CNET : E-Business : E-Commerce

   Malaysia's bank mergers open up tech minefields

By Lee Min Keong
November 19, 1999

A big Malaysian bank buys over a smaller bank and commissions an IT consultant to throw out the applications of a major software company during the integration of the two banks' IT systems. After three months, the consultant tells the big bank they cannot recommend extricating those applications because it is streets ahead of the big bank's applications.

An international IT consultant swears this actually happened not too long ago. True or not, this scenario could well be reenacted when Malaysia's controversial plan to merge its 58 financial institutions goes into full swing next year.

The selection of the target IT systems in a banking merger could possibly degenerate into horse-trading of applications or even acrimony if the parties involved lose sight of the main objective--to choose an IT system which best suits the business goals of the new bank.

"There is a psychological war which goes on. In most cases, if I am the big bank buying you out, your system is out," says Unisys Malaysia's regional director of marketing and business development George Gerald A Philip. Obviously, no IT director is pleased when someone says his system is not as good another bank's, as it implies he bought an inferior system, he suggests.

There will always be "emotional attachments" to IT systems, says Andersen Consulting's financial services group senior manager Chow Tong Ful. So can the evaluation and selection process be "depoliticised?" "The parties involved have to rise above it all. They will have to decide based on the best interests of the merged bank," he adds.

This battle of systems illustrates the host of problems that makes integration of IT systems in a merger situation a minefield that must be handled properly.

Bank Negara Malaysia, the central bank, triggered shockwaves last July by mandating that all local financial institutions be merged into six mega banks. However, strong objections by politicians, bankers and even the public forced the government to relax conditions of the program in late October. Banks are now allowed to choose their own merger partners and the number of mega banks are likely to be increased. Bank Negara also gave banks nine more months, until December 2000, to conclude their mergers.

One institution that underwent the delicate phase of evaluating IT systems is Bumiputra-Commerce Bank Bhd, a merged entity of Bank Bumiputra Malaysia Bhd and Bank of Commerce Bhd (BOC). After two months of evaluation and discussions, Bumiputra-Commerce chose a system described as "a mixed bag" by its Senior Vice President of Information Technology, Collin Lazaroo.


Lee Min Keong is a regular contributor for various regional magazines and has been a journalist for over 15 years. He heads Asia-Pacific Editorial Consultants, a Kuala Lumpur-based editorial services firm. Email us your comments.


Bank mergers

"Wedding over, marriage begins"

Untold costs of integration

Banking Web Resources in Malaysia

List of banks

Bumiputra-Commerce Bank Bhd
Early merged bank  

Bank Negara Malaysia
Malaysia's central bank 

The Malaysian financial system


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