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Creating a Shared Services Organization

InUnison Technology Services isn't your typical IT services organization. CIO Jeff Connery created it from the IT groups of two separate companies.

CIO Jeff Connery created a services organization that supplies IT to two credit unions. Here he shares his rules of the road.

Jeff Connery, CIO of inUnison Technology Services, spends half his time working out of a spartan office in the bowels of the First Calgary Savings & Credit Union headquarters in Alberta, Canada. Connery and CEO Tim Wasilieff share an office -- actually a trailer that's been backed up to a nondescript building where a wall was knocked out to create a doorway. The rest of the IT department is also crammed cheek by jowl outside the door. "We have no room here," Connery says.

Connery spends the rest of his time working at Envision Financial, on the other side of the Rockies, in Langley, outside of Vancouver, British Columbia. For a while, Connery was CIO of both credit unions -- though there had been no business merger. Instead, there was the vision of two CEOs of creating a network of credit unions across the country, providing services for traveling members, enabled by a shared technology platform and ultimately other shared services as well.

Two years ago, the credit unions merged their IT departments into a joint venture called inUnison to handle the technology infrastructure for both institutions. They also merged marketing, sales, HR and even executive teams, except for the CEOs and CFOs.

"In addition to IT services, our intention is to offer other administrative and back-office services that all credit unions need," Wasilieff says. "There's reason to believe that there will be economies of scale. It's about reducing the cost of technology by spreading the cost out among a larger number of credit unions."

It's also about merging staff in a way that there are no layoffs -- indeed, more jobs result. And about transforming a group with moribund gatekeepers into one replete with proactive leaders and trained specialists. And about installing a common software platform that provides views across myriad systems, enabling visibility that may provide a competitive edge.

"Credit unions have never been cutting edge in technology," Connery says. "Now we're looking to leverage technology. It's a big change."

More Than Cost-Cutting

Shared services is one of those IT buzz phrases that promises a lot but often fails to deliver. A Forrester Research Inc. survey in 2005 found that 59% of 87 IT decision makers rated shared services projects as only "somewhat successful," because they often trimmed costs but did not deliver better service.

Moreover, Gartner Inc. analyst Colleen M. Young notes that two-thirds of centralized IT organizations consider themselves to be running a shared services model when actually less than a third really fit the paradigm, which involves not only reducing costs but also transforming IT into a strategic business partner that helps the organization maximize its technology investment.

"You have a lot of siloed IT organizations attempting to become more service-oriented," she says. "They're defining good service as cost reduction. That doesn't actually do anything in the way services are delivered. It has no impact. With the best intentions in the world they're mispositioning and not really creating the culture shared services needs to survive."

Connery, though, seems to be following precisely Gartner's ideal of a shared services model. A veteran of seven mergers, Connery drew upon his experience to create inUnison. He says the shared services at the credit unions have cut the cost of desktop suite licensing by 21%, reduced mobile telephony and messaging costs by 30% and sliced the price of a new banking system by almost a quarter.

CIO Jeff Connery's Merger Blueprint
Phase 1 (2005)
  • Bring IT departments under one head; coordinate technology strategy
  • Develop common IT architecture and infrastructure strategy
  • Integrate IT resources and staff cross-utilization
  • Plan, design and set up new banking system for First Calgary
  • Create five-year strategic plan and three-year operations plan
  • Lay groundwork for inUnison
  • Create change management plan to ensure buy-in for all staff
Phase 2 (2006)
  • Implement the new banking system at First Calgary
  • Develop and integrate common systems and applications
  • Harmonize the Envision banking system to the enhanced First Calgary version
  • Integrate project planning and budgeting for both credit unions
  • Create inUnison Technology Services Ltd.
  • Focus on staff-related issues and HR policies
  • Build branding and excitement among staff for new company by distributing golf shirts, coffee mugs and pens
  • Expand data center capacity
Phase 3 (2007-2008)
  • Integrate a common business systems model
  • Integrate CRM and data warehouse into common business support tools
  • Move into enhancement and development of new business support systems
  • Foster and support the growth of the combined business operations

The Pathways Project

In 1938, First Calgary opened the first credit union in Alberta, loaning $50 to a member to buy a washing machine. Envision's origins date to 1946, when a group of fishermen in British Columbia joined together to run a credit union out of one of their homes; 20 years later, the union had only five employees. But growth picked up in both provinces as the result of numerous local mergers. Envision Financial grew to become British Columbia's third-largest credit union with more than $3 billion in assets, and First Calgary Savings reached $1.5 billion in assets.

Then, in 2003, the CEOs of both credit unions began discussing ways to merge operations -- including IT -- without running afoul of laws forbidding credit unions from operating across provincial boundaries, something lawmakers had never considered. The next year they announced the Pathways Project, which combined operations and executive teams, except CEOs and CFOs.

The first phase of the project, which would take three years, called for merging IT and operations and creating inUnison. The second phase would be to roll out services to other credit unions across the country.

"First Calgary and Envision are working together in a unique and innovative manner to establish a strong and relevant financial network for western Canadians," First Calgary CEO Dave Gregory said at the time. "Unlike traditional mergers, where one company gobbles up the identity of the other, the First Calgary-Envision partnership would be based on both credit unions maintaining their local identities and continuing to provide unequalled personal service throughout their local communities."

Enter Connery, who has a degree in fine arts photography as well as Microsoft and Cisco training. He had spent most of his career at Canadian Airlines International Ltd., where he managed corporate support and infrastructure for the airline worldwide. After 21 years at the airline, Connery jumped to Sierra Wireless Inc., a telecom equipment maker, as director of IT, where he was responsible for a major J.D. Edwards ERP implementation.

While at Sierra, Connery got a call from a search firm: Envision was looking for a CIO. Initially, Connery didn't think the job was for him. "Going from high-tech to a credit union didn't seem that interesting," he says. "But they laid out this idea of forming a partnership with First Calgary."

Such partnerships often don't live up to expectations, notes Forrester analyst Lewis Cardin. "I have a client who didn't do the preparation work," he says. "The project took three years, they're not sure they're there yet and it blew the business case out of the water. The ROI keeps getting diluted and diluted until there is none."

The most crucial step is the pre-merger planning. If companies don't spend enough time on the planning and communication for employee engagement, Cardin warns, "you'll wind up doing them anyway during the time of the transition and increase the time and the probability that things will fail. You won't get the value out of the business case, which is very time sensitive. The actual transformation is the last step. Make sure that takes place in the shortest time possible."

In February 2004, Connery was hired as Envision's CIO. Five months later, he added the same job at First Calgary. For the next year and a half, he ran each department separately. Then, in January 2006, the two IT departments merged.

Staffing Factor

When Connery became inUnison's CIO, Envision's IT shop numbered 28 people; First Calgary's had 14. But rather than cut back on head count, Connery went on a hiring spree. "The easy way to drive down cost is to trim staff," he says. "But we wanted to increase value and capacity. Both groups were understaffed. It wasn't a streamlining operation. We needed more people."

Connery inherited two data centers an hour apart by air, which gave inUnison a good platform for disaster recovery/business continuity. But the real challenge was transforming the IT staff from one with a custodial mind-set to a more proactive group of business analysts and security experts who would not only enable inUnision's growth, but also allow the company to roll out services for other credits unions.

Staff continuity was one of Connery's biggest concerns. He tried to reassure jittery team members that the merger would create greater opportunities. He had a lot of one-on-one sit-down chats: There would be a place for everyone, and more challenging work. There were no layoffs and, surprisingly, there turned out to be no redundant jobs, though five people opted to move to other departments or leave the company.

"What I've learned from all of my past mergers is that you have to answer the people question first," Connery says. "If you want to be successful, the people need to feel that they have a part to play in the success. They need to know that you need them to help you build the future and that their role in this is important."

To build a common culture, Connery outfitted the new combined department with inUnison golf shirts and handed out logo coffee mugs and pens. He created an e-newsletter to spread the word inside the company. The leadership team came up with performance indicators to measure results, involving business leaders in the process to foster buy-in. The CEO and CIO took workers out to casual lunches to share their vision. IT managers from both credit unions went on a two-day planning retreat.

Nonetheless, there were challenges. Only about a third of the jobs were held by IT professionals who had real tech skills and training; the rest of the staff had learned while doing. "Seventy percent of the folks came in through other projects at the credit union," he says. "Both companies were maintenance and support organizations. The level of expertise wasn't great. We don't have the skills to be a service company."

To fill the gaps, Connery lured part-time contractors to work full time, beefing up his business analysis and security staff, two key areas of growth. He hired search firms and even paid relocation costs to attract workers from other parts of the country to fill these jobs. He also increased the training budget so older team members could learn new skills. Professional development became part of performance reviews. "I'm focused on internal education," Connery says. "We spend a lot of time on management and technical education. From the CEO down, everyone has an educational component in their job performance."

Today the combined department employs 77 people, split between the two locations. The staff is broken down into two major divisions: partner services and operations. Partner services has 20 people, including relationship managers, business analysts, project managers and product managers. Operations has more than 50 people, including experts in security, networks and telecom, as well as technical analysts, technical architects, DBAs, systems analysts and help desk staff. Half the staff are trained professionals.

A Central Nervous System

Just before Connery arrived at Envision, the credit union had implemented a new core application: Fincentric's Wealthview Banking system (the vendor has since been acquired by Open Solutions). The new system replaced multiple legacy systems with a single platform.

Through its XML-based gateways, the system integrated views of data pulled from customer relationship management, data warehousing, collections and credit recovery and business intelligence systems. For the first time, the credit union was able to get a unified view of its customers: deposits, payments, borrowing. An online transaction-processing engine designed for high performance and high availability let the credit union analyze the value of each customer, formulate strategies to maximize their value and increase retention.

Connery says the Envision deployment was a boon operationally, significantly improving workflow and customer service. So much so that even while Connery was blending two IT departments, he found himself launching a two-year conversion project to put the Alberta credit union on the same platform, an important part of the shared services model.

Connery created a core team of 35 staff members from both Langley and Calgary to work on the project. And the company was able to cut a deal with the vendor to bring the cost down by 24% over the life of the contract by combining license fees for the two organizations.

On a Friday in November 2006, Connery flipped the switch on the new system. Everything was running in test mode by Saturday night; IT ran audits, balances and integrity checks Sunday and Monday. The system went live on ATM, debit card and credit card transactions on Sunday and fully live to customers on Tuesday.

"This was a big deal in that in the process we changed account structures to be member-centric versus account-centric; this meant changing account numbers, checks, debit cards and Web banking platforms," Connery says. "Having done at least a half-dozen large conversions in my past, [I can say] this was one of the smoothest. Thousands of moving parts, 100 different systems, 20 different suppliers and 100,000 members to manage and it all went off according to the plan."

But even with a tangle of legacy banking systems eliminated, Connery says the two institutions are still running too many apps: 250, to be specific. "We need to pare down," he says. "I'd like to get that down to 60 to 70 apps. We have a lot of little systems added piecemeal. We're moving to an enterprise architecture strategy." That includes looking at an ERP system to replace 12 different financial and HR apps.

Close Collaboration

Connery and Wasilieff have a close working relationship, even though they are in the same place only once every five or six weeks. Connery reports directly to Wasilieff, with whom he worked closely when Wasilieff was Envision's COO, but has dotted line reporting to the CEOs of both credit unions. The two have houses on the same block in British Columbia and share a condo in Calgary. Both collect wine and they go on an annual sturgeon fishing trip on the Fraser River in British Columbia.

"We're actually friends," says Connery.

That kind of close collaboration is also what they hope to bring to the credit union industry in Canada through the shared services project when it enters its next phase in 2008: rolling out infrastructure and back-office support to other credit unions. In the U.S. such a model already exists: the Credit Union Service Organization (CUSO).

"We spent some time down there in the U.S. trying to understand their business models," Wasilieff says. "There aren't any IT CUSOs operating in Canada. We're targeting [credit unions with] $200 million to $1 billion in revenue. As unions get larger, they find that the service bureau model doesn't work so well for them [because] they get the lowest common denominator. Above a billion, they generally want to take control of their own IT. Our model plays to customers that require more customization. It requires a deeper understanding of the banking system."

But ramping up for the next phase has proved somewhat harder than expected in western Canada's booming economy. Filling a vacancy takes six months in Alberta and four in British Columbia. And finishing a new data center build-out in Calgary is taking far longer than planned. "We're spending $400,000 more than we thought and we're six months delayed," Connery says. "It's impossible. It's a very hot economy."

But even when the new data center is ready, Connery says he wants to keep the desk pods close together.

"People will have a little more room," he says, "but we want closeness and interaction. There's a buzz when you get crowded. There's an energy and excitement. People need the ability to get together and really talk." And share, too.

Michael Ybarra is a contributing writer for Write to him at [email protected].

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