Fusing Business & Technology

The alignment of technology and the business has been a priority of CIOs since they first made the evolutionary leap from data processing to the executive suite back in the 1980s. And after all these years, alignment is still top of mind for most CIOs. In fact it could be argued that with the increasing need for the business to provide exceptional service to clients just to stay competitive, the fusion between business and technology is now more important than ever.

When Helen Polatajko describes her role as Senior VP and CIO of financial services company CIBC Mellon, she ranks that fusion of business and IT at the top of her priorities list.

“In today’s market, everybody wants things to be quicker but just as efficient and possibly cheaper than ever,” she observed. “And that’s the challenge for CIOs – how do we continue to meet the demands of our internal business managers, and do it cost effectively for them, while positioning the technology to continually move forward and grow?”

A difficult question, to be sure. And one that Polatajko seems to have found some answers to.

Making The Business Case

The idea ‘if you build it, they will come’ no longer holds true for technology. When technology is required for a business need, the IT department and the business must work closely together to build a solution that will serve the company in both the short and the long term. And due diligence on the cost versus payout is required as part of the decision-making process.

“Today, you can’t make a decision without a hard look at the financials and the business case to support technology expenditures,” noted Polatajko.

To illustrate the point, she cited the example of a recent request from one of her directors for a $600,000 expenditure. There was a very sound technology case behind it in terms of why the company needed to do it, and how it would advance the IT architecture. But from an ROI perspective it was a non-starter – payback was in the vicinity of five years.

“Clearly this was not something that a business manager would ever be able to consider,” she said. ” So the challenge to us as a technology group is to refine the business case and learn how to bring it down to something we can drive more in a 12- to 18-month timeframe. That’s a more reasonable payback from a business perspective.”

Emphasis on Education

Still, there are some expenditures that require longer timeframes to pay off, and in order to get the executive team to buy into them, they need to understand the full IT blueprint – what the technology means for them as a business today and what it means for them tomorrow. For this reason, Polatajko believes that CIOs must take the initiative in educating their peers.

“It’s now critical that CIOs not only sit at the table with the business but also spend time in getting the business and the executives up to speed on the technology,” she observed. “In order to justify and sell these projects, we have to be able to talk with our business peers on an equal basis in terms of understanding specific technology opportunities.”

Polatajko and her IT team have taken some deliberate steps in making this happen. The process involved a series of meetings between IT and the business, which took place over a two to three month period last fall. Some of the IT department’s directors gave PowerPoint presentations and even did small demos that would help the business executives understand IT components and concepts.

“We sat down with them, more frequently at first, and broke the technology down into pieces, explaining each piece,” she recalled. “The business executives were taught such things as: what does framework mean; what does directory services mean; and what does security and intrusion detection relate to? Once these technical concepts were explained, the business executives were shown how these things all hinged together and how they provide the fundamental underpinning of everything the IT department does.”

Having imparted this understanding, it was then easier for the IT department to say: that’s why we need to invest in this now, up front, because if we have that fundamental architecture in place, we can respond to requests from the business much more quickly.

“Now that we have that educational foundation, we refer back to it as needed. But it’s something that behooves repeating regularly,” noted Polatajko. “And we do have opportunities to restate things. I’ll say to the business executives: if you recall when we introduced this concept, this is what we were referring to.”

According to Polatajko, the educational process has been an effective means of helping fuse the business and IT. “Now, when we’re all sitting at the table together, I don’t have to explain various terms or concepts. We have a nice level set that we can proceed from.”

Approving New Initiatives

Further enhancing the fusion of business and IT at CIBC Mellon is the New Initiative Approval Process (NIAP). Prior to the introduction of NIAP last year, the approval process for new initiatives was not formalized.

With NIAP now in place, those who put forward a proposal for a product, service, or idea must get themselves organized on paper and present the business case to the NIAP committee, which is composed of CEO Tom MacMillan and the company’s six senior vice presidents, including Polatajko.

“We have a formal template that the business manager or project manager has to fill out and it includes such questions as: what’s the purpose of the project, what’s the scope, what are the requirements?” she said. “The template also includes different levels of risk assessment, such as: what’s the operational risk, what’s the marketing risk, what’s the technology risk? And the risk is looked at from both perspectives – what’s the risk of doing this project and what’s the risk of not doing it?”

A financial model is also incorporated into the NIAP document. It looks at up front expenditures, such as technology costs, people, and training. It also looks at the revenue side – what kind of revenues are expected to be generated from the product or service over a number of years, with a strong focus on payback over the first 12 to 18 months.

Polatajko admits that return on investment isn’t always easy to evaluate. “I deal with Gartner on that a lot,” she said. “I ask them what other companies are doing and how we are doing by comparison, but it’s difficult.” She added that she spends a lot of time with the CFO trying to fine-tune ROI estimates, but concluded, “There’s no right answer nor one definitive model that captures both qualitative and quantitative aspects of a business decision.”

Expediting the Approval Process

The NIAP steering committee meets once a month, and the meetings are very crisp – they’re not a forum for debating things.

“We’ve already had an opportunity to review the document in advance and any major issue should have been vetted out before the proposal comes to us,” said Polatajko. “What we’re doing is making sure we understand the payback. There’s a little bit of discussion around business and strategic issues, but the specific details of the proposal should have been ironed out ahead of time.”

NIAP has succeeded in expediting the approval process. When someone comes to the steering committee with a proposal, 90 to 95 percent of the time the meeting will result in a decision either to approve the project or to defer or cancel it. People do not have to wait around for further meetings or discussions. If the project is approved, the normal project methodology kicks in and the budget starts becoming available for spending.

NIAP is run very cohesively as a team, and it gives senior management an opportunity to understand what the company’s projects are and what expenditures are being made. Or as Polatajko puts it: the right hand really does know what the left hand is doing – that makes our team very effective.

Needs versus wishes

Polatajko came on board CIBC Mellon as CIO in January of 1998, shortly after the joint venture was launched, having worked for parent Mellon Financial Corporation in the U.S. Today her role requires her to: address business needs; implement a three-pronged cost model (financial, business, technology); oversee the company’s IT procurement and methodology; look at staffing requirements; and make decisions on IT needs versus wishes.

On the needs list are those things that the company can expect to see a return on within 12 to 18 months. On the wish list are those things that are expected to have a return two to four years down the road.

“That doesn’t mean that we are shying away from items on the wish list,” she said. “I know that we’ll eventually need to spend those millions of dollars, so our approach is to phase everything in and stage it so that we can justify the component pieces. We deliver what we can get a quick return on, but our vision looks further down the road.”

When a new business need is identified that requires a technology solution, Polatajko applies rigorous criteria for evaluating the proposal. Her methodology is as follows:

1. Understand the requirement.

2. Examine what existing technology can be leveraged (re-usability options will likely reduce costs).

3. Research other technology that can be leveraged – in particular, technology that has been developed by the company’s two parents, Canadian Imperial Bank of Commerce and Mellon Financial Corporation.

4. Turn to a third-party provider for a technology solution.

5. Build it internally.

Leveraging the Parents

“Because we are a joint venture,” she noted, “we have a unique opportunity to leverage both of our parents for opportunities where they might have already exploited some technology that we can fast-track here.”

In the case of Mellon, that means taking what they’ve done in the U.S. and Canadianizing it so that it’s applicable for CIBC Mellon’s client base in Canada, in compliance with Canadian regulations.

This has been done with considerable success in the creation of a product called Workbench. It was launched in Canada as an Internet portal in the fall of 2001. This browser-based, real-time reporting and global market information tool allows CIBC Mellon clients and their investment managers to monitor their investments from anywhere in the world. Workbench currently provides account reporting, reference material, real-time transactions and online client servicing.

When the need arose for such a product in Canada, the decision was made to adapt the service that Mellon had architected for its clients in the U.S. “We took the opportunity to leverage that work and used the technology in support of our Canadian clients,” said Polatajko. “This enabled us to deliver the product in a cost-effective manner without us having to reinvent it.”

Clients and investment managers can access the portal 24 by 7, and find out their security holdings at any point in time. The product is customizable, so if users want to see the information at a summary level or at a detailed level they have that option. “Flexibility is the name of the game,” said Polatajko. “Give users the information any time, anywhere, and any way they want it. That’s what Workbench is all about.”

Since its introduction, Workbench has been enhanced to provide users with mandatory and voluntary corporate action announcements as well as class-action notifications. All corporate action announcements are specifically tailored to the client or investment manager’s information needs, and updates are available via the Internet. All corporate action announcements are real-time, intra-day and give users the ability to perform customized searches by account, security, deadline date, eligibility date, update date or action type.

The product has been rolled out to nearly 200 clients and has been quite successful. So much so, in fact, that CIBC Mellon has been recognized as the custodian with the best Internet-based client reporting system by UK-based GSCS Benchmarks, a publication that has been providing the international securities industry with measures of operational performance since 1995.

Advice from the CIO

When asked what advice she would pass along to other CIOs, Polatajko replied: “If I synthesized it into one word it would be communication. CIOs have to be communicating, talking in the language of the business, understanding the business. They have to make sure their business peers understand what the strategies are, why certain things are being done, what the business and the financial justification is, and so on. The more you communicate with your peers, the more you bring them up that curve of understanding.”

Polatajko believes that by providing the business with a better understanding of technology, and by investing in that technology with both an eye to short-term payback and long-term effectiveness, CIBC Mellon has positioned itself well for the future.

“We’ve achieved a good balance,” she concluded. “We are continuing to invest in technology because we feel that it is a critical mass for us, but we’re doing it in a way that’s smart, that’s business savvy, and that’s supportive of the needs of the business.”

Having addressed the difficult issue of alignment, CIBC Mellon’s IT road should be a little smoother to travel on.

David Carey is a veteran journalist specializing in information technology and IT management. Based in Toronto, he is managing editor of CIO Canada.

About The Company

CIBC Mellon is a 50-50 joint venture between Canadian Imperial Bank of Commerce and Pittsburgh-based Mellon Financial Corporation. It was formed in 1996 to leverage the strong Canadian presence and client base of CIBC with the advanced technology and investment information services of Mellon. CIBC Mellon’s two operating entities are CIBC Mellon Global Securities Services Company, a global custody provider, and CIBC Mellon Trust Company, a supplier of transfer agency and corporate trust services. Through this union, CIBC Mellon provides traditional services and also helps clients increase operational efficiency, manage risk, increase performance, and improve relationships. It serves more than 2,000 clients who come from many different industries. The company’s Web address is www.cibcmellon.com.