs of about 12,000 out of 74,000. To date, 7,000 cuts remain, and some will be in IS. But since technology will continue playing a major role in the merger for at least two years, says O'Leary, IS job cuts will be made grad ually and mainly through attrition.

Now that much of the merger is complete, O'Leary and Chase can focus on new IT opportunities. The bank is rolling out a Windows trade processing application, called TradeWinds, that gives global trade customers continuous electronic access to trading information when making transactions. Chase also is expanding its use of workflow and call-center technologies.

At Their Service
Chase also is spending $98 million as part of a branch automation effort in its key New York, New Jersey, and Connecticut markets. It's adding 10,000 Pentium PCs from NCR and 4,000 servers from IBM at hundreds of banks. The upgrade will help Chase better serve most of its retail customers, says Mike Hegarty, vice chairman of retail banking.

Other challenges lie ahead. For one, there's the task of readying Chase systems and applications for 2000. "The merger has helped because it allowed us to get rid of a about one-third of the older systems that weren't 2000-compliant," O'Lea ry says. He estimates that code modification will be complete some time in 1998 at a cost of about $200 million--or $1 per line of code.

Chase also is evaluating enterprisewide management systems including Computer Associates' Unicenter, Tivoli's TME, and Hewlett- Packard's OpenView to manage its mainframes, servers, and desktops from a central point.

There's always the possibility that there will be even more to manage. Federal regulations that have for decades prevented banks from entering brokerage and insurance businesses are fast disappearing. Chase reportedly has its eye on acquiring Merrill Lynch & Co. and Salomon Brothers, among others.

Could another megamerger be in the offing? Chairman Shipley isn't saying. But if Chase were to pursue a merger, he says, technology would certainly play a role--and his top IT executive would be brought in as a trusted adviser.

O'Leary, already a veteran of two big bank mergers, will no doubt be ready.

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