As CRM Spending Drops, Merrill and Mellon Persevere

Financial services companies are struggling with deployments of customer relationship management (CRM) software, and only a third of securities firms will spend significant dollars on CRM this year, according to Jaime Punishill, senior analyst at Forrester Research, speaking at a CRM conference yesterday in New York City.

"There's a real reigning in of dollars spent on CRM projects," Punishill told the audience of wealth-management executives attending the executive forum titled: "Successful CRM Strategies for Wealth Management," produced by Wall Street & Technology.

Based on a survey conducted by the Cambridge-Mass.-based technology research firm, Punishill reports that 36 percent of securities firms will spend significant dollars on CRM in 2003. The survey found that: five percent have no plans to spend money on CRM while 20 percent are considering spending, 15 percent are piloting projects, 23 percent are rolling out existing projects and 22 percent have completed projects.

Increasingly firms are abandoning projects in midstream, he claims. Calling it the "$20 million sink hole," he cites one insurance company that "is pulling the plug on a $20 million Siebel project, convinced that it will have to spend another $25 million to complete it," he says.

Meanwhile, Merrill Lynch is moving ahead with a $1 billion deal to build a wealth-management platform with Thomson Financial that includes Siebel as the CRM component.

"We have a $25 million marriage with them. I'm not as anxious to (separate) as I am to get it to work," says Byron Vielehr, chief technology officer, Merrill Lynch Global Private Client Group.Merrill already has a 2,000 seat Siebel implementation in call centers around the world and plans to roll out 25,000 seats to financial advisors and support staff. "We've been working with the tools and understand the warts and issues with the product," says Vieleher.

Acknowledging Siebel "has its quirks" with data loading and redundancy, Vielehr says Merrill "is jumping through hoops to get it to work" and that it's spending a ton of time with Microsoft, IBM, Hewlett-Packard and EMC and other hardware companies to build fail over and enterprise monitoring tools.

Because not everybody has Merrill's resources and staff to do this kind of integration, Punishill says he expects to see the emergence of a few single vendor models, such as Thomson, SunGard and a few others. "You'll be happy to take an all-in-one solution even if you make trade offs because the integration bear is too much," he says.

After 10 months of due diligence, Timothy Tully, chief information officer, Mellon Financial Corp.'s Private Wealth Management Group, says the firm chose Onyx over Siebel and Salesforce.com as its CRM package. Mellon chose Onyx over Siebel out of concern for back-end integration costs with other pieces. Noting that Mellon is in an acquisition mode he said, "As (Mellon) continues to grow we wanted to have consistency on the sales and service side of the business."

"The number one challenge we have is that people are going to have their workflow change," says Mellon's CTO. In order to get data into the system, you've got to use Onyx, he says.

A real hindrance to adoption is convincing financial advisors to enter their data into the system, says Punishill. Tying data entry into compensation won't work, because advisors will game the system, he contends. There's confusion over "who owns the data," says Punishill. Firms encounter resistance from advisors because they don't want to give the firm control of their customer if they leave the firm. There was also debate on whether to make a business case for CRM based on "productivity lift" for advisors.

Vielehr used cost cutting as an argument to sell the business side on building a new wealth-management platform. Even though the Merrill platform is a $1 billion dollar deal, the CTO says he's taking $60 million a year out of the spending for outsourcing. And the $1 billion deal is less expensive than the $1.5 billion Merrill spent to build Trusted Global Advisor -- a monolithic, brittle client/server system -- which "wastes one or two hours a day," he says. "TGA was sold on a productivity lift, we dropped that," adds the CTO.

Merrill also intends to "white label" the new platform and resell it to regional broker/dealers for use as client Web sites or desktop solutions. Vielehr says it fits in with the servicing side of Merrill's retail correspondent clearing business. "We think we can make some money there," he adds.

Blurb: Securities firms are reducing their CRM spending and some are abandoning projects in midstream. But, Merrill Lynch and Mellon Financial Corp. are rolling out wealth-management platforms with CRM.

Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio