Does It Pay Off

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Compare/ assess HSBC and Citi-corps IT strategies. 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 entrench their competitive positions?

As noted in the conclusion of the article written by the Asia Case Research Center and the University of Hong Kong HCBC and Citigroup have both developed into global financial institutions. Both organizations have heavily invested in Information Technology and, as is self-reported in both companies’ financial statements, both are committed to using IT to gain a competitive advantage. That is where the similarities end. When we examine the details it is obvious that although both firms have heavily invested in IT advancements the types of projects and overall approach are very different.

Let us first look at HSBC. The Hong Kong and Shanghai Banking Corporation was founded by Thomas Southerland in 1865 with branches in London Shanghai, and San Francisco. By the year 2007 the company had grown to have 9500 offices, 200,000 shareholders, 310,000 employees and over 125 million customers spanning 76 countries.

HSBC built their business based on the philosophy of managing for value from 1998 through 2003 with the objective of providing a satisfactory return on shareholder capital. One of the primary ways HSBC attempted to accomplish this strategy was through its approach to leveraging technology.

An example of the company’s technology strategy is found in a statement which was part of the company’s 1996 annual report. In this report the company described its IT policy as a strategy based on harnessing the power of new technology to provide new and better services for their customers while simultaneously improving the banks operational efficiencies. Then stated the challenge they saw as a global financial services organization factored highly around their ability to link different parts of the group more closely together.

As one progress’s further into the details of HSBC’s information technology approach numerous examples of this 1996 strategy are apparent in the organizations approach to the use of information technology. HSBC’s history appears dotted with instances of the development of ground breaking Independent systems, outsourcing to save costs, and acquisitions of emerging technologies. Despite the hefty price tag the company remained focused on providing innovate value added products and services to both current and prospective customers.

Outsourcing is one key to the operational efficiency approach mentioned in its 1996 annual report. HSBC opened its first offshore processing center in China in 1996 and by 2007 had more than 18,000 employees across Asia spanning ten (10) Asian countries. HSBC estimated that by transferring its back office processing to India and China it saved the organization approximately 30 million U.S dollars annually. Further savings were realized in 2003 when the bank merged and consolidated HSBC and HSBC Finance’s technology service teams later leading to the offshoring of the HSBC Group Service Center creating another 67 million in annual savings. In total HSBC claims that offshoring provides the bank an estimated cost savings of over 100 million U.S dollars annually.

Meanwhile HSBC took on more IT staff to support service improvement projects and online banking. Heavily investing in platforms and applications designed to extend or streamline the online process HSBC fully embraced ecommerce. Beginning in 1998 with their successful Y2K testing and implementation HSBC heavily invested in the internet as a means of reaching new customers and deepening current customer relationships. Some of the projects were internally innovated however, most were a product of strategic acquisitions and/or partnerships with other organizations

HSBC is very focused on innovation the company has used its innovative focus to successfully leverage the power of...
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