ISM-II

Case 1, Submission by- Group 4

Q1. Some have argued that companies should spend less on IT and wait longer to invest in more mature technologies because IT is a commodity and
brings little competitive advantage. If this is the case how could these two banks justify their multi-billion dollar investments in IT?

HSBC

In 2001, $164 million spent on second-generation hsbc.com provided common presentation and browser
capability to offer all banks services to customers.

In 2002, bank launched Global Technology centre by off-shoring, saved $30 million, improved service projects
and online banking. It served 1.2 million internet banking customers over 150 countries with 76,650,000 visits
and 177,000 TV banking customers.

In 2003, spent $1 billion for coordination of comprehensive global credit card technology, leading to annual
savings of $67 million.

In 2004 with launch of HSBCnet, bank provided range of transaction banking and treasury services to corporate
and mid-level customers.

In commercial banking, number of customers registered for commercial banking increased by 43% with launch
of new e-banking platform in 2004. Investment also included development of Finance Corporations WHIRL credit
card system.

In 2005, $1.1 billion spent due to increased activity supporting in new capabilities in Corporate, Investment
Banking and markets. Customers increased by 24% and 116% in online transaction volumes.

In 2005, 2G Innovative Business Solutions provided real time sales campaign activities and presented
customers with personalized content user-related images and pre-filled forms, raised US $5.7 billion and 25000
new online savings accounts.

In 2005, HSBC Direct : Direct banking and Savings scheme reached 343,000 customers with US $ 7.2 billion in
deposits.

In 2006, Bank invested in updating its websites for serving additional features, personalized content and
improve customer accessibility.
Personal Bank Services : IT investment enhanced targeting and analytical insights to better meet customer
needs and drive sales growth. [40% growth in personal customer numbers to 16 million and 55% increase in
online sales volume]

Q2. How would you assess IT investment strategies at HSBC and Citigroup? Do they invest in IT primarily as a way of cutting costs and improving their
operational efficiencies, or do they invest strategically with a view to entrenching their competitive positions?

HSBC : Operational & Strategic Investments in IT

In 2003, spent $1 billion for coordination of comprehensive global credit card technology, leading to annual
savings of $67 million.

Executed Manage for Value strategy through e-commerce projects like internet gateway to allow merchants to
authorize and accept credit payments, enabled merchants to set up online storefronts, mobile banking for daily
banking and share dealing.

Launched First Mondex Card : An electronic wallet to store money on a chip , a joint venture with Master Card.

Interactive Financial Services with IBM : offering multi-channel e-banking service.

Merrill Lynch HSBC : online banking and broking service for affluent customers, a joint venture with Merrill Lynch.

PayDirect from HSBC : Enabled secure online money transfers for customers with email address and bank
account.

Investment in Customer Relationship Management System : Helped in providing additional intelligent services to
customers.

HSBC Universal Banking System : Risk and credit control system to manage and implement group projects and
provide consultation services to meet local needs to keep up with the strategy of Worlds local bank

2G Innovative Business Solutions : Allows present customers with personalized content and pre-filled forms,
raised US $5.7 billion.

First Bank to offer pre-approved online mortgages and introduced 2300 self -service terminals through HSBCnet.
HSBCnet served corporate and mid-market customers by providing transaction banking and treasury services.
Citigroup : Operational Investments in IT

Objectives of using technology: Better serve clients and lower costs

Citigroup used IT to enhance its organizational strengths & capture expert knowledge of its extensive
international branch network

Launched IT program to integrated Citibank systems into a standard global platform to cope with mergers
demands, emergence of new Euro currency and reprogramming required for Y2K program
Development of internet based administrative platform to support development in pension and mutual funds
and capabilities expansion to provide clients with round-the-clock account information, research & email
exchange with financial consultants
Launched e-Citi Commerce Solutions in 1998 to offer electronic bill payment presentation, authentication and
certification to big companies and government organizations

Citigroup : Strategic Investments in IT

Strategic Alliances with Netscape, AOL & Oracle to provide financial advice, news, research reports, interactive
investment tools and offered online banking, insurance and mortgage services

Introduces business-to-business e-commerce system (Citigroup Commerce) in Asia Pacific region

Allowed clients to open A/C and transfer money using mobile phones using trial service with Mobile One in
Singapore

It accelerated its global growth in credit card business through 10 strategic acquisitions, reaching 100 million
accounts in 2000 and provided best-in-industry cost position

Rapid integration of CitiFinancial system with 750 former associates branches in US in 2000

Adoption of strategy- Citi on the Net; Internet units like e-Commerce,e-business and e-Capital Markets were
created to empower business lines and Internet Operating Group was created to drive corporate internet
strategy and coordinate across various divisions

Creation of Citi.com to offer integrated services in areas of banking, brokerage and insurance

Introduced MyCiti.com to become the first global finacial institution to offer account aggregation

Made a strategic alliance with Microsoft Network and AOL to develop different online products in 2001

Year 2002- Launched new foreign exchange products,enhanced Citigroup Direct, created Global Transaction
Services, Global Securities services, upgraded CitiDirect Online Banking(in 90 countries)

Year 2004- Acquired Lava Trading, joint venture with Shanghai Pudong Development Bank(issued first dual card
currency in China

Year 2006- Acquired Egg Banking Plc(leading online bank), launched Citibank Direct, biometric credit card
services in Singapore and biometric ATMs for microfinance customers in India

Q3. In general, how should companies go about assessing the value of their IT investments? In your assessment which of the two banks is cleverer in its
IT investments?

The value added by IT investments are beyond increasing efficiency ,productivity or reducing cost ,the main idea
is to increase the companys scope and knowledge to compete in a constantly changing environment .This is
achieved by providing valuable information when the organization requires it the most .
To assess the value created or added by the IT investment the company must have a clear understanding of who
the customers are, what are their most important values and requirements, how this value is provided to the
customers in a sustainable way and the profits they wish to make by providing this value .To evaluate these
requirements the business model and strategy adopted need to clearly defined, and they are designed
complementing each other as well.
Another important step is assessing the benefits of IT are through the value chain. By applying appropriate
frameworks on the value chain, the intangible benefits of IT investment can be quantified. One such framework
used by organizations is the BALANCED SCORECARD which provides a comprehensive view of the organizational
performance .The scorecard divides the organization into 4 areas-financial performance, customer relationships,
operational excellence and organizations ability to learn and improve.
Traditional methods of assessing the value of investments are - comparing financial measurements such as ROI
or TCO, and employing qualitative frameworks like IE (Information Economics).
Employing AIAC framework for measuring IT payoff

The IT investments made by CITIGROUP have been identified comparatively superior to HSBC based on the following
facts:

Citigroup had an integrated approach towards IT governance, using combination of packaged and customized
software .The primary aim was to adopt a global approach which takes care of the local conditions as well.

Whereas HSBC focussed on being perceived as the worlds local bank and promoting its regional technology
services .

Citigroup provided customers a unified, group wide, standard technological platform, thereby providing