Integrated IT and business strategy for bank’s M&As

After the Japanese "Financial Industry Big Bang" and recession in the 1990s, Japanese banks faced many challenges: significant “bad debt” losses, new players entering the banking business, and fewer good corporate customers. Many banks have had to change their cost structures and business model to survive.

One of the largest regional banks in the southern part of Japan made a strategic decision to consolidate small regional banks to compete with mega-banks. The mega-banks were expanding their markets from metropolitan to regional areas to find good corporate and individual customers.

But the bank was not sure whether or not the consolidation of IT systems would be more costly than the business benefit.

Challenge
A.T. Kearney was engaged to assess the bank’s consolidation strategy - encompassing both the business and IT strategies. The project’s three primary objectives included:

1. Clarification of strategic issues for IT and business, regarding the consolidation of small banks
2. Basic IT and business strategy for consolidating additional banks in the near future
3. Reduced IT costs for the first stage of consolidation

Approach
The project teams, which included A.T. Kearney consultants, employed a structured approach to address the interrelated issues between business and IT strategies:

• Prioritized each business system based on the current level of functionality and business value before and after consolidation
• Established benchmarks of IT cost structures supporting each business system in the Japanese banking industry
• Analyzed zero-based approaches to establish a scenario for minimized IT consolidation cost and maximized business consolidation values
• For each variant in the scenario, clarified the "best and why"
• Defined key elements of business and IT strategies for future consolidation to minimize cost and maximize strategic value

Results
Using IT as the consolidation scenario, the teams completed projects for over 50 business sub-systems, providing the bank a joint IT / business consolidation strategy. At the same time, the project achieved significant savings with more than 10 percent reduction of consolidation cost, for over $30 million.

In addition, the teams developed metrics for implementing and supporting the bank’s future consolidation strategy. And with the bank’s the next consolidation, it is likely to become the top regional bank in Japan – based on the new IT / business strategy.