RBC Dominion Securities (RBC DS) is Canada’s leading securities dealer. It provides wholesale financial services such as banking, equity trading and foreign exchange (FX) to Canadian and global corporations. RBC DS is the fourteenth largest foreign exchange dealer in the world, the third largest in North America, and the largest in Canada. It serves customers globally from offices in North America, Europe, Asia, Africa and Australia.

Unlike the pin-striped world of traditional banking, the securities business is an extremely dynamic one. As a result, dealers must be prepared to move on a dime to capture new business or take advantage of new opportunities. In this business, senior executives have their desks on the trading floor, and are constantly consulted about decisions that could make or cost the firm millions of dollars. However, while the business might appear to be operating on an ad hoc basis, said Jamie Barton, Vice President, Commercial Foreign Exchange, its processes have always been carefully, even cautiously, thought through.

FX was a good example. Dealers would speak directly with customers about potential transactions, and when the customer was ready, would execute deals worth tens or hundreds of thousands of dollars. Once entered, the firm’s back-end systems would take over and produce the necessary records for everyone involved without any further intervention.

The Vision. In early 1997, David Gibbens, Business Head of Global Markets Fixed Income, and Barton recognized that the front end of the FX process could also be automated to allow customers to directly access FX quotes online and make their own trades. This would enable the firm to penetrate new markets without the added cost of new offices. With customers submitting trades in this fashion, staff could then focus more on marketing. Direct trading would also reduce costs and streamline operations. Their research suggested that more than 80 per cent of their corporate clients could be linked directly into RBC DS’s systems via dedicated data lines if a user-friendly front end was developed. They were aware of a company, Cognotec in Ireland, that had a package which could enable automated dealing, and approached IS with what they viewed as a “simple connectivity problem”.

The IS Challenge. Roger Mahabir, who took on the CIO assignment in 1997, was faced with a considerably larger challenge. Significant changes in the industry and the firm had taken a severe toll on the morale of the firm’s IT staff and were resulting in significant turnover. Furthermore, there was much work to be done before IS could play a meaningful role in the company’s strategic planning process. IS priorities were constantly changing, and relations with the business units were poor. It was obvious that the company was not going to be able to use IT effectively in an increasingly competitive market place, or even keep up with “simple” business requests, such as the one above, unless he made a number of key changes.

“The immediate challenge before starting anything new”, said Mahabir, “was to build a team capable of providing innovative solutions on a timely basis and to start treating our business partners as customers.” He needed to send a very clear signal to the business units that, in partnership with their vendors, IS could come through for them consistently.

Mahabir set about the task of signalling both his IS staff and business clients that things were going to be done differently. First, he created a Project Management Office to oversee all ongoing projects and staffed it with experienced project managers. Second, he assessed how the company was using technology at present. This survey told him that RBC DS had many opportunities to improve the functionality of its systems and to become more competitive with its uses of IT. Third, Mahabir recognized that he had to put a process in place that would recognize the business’ need for flexibility and speed to market while still ensuring that IS resources were used effectively and for the most important business priorities. To do this, with the approval of the President, he created a Systems Priorities Committee (SPC). All major Divisional heads would meet regularly to determine what systems had to be implemented in order to execute business strategies. The SPC could adjust priorities if changes could be justified to the business as a whole. This process ensured that the different business “islands” would work with IS for the overall benefit of the organization.

Said President and COO, Charles Winograd, “The entire SPC process is very well organized and managed. It is perhaps the best meeting that I participate in within the firm.”

The need for direct customer FX dealing was the first major project proposal Mahabir took to the SPC. As a result, there was a lot more riding on its success than simply providing a connectivity solution for customers. FX Direct, as the project was known, was Mahabir’s opportunity to demonstrate a new, more effective working relationship between IS and users. It was also a chance to show IS staff that the firm was committed to utilizing their talents to make it a preeminent and competitive user of technology.

The first steps were deceptively easy. The plan was straightforward and the project was approved by the SPC in August 1997. A team of senior business users and IS staff was established to oversee the project’s development. Cognotec software was a clear choice since it was already being extensively used for FX deals within many banks. Cognotec agreed to customize its product for external users.

The project also had another advantage. Its existing back-end systems had been so well designed that very little needed to be done to enhance them for this application. Bill Adams, a senior IS team member, explained that their open, modular, real-time design and continuous enhancement over time, meant that FX Direct could easily interface with them with few changes. “These were good legacy systems,” he noted. “Over the years, we have honed and polished them to keep up with business changes. As a result of our continuous improvement of these systems, we could make FX Direct ‘plug and play’.”

The first client went live in January 1998 and 20 more were added over the next few months. However, by April 1998, implementations had stalled. Clients were no longer willing to sign up for the system. In the few months since the project had been approved, client telecommunications had evolved away from LANs to Web-based computing. Barton had to inform Mahabir that the project had to be completely redesigned to permit browser access. Suddenly, a fairly straightforward project became a leading-edge e-business application complete with major connectivity challenges. The change tested Mahabir’s philosophy of working with the business, for the business. But the SPC agreed the changes had to be made and he wholeheartedly committed to making them work.

However, a new element had been added into the mix. Security over the Web simply wasn’t good enough for the deals the company handled. High security was an absolute essential.

The users also had three further requirements. First, the system had to be easy to roll out, taking less than 30 minutes to enrol a new customer. Second, the system had to use the open Internet and find ways through corporate firewalls without being rejected. Third, it had to be open to many different devices and combinations of networks so that customers could use it via any technology they had installed.

The resulting project was a highly complex, collaborative effort between RBC DS, Cognotec, AT&T and numerous vendors. In the end, however, the company not only had its browser application for foreign exchange — the first of its kind in the world — it also had something more important. It had a platform that would enable many different kinds of e-business and allow it to be first-to-market with a variety of Internet-based business-to-business applications.

The new connectivity solution was implemented with the first client in summer 1998. The company chose a client with whom it had a strong relationship and who was geographically close to RBC DS so that problems could be quickly resolved. By October 1998, six clients were using the system. This grew to 50 early in 1999. At this point, the firm still had not announced or advertised the system, wanting to make sure that things were going smoothly. However, in spite of this, there was huge demand from clients to get access to the system. At present, the system is fully operational with 330 clients and handles approximately 6 per cent of all FX transactions handled by the firm.

Business Value. Today, RBC DS has the world’s most advanced FX auto-dealing system. Clients from around the world are using it to conduct commercial transactions securely and safely. In 1999, Barton was able to take $1 million out of his budget and eliminate 13 dealer positions. More importantly, customer reaction has been excellent with almost all qualified customers signing up for the system, and the firm has increased its market share as a result. In addition, three tier-two U.S. banks have decided to use RBC DS to manage their own FX dealing using FX Direct, and there is much more opportunity in this area. Thus, the system has opened up new avenues of doing business which weren’t initially apparent to it.

Collaboration. During the project development, Mahabir and the senior user, Andy Scace, Head of Global Markets, chaired weekly steering committee meetings. All teams were jointly composed of users, IS staff and vendor staff. This close cooperation enabled the team to deal with the many unforeseeable business and technical problems which arose during development. Mahabir’s involvement at a very hands-on level signalled to the users that IS intended to work with them in an active partnership. Barton noted, “Roger treated us like clients and this led to a fundamental change in the quality of the IS-business relationship.” Added David Gibbens, “For the first time business and IT are collaborating on a major initiative. Roger and I have been joined at the hip throughout this entire project.”

Service Excellence. This system taught both IS and users a great deal about what makes service excellent. Users had to learn more about their business. No longer could they just know that a particular client liked to work in a particular way. They had to think through their protocols and make them systematic, ensuring that the system would provide the same level of service without human intervention. Now, the system takes care of routine transactions and when traders get involved with clients, they are truly adding increased value to the deal. This provides greater satisfaction to both customers and traders. Conversely, IS staff were placed on the front lines for the first time, dealing directly with external customer problems. They could no longer afford to take a laid-back approach to service. Today, a three-person client-care team has been integrated right on the trading floor to provide immediate solutions to customers with problems.

While the FX Direct application has resulted in the development of a robust platform for doing e-business, it has also demonstrated to the firm the value of thinking and acting strategically when making IT investments. Today, business and IS have an “unbreakable partnership” which has totally changed how the company views IT. As Jamie Barton commented, “We have gone from spending carefully but reactively on IT to spending carefully and strategically.”

Heather A. Smith is a Senior Research Associate at the School of Business, Queen’s University, and coordinator of the ITX Awards University Advisory Council. She is a co-founder of the Queen’s I/T Management Forums, which explore IT and knowledge management issues, and the author of Management Challenges in I/S . She can be reached at hsmith@business.queensu.ca.