July 24, 2000

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Chase.com Goes Global

IT shortage and security force bank to embrace service providers

By Claudia Graziano

Chase.com's RFP:

his is one of a continuing series of RFP (request for proposal) articles that examine the business problems--and related technology needs--of selected companies. InformationWeek, and its partner, Doculabs, invite interested vendors to submit detailed technology proposals to solve the technology challenges described. Selected vendors will present their proposed solutions live at the InformationWeek Fall Conference, Sept. 10 to 13 in Tucson, Ariz. For details on how to submit a proposal, visit our Web site, http://informationweek.com/events/chase.com.

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It's a common complaint among IT executives: Too many projects and not enough time or people to get those projects going. The added pressure to complete strategic projects before the next Competitivenightmare.com springs up is causing many an IT executive to seriously consider--or reconsider--outsourcing these projects to a growing crop of application service providers.

Such is the case at Chase.com, a business unit of Chase Manhattan Corp. in New York. Historically, Chase.com has shied away from using service providers, preferring instead to own and control critical IT applications itself. But a chronic shortage of IT talent and an aggressive deadline to roll out online customer-service options for its international clientele has caused it to re-evaluate its position.

"Chase didn't do much outsourcing as a matter of policy prior to 1995," says Mike Mazza, chief applications architect at Chase.com. "What [outsourcing] we did do was limited to integration projects. We live in different times today."

A sign of those times is the rebirth last year of Chase .com, formed not just to Internet-enable Chase's existing financial services but to help the bank play a principal role in the emerging technology-driven business economy. To help it realize that goal, Chase.com has already spent close to $200 million on Web-related projects since its launch last year and plans to spend another $250 million this year.

Of course, Chase isn't the only financial institution looking to establish itself online, which is why it's looking to get outside help on many of its Web-related development projects. "We have to remind ourselves every day that we're a bank, which means keeping the focus on our core competencies," Mazza says. "Philosophically, why would we want to build up expertise in areas that are essentially commodity-based?"

It's an increasingly common concern among IT executives, and one that's driving demand for E-services. Dataquest predicts ASP sales will grow to $23 billion by 2003. "The ASP model addresses the need for faster time to market, lower cost of ownership, and easier applications deployment for all kinds of companies," says Rita Terdiman, VP and research director for Gartner Group.

Chase.com is shopping for an ASP to help it create and host sister Web sites internationally. The sister sites will give Chase's international customers a way to interact with Chase locally and in their native languages, while keeping those sites synchronized domestically with Chase.com. The idea is to extend the same online benefits the bank is offering domestically to its international customers--all of which are almost exclusively corporate business and private institutional customers. (Chase isn't chartered to do consumer business internationally. Federal law prohibits it from offering banking services to consumers outside of the United States.)

As the United States' second-largest commercial bank, Chase conducts business in 180 countries on six continents. Its Global Services business unit moves trillions of dollars a day in securities and cash for international customers and is the world market-share leader in terms of the amount of money it handles for its customers, according to Chase.

Because business and institutional customers tend to work with large amounts of money, the loss of just one international customer could markedly dent Chase's revenue growth. While Chase has been trying to shed its conservative banker's image with respect to its investors, that's not the case with its customers, for whom the bank's foremost consideration is to preserve an image that projects safety and security.

While the chosen ASP partner won't conduct any transactions, Web-site service will be key to specific customer relationships, including some of the bank's most high-powered clients. The professionalism and security with which the ASP executes the project is Chase's biggest consideration. The partner won't have access to customer data, so Chase.com isn't worried about security breaches that would affect the safety of funds or data security, Mazza says.

Other types of snafus--such as a slow Web site or one that becomes a target of a denial-of-service attack--put the Chase brand at risk. Prevention requires drum-tight security, both physical and electronic. "Our clients don't care who's hosting the site. To them, the Web site is Chase .com," Mazza says. "But there's the potential to lose millions of dollars if customers lose faith in our ability to manage their assets."

Chase.com already has a few international sites: A Brazilian site is hosted in Portuguese and a Hong Kong site is hosted in English. But these sites also offer customers little beyond basic information about services available in regional offices. The plan is to expand overseas brochureware sites to include some of the online services being offered on a limited basis in the United States, such as credit-card transactions and account viewing, Mazza says.

Chase is starting to offer online financial services to domestic business clients. The bank has a pilot program in place that gives 1,000 clients access to corporate account information that resides in U.S. data centers. Given that many of Chase's competitors--including Citibank and Hong Kong's Shanghai Banking Corp.--already offer this type of online service for their international clients, the pilot program is modest. But Mazza expects it to grow more than 100-fold over the next year and to expand worldwide within three years.

One of the big challenges Chase.com is anticipating as part of expanding Web services that it offers is the need to increase customer support. "When you go to a self-service model, that definitely doesn't mean support-free," Mazza says. As is the case with other service industries migrating to the Web, online banking requires nearly twice the staff to handle routine customer inquiries. "In banking, there's a heavy need for back-end support," he says.

Mazza envisions creating an international processing center for each major geographic region: Asia, Europe, and Latin America. Each center would have smart links to domestic processing centers so that when English content changes, a reminder is sent to the operator or senior content manager at the local site, who may then decide whether to make the change for a specific group or region. Hosting content in native languages is a must, because auto-translation services have proved embarrassing at times, Mazza says.

Chase.com will look to its ASP partner to create Web-site banking features, such as an investment bank portal for each major geographic region, an online portfolio management option, a funds-transfer service for allowing business clients to automatically move cash between accounts, and an online foreign currency exchange.

To cut down on staffing requirements, Chase.com plans to outsource the hosting of the servers domestically, as well as internationally. "Our operations model is to outsource noncore services like Web servers, search engines, domain name system servers, and MIS capabilities," Mazza says. "Our job is to design, develop, implement, and optimize the business apps that need to be linked to these noncore services."

Another reason Chase decided to get outside help: Web applications that make online banking possible, as a rule, need constant updating. Mazza calls the problem resource creep. "We started out with 10 people working on version 1.0 of the [pilot] project. Immediately, customers began demanding more features," he says. Programmers worked overtime to create new functionality, but at the same time they were also working on fixing bugs. "Running at Internet speed requires a level of support that wasn't there in the past," Mazza says. "You need at least twice the staff--half to work on site maintenance and half to work in development mode."

As is the case at dot-coms and old-line companies, the internal demand for IT resources at Chase.com is extremely high. Losing a key individual can leave the bank exposed for a short time. If the company loses one of three Webmasters, for example, "that means we're down to 67% support capacity," Mazza says.

It's easier to hire strong people to work for a technology company than it is to hire strong people to work for a bank, Mazza says. "Why assume the risk of a difficult hiring process?" he says, adding that Chase.com should invest its time and money in development projects--building personalized site portals, for example, or Web-enabling apps and cross-linking different products and services, such as cash-management services and mergers and acquisitions advice.

Speed and flexibility are also prerequisites when it comes to allying with a service provider. "We don't want to go through a lot of chains of command to get things done," Mazza says. Adding Web servers or bandwidth, for example, should be done within a week with one phone call.

Chase.com needs to minimize risk by keeping the number of players in its operation to a minimum. The bank isn't interested in buying bandwidth from someone who turns around and then buys it from someone else buying directly from Internet access points, Mazza says. Company size, too, is a consideration. "We don't want an ASP with only one customer, but on the other hand, we don't want a provider with a lot of big clients demanding significant attention."

As for cost, Mazza declined to say how much Chase.com has earmarked for the project. The company's aware that these services won't come cheap, Mazza says. "If you go in to something like this without knowing internally what your costs are, you're in for a huge sticker shock."

Mazza says the steep cost for ASP services is an investment against lost opportunities. "That's why turnaround time on the project is so important," he says. "If getting these sites up quickly allows us to generate more business, then the return on investment is going to be realized much faster." With international institutional banking, the stakes are higher.

"In the international arena, our customers deal with larger sums of money," and potentially many more transactions, Mazza says. "You can't really put a price on how much it would cost us if we were to lose one of our customers."

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