Bank of America needs to assimilate Fleet's technology and systems, along with its 18 million customers, quickly and without those customers being inconvenienced or even aware that a change is taking place. To accomplish that smooth transition, Bank of America executives need to map out which of the company's infrastructure and applications FleetBoston will be migrated to, then methodically move Fleet's customers and systems.
The strategy differs from the one employed by NationsBank when it acquired Bank of America in 1998, leaving the BofA name intact.NationsBank took a best-of-breed approach, mixing and matching apps and platforms from the two companies. This time, most of Fleet's major systems, with the exception of its branches, are likely to be either scrapped or migrated to Bank of America's, says Dennis Rygwalksi, former director of IS at FleetBoston. Rygwalksi, who left FleetBoston three years ago, is general manager of finance-industry solutions at Exigen Inc., a manufacturer of business-optimization software.
The merger is a cultural challenge for Fleet. After years of gobbling up other institutions to become the largest bank in New England, it will have to adapt to someone else calling the shots. "They've never been in that position; they've always been the acquirer," Rygwalksi says.
The companies need to focus on melding business processes as well as technology, says Chris McLaughlin, head of financial services at FileNet Corp., which supplies back-office processing software to both institutions for mortgage lending and other document-intensive applications. Many of these business processes are hobbled by older, legacy-type systems, he says.
The best-of-breed approach has been a bugaboo for some of the banks formed in the merger wave of the past several years, including Citigroup, J.P. Morgan Chase, and Bank of America. Predicated on the dream of creating a financial supermarket, those deals failed to take into account the complexity of merging different businesses and cultures. Citigroup in particular has failed to execute on the supermarket concept, says Jim Eckenrode, research director at TowerGroup. "They don't have the right people in the branches and there are cultural issues." Its back-office technology platforms, he adds, are "a huge mess." A Citigroup spokesperson says its business model is working, as evidenced by the company's earnings and income growth over the past four years.
Many of these mergers fumbled technology integration, with major systems decisions being made by fiat instead of through planned deliberation. Integration "is not just a matter of smashing two systems together," Eckenrode says. "That's why [these banks] are still cleaning up from old acquisitions."
During the NationsBank-Bank of America merger, for example, most of the shots were called from NationsBank's headquarters in Charlotte, N.C., but Bank of America executives successfully pressed to retain systems developed for their California operations, including Internet banking, branches, and core-transaction processing. Those duplicate systems remain in place today. "Bank of America has been less disciplined about making hard calls to force people to adopt a single platform," says Eckenrode.
FleetBoston had its share of problems, some of them self-inflicted, when it merged with BankBoston in 1999. Fleet's policy was to rip out BankBoston's infrastructure and replace it with its own, including the branches, which BankBoston had just revamped. "In the BankBoston acquisition, [FleetBoston] pulled out contemporary technology and put in older technology, with adverse consequences for customers," Eckenrode says. In return, Fleet got BankBoston's Robertson, Stephens investment banking arm, which Fleet shut down last year after failing to find a buyer for the dot-com era hotshot.
Rygwalksi, who was with Fleet at the time, says the BankBoston merger was challenging--but he also says that the deal, like those of Citigroup, J.P. Morgan Chase, Bank of America-NationsBank, Bank One-First Chicago, and others, were "mergers of equals." In the case of Bank of America and Fleet, the deal is clearly an acquisition, and Fleet will have no choice but to bend to the wishes of Bank of America. Still, the merger is no cakewalk; the need for flawless execution and attention to detail are ever-present, he says. "No merger is easy, certainly one of this magnitude."