Slumping Economy and Merger Test Industry Vet

Faced with what he calls the worst economic environment he has seen during his career in financial services and IT consulting, Paul Donovan, CIO for Atlanta-based ING US Financial Services, part of ING Group ($467 billion in assets), recently took on the most challenging job of his career. "At the end of 2000, ING bought two companies," ReliaStar and Aetna Financial Services, "and we began to merge"them," Donovan says. "Just as 2001 came around, the economic data became very poor and we had a huge need for integration. In financial services there are always peaks and valleys, but because of the timing of the merger, this has been very tough."

As a consultant with then-Coopers & Lybrand and as a financial services executive in various positions at Aetna Financial Services and Fidelity Capital Markets, Donovan has seen his fair share of mergers, but this one was different from the outset. "This merger is unlike any other I have experienced," he says. "In most cases you are either absorbed or you do the absorbing." When ING acquired the two companies, Donovan was CIO at Aetna Financial Services. "We were acquired by ING and ING said we should make one company from three. It has been truly a three-way merger to come up with everything. We have taken three organizations and created a new one—not take two companies and merge them into a third."

In fact, Donovan has focused much of his attention on the consolidation of the companies into ING. "Since the acquisitions, a large portion of our activities have been focused on creating a single, large financial services organization," he says. "On the IT side, most of the technology was aligned by platform, product and location." Since the consolidation, ING and its IT have changed to be a distribution-, manufacturing- and customer-aligned organization, Donovan adds.

Structural Shift

And under his watch, many changes have been made to ING's IT infrastructure in order to match the business plan. ING now has a single data center (as opposed to many different ones) located in Des Moines, an infrastructure center in Minneapolis, and has consolidated 18 call centers into four. The single infrastructure center has allowed Donovan and his team to evaluate which systems could be consolidated and which could be outsourced.

"We have been able to identify which applications we can outsource for maintenance," Donovan says. "In this market, we have to reduce cost, and maintaining a legacy system takes time and money. To date, we have moved application support for nine platforms to India." Currently, INGutilizes services from three India-based companies, Infosys (Bangalore), NIIT (New Delhi), and Tata Consulting Services (Mumbai). "We have reduced the cost in application development and maintenance by about 30 percent and we are improving quality at the same time," he says. "The companies we use are all CMM Level 5, so they are mature in the processes."

However, while the outsourcing vendors had proven methodologies, ING did not. "When we inherited the multiple IT organizations, we realized that everyone was doing the processing and development differently," Donovan says. "In order to take advantage of our assets and size, we had to implement a number of processes across the enterprise." ING eventually bought a methodology from PricewaterhouseCoopers (New York). "Now we all speak the same language and the outsourcers also know the language," based on PwC's methodology, "so it is easy to work with them."

The benefits derived from the use of standard practices for development have also led IT to implement standards of another sort: an enterprise-wide architecture based off of IBM's (Armonk, NY) IAA (Insurance Application Architecture). "With all of the legacy, we have had tremendous difficulties," Donovan reflects. "With IAA, it brings all of the architecture together and we are in the process of rolling that out."

Also, in the same way that Donovan wants all of his developers reading from the same playbook, he leverages Amsterdam-based ING Group's global strength and is a member of the Global IT Leadership Council that meets to discuss best practices and to share global IT contracts. "Each region has its own executive committee," he says. "Autonomous is not the right word for the structure, but we run as regional entities and we take advantage of ING's scale where we can."

Dealing with Change

One thing that has helped Donovan navigate through two years of extensive corporate, technology and cultural change is the backing he receives from other senior managers. "To be successful, a CIO has to be a partner in any discussion that involves IT from the start," he says. "I have to be at the table from the beginning and that is something I have been working on since I got here. Since I am perceived as a business person who knows technology, I am invited to participate." Donovan is also a member of ING's management council and reports directly to CEO Thomas J. McInerney. "Having a seat on the management council is vital," he says. "Luckily, I also have a CEO who is very technology literate." See June 2002 I&T, pg. 26

McInerney, in turn, credits Donovan with transforming IT into a tangible product that business leaders can understand. "Paul has been in the business for a long time and is a great communicator," McInerney says.

And because of Donovan's effective communication skills, McInerney pushes a good portion of the credit for the IT consolidation to Donovan. "Paul has done a nice job," McInerney says. "His team is made of the best people and it is heavily populated with executives from all three organizations. In fact, the...IT consolidation is the furthest along," when compared to some other business areas that are being consolidated.

Taking the High Road

One area that was among the first to be integrated, beginning in 2000, was ING's financial systems—from 61 disparate systems onto one PeopleSoft (Pleasanton, CA) platform, a timely project given the current focus on corporate reporting and profits. "Now we are getting good consolidated information about the company's financials," Donovan says.

And although the financial systems consolidation was driven by a business need, not hidden fears over corporate greed, the consolidation does relate well to Donovan's view of his responsibility as an executive at one of the largest financial services organizations in the world. "When I speak to MBA classes today, I stress to them about ethics," he says. "There is not much room for anything but highly ethical behavior in a corporation." But more importantly, ethical behavior does not translate into boring work. "You should look for areas where you can take a risk, stick your neck out. Companies that don't allow for mistakes and don't take risks will not prosper in the long run. When mistakes aren't tolerated, that is unproductive."

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PAUL DONOVAN

Chief Information Officer, ING US Financial Services

SIZE OF IT STAFF: 1,600

BACKGROUND: Donovan has also been CIO for ING US Worksite Financial Services, Aetna Financial Services, and Fidelity Capital Markets.

HOBBIES/INTERESTS: Spending time with the family, golf.

DREAM JOB: "Starting another company. That is about as much fun as I could have because it is such a challenge."

Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio