CIO talk: A look at the Wells Fargo-Wachovia integration

Wells Fargo is entering the final leg of the integration of Wachovia---a big, but largely complementary bank combination forged in the market meltdown of 2008. When the $15 billion merger was announced, Wells Fargo estimated it could save $5 billion in costs. Of that sum, $1 billion was related to technology and operations.

Wayne Mekjian (top right), chief information officer of Wells Fargo, and Martin Davis (bottom right), head of technology integration, have been on the front lines of the integration. Mekjian was a Wells Fargo veteran and Davis hailed from Wachovia.

Here's a recap of my chat with Mekjian and Davis, the Wells Fargo-Wachovia integration and a few IT management themes.

Structure: When Wells Fargo and Wachovia merged Mekjian said the goal was to "keep as flat as we could." As a result, Wells Fargo has 10 CIOs by business unit---brokerage, retail, wealth management, real estate lending, core systems, operations etc. These CIOs pick their own systems, but common tools such as deposit and human resources are shared.

On the integration: Davis said the strategy was to take the Wachovia and Wells Fargo systems and choose system a or b. The choice was driven by the business model of each group. There were no options for a third system. If there were feature gaps between the two companies' systems they were filled during the integration, said Davis.

What was the savings? Wells Fargo is entering the home stretch of the Wachovia integration and the aim is to save $1 billion. Davis detailed three integration tracks: Infrastructure, independent conversions for business units with "big bang" conversions and market and regional customer conversions. The goal was to get to a common platform and combine the best of applications to leapfrog.

App consolidation: Naturally this integration resulted in consolidated applications. Each side---Wachovia and Wells Fargo---brought about 2,000 apps to the integration party. The company now has 3,200 and plans to trim down to 2,500 over the next year. "We can try to get to 2,000 as a goal, but I don't think that's going to happen," said Mekjian. Why? Some units---international and brokerage---were new to Wells Fargo and didn't need consolidation, said Davis.

On development: Mekjian said that 75 percent of Wells Fargo's applications are home grown. The remainder of the software portfolio is purchased. "We favor more to developing our own," said Mekjian. "We don't develop applications the way we have in the past. Today it's about smaller units that can be connected in various ways."

When it comes to programming languages, Mekjian said Wells Fargo is like any other large operation: "We have everything you can think of," he said.

The post integration plan: Mekjian said Wells Fargo will lump its IT projects into three buckets:

• Simplify the environment.
• Cut costs with cloud computing, virtualization and better utilization via its business continuity assets.
• Innovate with more self-service, more data and more mobile for customer-facing applications.

Cloud computing: Mekjian fell into the private cloud camp. The aim is to tie storage, networking and computing power together to be managed as one asset pool. "We've been working on it for years," said Mekjian. He added that Wells Fargo has been working to migrate from the mainframe to standard servers, but there's a catch: The bank wants to be able to move things back to the mainframe if pricing and returns are there. Mekjian was very aware of lock-in via standardization on platforms like VMware. "We are doing our best to make sure that we don't get locked in," said Mekjian.

Davis added that public cloud computing will be used very selectively since Wells Fargo has plenty of capacity. "We're going to lever the infrastructure we've invested in," he said.

Disaster recovery: Mekjian said business continuity is a key goal. Wells Fargo has spent its time in recent years replicating data in various active environments with real-time backups. The aim: Give customers the data they want even if there's an outage. "My No. 1 priority is availability," said Mekjian.

IT talent. Both Wells Fargo and Wachovia used a heavy dose of contractors. When the IT organizations were put together contractors were the first to go. Mekjian said that Wells Fargo has been retraining and redeploying existing IT talent. Offshore outsourcing is used as a supplement. "I'm not a huge believer of one or the other," explained Mekjian. "I just find where the talent is and go get it. Five years ago we ran out of talent. There's talent, but it's usually busy.

As a result, Wachovia had two offshore outsourcing relationships. Wells Fargo has a captive operation in India.

Mekjian added that the biggest part of the integration was making sure IT workers knew they were part of something. "We made sure that they understood they had a home," said Mekjian. "If left alone they'd be worried about the future." Enterprise 2.0: Mekjian was a bit skeptical. "we're not sure how it fits. Just because there are ways of dealing and communicating doesn't mean there's a bridge between into financial institutions," said Mekjian. Davis added that telepresence has been a big help on collaboration.

Wells Fargo has 12 to 15 telepresence locations built by Cisco, said Davis. Travel is the primary return, but the real benefit is that you can bring in more people to collaborate.