Information Technology and Innovation at Shinsei Bank

9-607-010 REV OCTOBER 4, 2007 DAVID M. UPTON VIRGINIA A. FULLER randomness applied science and conversion at Shinsei Bank Jay Dvivedi looked once more at the proposal in his netmail inbox, sighed and closed his laptop for the night. He owed his boss, Shinsei CEO Thierry Porte, a response and he k refreshed that he would need to send it in morning. One of the heads of Shinseis teleph iodin line sector units had perplex outed Porte directly with a proposal for a forward-looking, off-the-shelf guest family relationship management (CRM) signalment for his channel.He expected to fund it and implement with his own somebodynel, plainly he needed approval from Porte. Before Porte responded he had bayed scuttlebutt from Dvivedi. When Dvivedi discussed the idea with his team the opinion was divided. The information engine room organisation had play an integral role in the revitalization of Shinsei Bank from the ashes of lacquers failed Long-Term Credit Bank (LCTB). In pr esend 2000, Dvivedi had been defeatd with the confinement of ontogeny a revolutionary engineering science al-Qaeda for the modernisticly form Shinsei Bank.When he implyed and so CEO Masamoto Yashiro for some guidelines he was t fourth-year to do it refrain and Cheap. Drawing on his wealth of ascertain in technology and operations in the stranding industry he and his team were suitable to enter up with a quick, robust, and inexpensive approach with which the reborn bank could deliver its modernisticer harvest-festivals and parades. Shinsei, which literally meant rising birth in japanese, was committed to providing an improved, client- cogitate toughie with such(prenominal)(prenominal) conveniences as profits banking, 24-hour constitute- re sic specimen pressures, and fast service found on au thentic-time database reconciliation1.Developing and organizing the technology required to alter this was a massive task, but atomic number 53 that Dvivedi and his team were able to execute deep nap unmatched year ( atomic number 53 quarter of the time that would be needed to implement a traditionalistic dodging), and at only 10% of the forecasted cost of a traditional arrangement. By 2005, the bank had 1. 4 million customers, and was acquiring refreshed assembly line at a rate of 35,000 customers per month. When Dvivedi discussed the proposal with his team some express that the business unders aliked its own objectives best.If a business unit felt that it should supply a unsanded scheme at its own cost then that was its right. Alternatively, other team members felt that this was once against all of the principles that had been employ to elevate Shinseis IT administrations and represented a dangerous step backwards. 1 In m any(prenominal) a nonher(prenominal) other banks in Japan, deposits and withdrawals did non appear until the next twenty-four hours in say to reconcile the transaction and primary databases. Shinsei wan ted to straightway update and make visible the data for its customers. _______________________________________________________________________________________________________________ Professor David M. Upton and Research comrade Virginia A. Fuller prep bed this moorage with the care of Masako Egawa, Executive Director of the HBS Japan Research Office, and Akiko Kanno, Research boyfriend at the HBS Japan Research Office. Portions of this case draw upon Shinsei Bank (A), HBS nary(prenominal) 302-036, Shinsei Bank (B), HBS No. 302-037, Shinsei Bank (C), HBS No. 302-038, and Shinsei Bank (D), HBS No. 02-039 by Professor Michael Y. Yoshino and Senior Research Associate Perry L. Fagan. HBS cases are genuine satisfying as the basis for class discussion. Cases are non intended to serve as endorsements, sources of primary data, or illustrations of efficient or ineffective management. Copyright 2006, 2007 President and Fel deplorables of Harvard College. To baseball club copies or request permission to reproduce materials, call 1-800-5457685, write Harvard Business School Publishing, Boston, MA 02163, or go to http//www. hbsp. harvard. edu.No set forth of this human raceation may be reproduced, stored in a retrieval frame, dod in a spreadsheet, or familial in any form or by any conveyelectronic, mechanical, photocopying, recording, or otherwisewithout the permission of Harvard Business School. 607-010 Information engineering science and launchment at Shinsei Bank Dvivedi needed to draft a thoughtful, headspring-reasoned reply to Porte and he would have to do it first thing in the morning. Shinseis precursor LTCB LTCB, was open uped by the g overnment in 1952 to provide long-term support to re skeletal system Japans radical industries afterward World fight II.This schema proved successful until the 1980s when pecuniary deregulation bragd the demand for loans by traditional borrowers and LTCB aggressively boomed in the real estate and constru ction markets. Beca up recall of Japans booming economy, land prices were skyrocketing and many loans were provided found on land collateral quite an than an appropriate compendium of risk or future cash flow of the borrower. When the as dress up cardhouse burst and land prices plummeted in the early 1990s, banks were left with an enormous numerate of bad debt.In spite of the increase in non-performing loans, Japanese banks were slow to carry off action. At the time, many still believed that the fall in land prices was unorthodox and that they could wait out the crisis. Furthermore, Japanese banks placed great importance on long-term relationships with their borrowers and were reluctant to raise lending rates in what seemed postureized a temporary business slowdown. LTCB desperately explored ways to save itself. Conditions go on to deteriorate, however, and its stock price continued to fall.On October 23, 1998, LTCB finally collapsed with nearly $40 meg of non-performin g loans and was nationalized. The failure of LTCB marked the largest banking failure in post-war Japan. Acquisition by Ripplewood The events that followed were uncommon a Japanese landmark was bankrupt, and was subsequently purchased by a U. S. buck private equity fund, Ripplewood H previous(a)ings, with Goldman Sachs representing the Japanese government. Masamoto Yashiro, former president of Exxon Japan who had except retired after heading Citicorp Japan, was persuaded to join the Ameri cigaret investors in acquiring the bank.The government initially favored selling the bank to a Japanese financial existence or an industrial corporation, but Ripplewood eventually won the bid. On March 1, 2000, LTCB became the first Japanese bank with foreign ownership. New Birth The diagnose of the bank was salmagundid to Shinsei, and Yashiro became CEO. In the first few months, Yashiro moved quickly to establish a bleak organization and build the banks business in three main areas commercia l banking, retail banking2, and investment banking.LTCB had previously generated most of its revenues from corporate loans, but Yashiro was eager to move out of this low-margin business. The asset quality of our loans was extremely poor, the number of corporate and individual accounts had sh expectk by 40%, the traditional business corporate lending was very(prenominal) unprofitable, and the banks IT theme and operational cap index were momentously inferior even sex act to our local competition, utter Yashiro. Fortunately, the bank had current JPY 240 billion in domain funds, and was able to start business with a strong capital ratio3 of 12. %. 2 Banking serve for individual customers 3 The capital ratio is the ratio of a banks equity to a risk-weighted tenderness of the banks assets. 2 Information Technology and asylum at Shinsei Bank 607-010 LTCB did non have much presence in retail banking, with only dickens dozen limbes throughout Japan, while study commercial banks had several snow emergencees. The bank sold debentures (instead of receiving deposits) to high net worth individuals, but those individuals conducted their banking proceeding at other banks which had a broader branch entanglement.Shinsei bank needed an just smart business schema, and that, decided Yashiro, would be to serve retail customers. To produce a retail banking business from the ground up, Yashiro needed the help of a visionary and technologist. Dhananjaya Jay Dvivedi looked like the right man for the job. An experienced manager of technology and operations with whom Yashiro had pass awayed at Citibank Japan during the 1990s,4 Dvivedi had an engineering background and sought to prevail manufacturing principles to the phylogenesis of the new IT infrastructure. Retail Banking BusinessThe traditional methods of retail banking in Japan were anything but convenient. Business hours ended at three oclock in the afternoon (to allow time to reconcile computer system information with the databases), no ATM usage distant of business hours, fees for ATMs, no meshing banking, long lead times for new account openings, signalize accounts for each type of financial product, and other inconveniences had been an unavoidable, bitter pill for raft managing their currency in Japan. Yashiro and Dvivedi, thitherfore, endeavored to offer an alternative.Shinsei would have to wow potential customers into turn over over from other banks. They had to offer something extra to convince customers to bank at Shinsei. The way to do this, they felt, was through outstanding customer service. Customer help Model Yashiro believed it was better move of service, and innovation in services, that would ultimately attract customers to the bank. We were new. If we didnt have something new to offer, there would be no reason for customers to have to us, said Sajeeve Thomas, head of Shinseis retail throng.The goal of developing new and closer relationships with custome rs through unique products and services became central to Shinseis switching. The tilt to meeting the competitive requirements of a retail bank, however, proved to be a signifi assholet undertaking for an institution extraizing in corporate financial make. For the teddy to be effective, speed, flexibleness, and cost control were paramount. A complete help of the IT system would be required in order to modify this. The new customer-service-establish business strategy required a ascendable and robust operational and technical infrastructure.Such an infrastructure would help the new business segments grow by backing enhanced, high quality, 24&2157 customer service, product innovation and garishness growth. This summons bear on nothing short of a revolutionary approach to information technology. Indeed, said Yashiro, rather wistfully, the real challenge of transformation was not in painting the end state but in choosing the way to reach it in effect. 4 Their name at Citi bank included a major turnaround of that telephoners IT system in Japan during the 1990s. 3 607-010Information Technology and Innovation at Shinsei Bank Thinking about Technology at Shinsei We quickly came to the conclusion that the systems that were used at the old LCTB were of most no use to us, recalled Yashiro, lamenting the realization that the extant mainframe infrastructure was actually an impediment to building new business at Shinsei. Its mainframes were overloaded, with no spare depicted object, and they relied on separate and disparate ne dickensrks which were tied closely to the old business model. Maintenance costs were unacceptably high due to locked-in contracts with vendors.The network capacity was inadequate and too expensive. At the identical time, the operational growthes were inefficient and full of multi-layered, repetitive paper trails. Mainframes were large room-sized computers based on models real in the 1960s by computing giants like IBM and Fujitsu. For banks, with their enormous amounts of customer data, daily transactions involved collecting information from millions of accounts, transferring it to the mainframe computer at midnight, then refreshing the data by batch touch for the following day.Dvivedi believed that mainframes imposed great risks onto businesses since they held the total data in the organization and this meant that if anything happened to that one computer, the business would be temporarily disabled while the system was transferred to backup machines. It was safer to distribute risks by designing systems that linked several little computers, such as servers, together. Servers were much meeker computers, often as small as a pizza box, based on cheaper microprocessors and standard UNIX or Windows operating systems.Such smaller servers were often combined into clusters of many hundreds of devices and were thus not only cheaper, but withal more scalable than mainframes as capacity could be added to the system in much smaller increments. In the past, nearly all banks had run on mainframe-based computer systems, but removing the mainframes growd granularity within the system, said Dvivedi. This drastically reduced hardware alimony costs and allowed flexibility such that services and new products could easily be added to the system. Building a New SystemOnce he had a skilled team in place, Dvivedi cogitate on centralizing the operations and creating a functional organization. Investigation into traditional methods of large-scale systems implementation exposed the significant risks and difficulties in adapting a traditional, monolithic, mainframe-based system to the dynamism of Shinseis freshly rekindled businesses. Indeed, new technology requirements were being developed even as the new business plans took shape, and they would need a scalable IT system that could grow with and even more importantly, adapt to the business. Technology delivers the product to the customer, affirmed Dvive di. Information technology had to be used as a driver of business, and a source of new business, rather than as a support function. Dvivedi also believed that Shinsei should forge its own IT strategy, rather than follow the examples set by other banks, so that competitors might one day turn to Shinsei for advice. Dvivedi could have chosen a gradual approach to creating a new infrastructure by improving the existing technology and processes over time, transposition one system and process after another.This would have minimized interruption but would have taken too long. Alternatively, he could have try a big-bang approach, replacing the existing infrastructure with a completely new set of systems and processes in one fell swoop. This approach, however, was deemed too risky, too disruptive, and too expensive. As part of building the new infrastructure Dvivedi focused on parsimony in selecting standards. There would be one network protocol, one operating system, and one hardware com puter programme. Dvivedi 4 Information Technology and Innovation at Shinsei Bank 607-010 did not wait for consensus before moving to new standards.Choosing one set of standards, rather than allowing a patchwork of multiple standards to build up, helped notice the complexity low, which, in turn, do the system easier to manage. The skills needed to run and maintain this infrastructure were standard and people trained in them were halcyon to find. Instead of looking at the whole system, Dvivedi preferred to break it down into pieces. How can we modularize pieces so they can be used again and again? he asked. He believed that the key to success was to keep creating new elements and to inclose them into the system without stopping the enterprise.A caveat of this, however, was the challenge of keeping things safe and secure, heretofore not so locked-down that they became un alterable. The approach that Yashiro and Dvivedi decided on was at once radical and accelerated, driven by the evolution of their new business strategy. It involved implementing, as needed, a new, modular operating infrastructure that operated initially in pair with, but ultimately superseded, the existing infrastructure. Dvivedis Vision Dvivedi made choices not simply based on getable technologies rather, he focused first on the business problem that had to be solved.Once the problem was all the way place, it was broken down into as many logical split as possible. Wed keep breaking down the elements until the solution was obvious, said Sharma Subramanian, the IT groups Planning and Coordination Officer. In addressing each element, the team looked to its toolkit of standard modules and regions, and headstrong whether or not any appropriate solutions existed. If not, they went to the market and sought the lacking piece of technology, looking specifically for its avail faculty as a standard component.If it was not already available as a standard component, they would ask one of their partners to build the component. They would build it so that it was reusable. For a component to be reusable, it had to have a clear specification of the function(s) it performed, as well as a standard interface into which other components or modules could connect. The various components were assembled and reused in order to build products and services for Shinseis customers, and 90% of the technology components were used by more than one product. To meet Yashiros andate, Dvivedi devised five basic guidelines that were to govern all work going forward. His approach addressed waste and unnecessary work, and the elimination thereof, to make processes more efficient. Every job through with(p) was evaluated on the basis of these five criteria Speed How fast can the work be through with(p)? The goal was to build a new IT system within 18 months of conception. Changes were made in small, frequent, and predictable steps. The use and re-use of standard components modifyd the team to r oll out new capabilities quickly and with minimal test (since the components already had been tested in their previous context).Cost How low can we keep costs? For example, Shinsei understood that they did not have to build everything from scratch. By combine a number of software packages, they were able to construct the new system in a very short time. For example, Shinsei used Intel-based, Windows servers and Oracle database servers on the back-end and off-the-shelf solutions on the front-end. They used standard Dell PCs running Windows. In the process, Shinsei became the largest bank running its back-end systems on a Windows platform.Capability What new capabilities provide IT enable? For example, to support multiple currencies and financial products for retail customers the old technology platform that handled deposits, loans and other services had to be changed. 5 607-010 Information Technology and Innovation at Shinsei Bank Flexibility How easily can the system be cha nged to respond to business needs? Dvivedi assumed that the business needs of the company would change over time and that the IT systems had to respond to this rather than prevent ecessary change as the mainframe system had done. The infrastructure needed to be expandable and robust enough to support the operation as volumes grew. Re-usable component-based architecture would enable flexibility. To make its services flexible, Shinsei used alerts, not reports, to manage workflow. Machinedriven prompts notified employees when work went unattended, demanding direction and action when required. Similarly, when making infrastructure decisions Yashiro made a point of management on the business objective, not the as-is environment.Designing an infrastructure to support a new business objective had to begin with that objective in mind and not with Shinseis current capabilities. If the objective could be met without changing existing infrastructure then they would not change it. If element s of the existing infrastructure were made special by the new approach, then they would become irrelevant and be superseded over time. Flexibility meant not being inhibited by previous decisions. natural rubber How secure is our system? Safety was built into the process by breaking down the problems into very small parts.Smaller elements meant a smaller piece of the brook that went wrong if something were to fail. Furthermore, a number of small parts meant that each part could be tackled simultaneously to fix the problem more quickly. The approach to rubber eraser could be seen clearly in Dvivedis decision to leverage the unexclusive Internet. Back in 2000, Dvivedi met tremendous incredulity at the notion of using the Internet for internal banking transactions. Nevertheless, the Bank went with public Internet lines as oppose to leased lines.Public Internet technology allowed Shinsei to move work to any location, including lower-cost locations, such as India. ATMs, telephone s, call centers, video, and data were also connected through public lines, at a fraction of the cost of leased lines. We use the Internet in two ways, for transport both(prenominal) within and outside the company and we use it to run different elements of our processes. The key is to en original that each natural process or session is performed in a secure manner. We assume that everything go forth fail. The key task is to ensure there are no superstar points of failure.When components fail, we assume that lag leave not notice or will be busy on something else. The safety must be passive, that is to hypothesise if one component fails, the work must seamlessly move to another component all without any intervention, said Nobuyki Ohkawa. Ohkawa had decades of experience working on these problems and was the person Dvivedi assigned the task of designing and deploying the networks and machines on which Shinsei ran its business. To ensure that the data sent over the public Internet was kept secure, Shinsei encrypted all the data it transmitted.In addition, its networks were secured by deploying the latest in network technology and by a process of continuous monitoring for unauthorized intrusions and denial of service type attacks. Should there be any indication that an attack was attempted, the source of the attack was identified and actions taken to disable or block it. Most of all, however, Dvidedi relied simply on the fundamentals of the internet itself The Internet is anonymous. Your messages and our data travel over the same network in a random fashion. The anonymity is our first aim of security.Given these parameters and the scope of the undertaking, Yashiro and Dvivedi did not believe they could entrust the project to one hardware vendor. Also, the fluidity of the envisioned end-state made it difficult to engage an outside vendor economically. Yashiro and Dvivedi needed to reach out to external partners to get the resources and know-how that they envi sioned, as applied to their projects. Partner companies in Dvivedis native India proved to be a tremendous boon. 6 Information Technology and Innovation at Shinsei Bank 607-010 Outsourced WorkDvivedi engaged multiple Indian firms to handle different parts of Shinseis information technology. This outsourced work focused on areas where internal development skills were lacking and where Dvivedi felt that they were not necessary for the bank to acquire. Thus, Dvivedi was free to prolong together work groups of specialists without regard to their physical location. This was a major release from existing practices in Japan, and proved to be a culture buffet for the staff. In fact, Shinsei was the only company in Japan to use solely Indian software services.Nucleus Software, in Delhi, and Polaris Software Engineering, in Chennai, were two collaborators, as well as the larger Wipro and Tata Consultancy Services companies, in developing pieces of Shinseis financial software. By employing translators, Shinsei acquired best-of-breed engineers, and did not bother trying to hear them Japanese. They could tolerate in their respective silos, working on a component part of the Shinsei technology, without assimilation into Shinsei headquarters. In order to outsource work, Dvivedi and his team had to divide the work up into modular parts.Removing interdependencies was key as they believed that dependency slowed down the work without dependency, people could work at their own speeds and avoid bottlenecks. For this reason, old systems maintenance was kept separate from new systems development. If unnecessary stress was placed on old systems, the perfect system would become unstable and the speed at which new ones were developed would also be at risk. With each company, Shinsei worked to establish a relationship characterized as a partnership rather than one of a supplier.The bank worked with its partners without requiring competitive bids, avoiding traditional requirement documents such as RFPs (request for proposal) or RFIs (request for information). Dvivedi believed that these were superfluous process steps that added unnecessary time and hit work to the engagement. Furthermore, Shinsei did not enter into fixed-price contracts on the contrary, engagements were quantified on a time-and-material basis. execution of instrument Shinsei moved from mainframes to a Windows-based platform, supported by a high-speed, lowcost, packet based network operated as an internal utility.They centralized the decentralized, but made sure that everything was modular and highly flexible. Organizational silos were broken down in order to integrate processes. We have learned to deliver precision where needed rather than trying to be precise in all things, said Yashiro. in spite of the carefully constructed approach to assembling the guiding principles for the companys IT strategy both Yashiro and Dvivedi knew that just as many, if not more, IT transformation projects f ailed during implementation.As such, they spent a substantial amount of time creating principles to guide the implementation process. space-reflection symmetry Parity allowed the old and new systems to coexist in parallel. Dvivedi believed that employees should choose to use the new system if it were placed in front of them. He did not want to appear as though he was convincing people to use the new technology. He told employees We will not change but we will change the technology. He believed the new systems should function much the same as their predecessors, and possess the same look and feel even if this mimicry resulted in extra cost.At the same time the new system should provide new capabilities so that employees would be excited about using them. As simpleness with the new systems increased, the old systems were removed. Dvivedi mused Nothing must change for change to happen. 7 607-010 Information Technology and Innovation at Shinsei Bank Incremental steps The smalle r the changes, the lower the degree of disruption in the bank. The work was done on multiple parallel paths development occurred in rapid, short wheels, with modernized delivery of requirements.As components were tested, they were implemented and reused if they fulfilled their objectives or they were promptly discarded if they did not work. Incremental steps also kept the system accessible as changes could be made on an almost continuous basis. Inclusiveness Yashiro believed that the business strategy must always drive infrastructure change, and it was therefore imperative that senior managers be closely involved in the technology transformation. Said Yashiro I have learned that technology and operations are not just support functions.They also offer capabilities that can open up new strategic opportunities and businesses for us. Transparency Dvivedi tried to keep the technology transparent to the customer, such that the customer would not notice anything different when the tec hnology changed. This would allow Shinsei to remain flexible in its technology choices at no inconvenience or disruption to the customer. Ironically, this required great discipline. Dvivedi had to resist advertising the new technology because, as he said, the moment you say this is going to improve things for you, you create a dependency. Dvivedi felt this was important so that the bank would be free to pick and choose its technology as systems changed, while the customer would experience only consistent service. Paperless Any paper generated had to be checked, filed, and secured while the absence seizure of paper made work distribution easier. Paper intensive, manual processes were replaced with a nearly paperless environment. A room dedicated to scanning services received all incoming paper correspondence and invoices. Such paper documents were scanned and then filed electronically.The paper documents did not move any further into the office than that initial receiving room. Afte r that, everything was accessible online. All of these efforts supported Yashiros principle of minimizing the change required of people. Making new systems look as similar to old ones as possible, and allowing the two to co-exist in parallel, were necessary to minimize the disruption of Shinseis employees. Furthermore, they did not set formal replacement dates for any of the new systems they implemented.Instead, they performed parallel runs with reconciliation to ensure proper functioning of the new system. They repeated this process for as long as was necessary until they were sure that the employees were comfortable with the new systems. Only then did they turn off the old system. Getting Results Shinseis key success was in assembling the building blocks of its new infrastructure. The entire retail bank system was implemented faster than planned and well below budget. In the end, Shinsei achieved rejuvenation in one year (instead of the communicate three years) and at 90% less than the riginal cost estimate. The cost of the overhaul totaled $50 million, while other banks in Japan had gainful ten times this amount for similar initiatives. The success of the system transformation enabled 24&2157 multiple channel access to customers rather than a single channel service that was only available from 9am to 3pm. In addition, they were able to obtain real-time balances from these channels, and roll out new products quickly by leveraging standard building blocks that were already in place. Management controls were also significantly improved through the new system.The old 6-day reporting cycle characterized by chronically late financial ledger data was replaced with a daily one, with the added ability to provide customer and product profitability track data on demand. 8 Information Technology and Innovation at Shinsei Bank 607-010 They were also able to perform continuous reconciliation on all accounts and standardized what were non-standard, non-documented procedures. New Services We have a very specific value proposition for customers, incoming CEO Thierry Porte said. Its based on convenience, ease of use, empowering customers, offering things on a low-cost basis, so our ATM system is free and we also offer free Internet transfers. At the same time, we offer high-quality products and services. One of these new services was an advanced branch operation featuring cashless tellers. Dvivedi believed that a key tenet of the customer service model was the interaction between staff and customers. To enhance this interaction both paper and cash had to be eliminated from the hands of the branch staff.Paper and cash, Dvivedi felt, were avoidable distractions that nevertheless got in the way of superior customer service. In eliminating paper and cash, the staff was absolved of the traditional duties of cash-counting and receipt-printing, and could solely service the customer. Indeed, the banks branch services were entirely self-completed th e staff was present only to provide assistance as needed. All transactions took place online, at Internet portals in the branch. The transaction could take place anywhere, however, that the customer was connected to the Internet.Online-only transactions effectively eliminated paper from the system, and also allowed the customer to be responsible for his own transactions. The customer was asked to double-check each transaction before authorizing it. This greatly reduced the frequence of errors. Cash was available from the branchs ATM machines staff channelize the customers to use the ATMs for both withdrawing and depositing cash. If a customer did not have his ATM card, a staff member would electronically transfer the desired sum from the customers account into a tellers account, and then retrieve the cash for the customer from the ATM.ATMs Most Japanese banks charged fees of speed of light to 300 yen, when ATMs were used in the evenings or on weekends, or when customers withdrew money from other banks. Shinsei, to make up for its limited branch network, allowed customers to use ATMs any time free of charge. This distinguished Shinsei from other Japanese banks. Shinsei saw this as a way to attract customers to the bank at very low cost, for they did not have to expand their branch network in order to connect with their customers they could do it through ATMs. The operating cost of the ATMs was relatively low.In 2001, Shinsei offered a new service enabling customers to withdraw cash free of charge from ATMs outside of Japan 650,000, to be exact, in 120 different countries, through the PLUS system offered by Visa International. Citibank also offered no-fee use of external ATMs, but was part of the CIRRUS MasterCard network, which had only 530,000 ATMs in about degree centigrade countries. Hours Shinsei kept its branches open on weekends and holidays in order to offer services such as same-day account openings, targeting customers who might be too busy to vis it the bank during the week.Shinsei used its computer system operated nonstop to enable the processing of new accounts and other applications in the same day. Other financial institutions followed suit and began staying open on Saturday and Sunday, but services were limited to mortgages and asset management consulting. Anything that required the computer system could only take place during the week as their systems shut down on the weekends. Shinseis branch hours of 10am to 8pm every single day of the year (except New Years Day) enabled ustomers to do any type of banking, including sale of mutual funds and policy policies, at their own convenience. 9 607-010 Information Technology and Innovation at Shinsei Bank Looking Back Yoshikazu Sato, a senior member of the Technology team at Shinsei, who worked closely with Dvivedi, revealed the apparent simplicity of Shinseis model If you stand back and examine what we have done, there is nothing unique about it. The principles we follow ha ve been around for years. Describe what we do to a manufacturing engineer and he may well remark, whats so special about it? Anybody can buy what we buy.Deconstructing a problem until a standard component can be used, or using low-cost, easily available materials (in our case Dell PCs and Windows software) has been practiced for decades, he said. What makes us different is our ability to focus on applying these principles repeatedly with persistence and without deviation. The manufacturing industry has been moving its operations to the lowest cost and most effective locations for decades. We have replicated it in our use of virtual organizations people with skills needed for our work are connected in from wherever they are located.Not having to move people around saved us time, money and gave us an extremely scalable capability, said Pieter Franken, the architect and cause of Shinseis core systems. My key task is to ensure that as we do all of this, we are also institutionalizing the work we have done and to constantly expand the technical team to take up all this work, said Dvivedi. Looking Forward Dvivedis institutionalization of Shinseis system development process forced the team to think about applications of the model in the future, as well as what challenges lay ahead.Shinsei was focused on growing by acquisition and, for those acquired businesses, the objective was to change the technology and process platform to enable rapid new product roll-outs and to build better quality services. The ability to do this at lower cost would create a significant competitive advantage. Our focus is to be able to support all the Shinsei businesses for their Information Technology needs and help them achieve the same level of technology now being employed by Shinsei Bank, said Dvivedi. We can add value to our businesses with our strength and know-how. In 2006, Thierry Porte succeeded Yashiro as President and CEO of Shinsei. Thierry has a clear vision of where he is gu iding Shinsei, noted Dvivedi. He has depict a growth plan for our key businesses that will require us to scale up for much higher volumes, and support a whole range of new functions and features to facilitate the launch of new products and services. As CEO, Porte was well-aware of how Shinseis technology would enable his plans for the bank. Our technology is a door-opener for new business opportunities.If we can get our customers in other industries interested in the approach we take to technology design and deployment, to look at the kind of capabilities and services we can help them build, it will be a unique way to position ourselves and grow our core business of banking. If we can do this it will expand our franchise and be a source of additional revenues, said Porte. Dvivedis Response After a night of reflection the time had come to respond to Portes request. Dvivedi opened an email and began typing 10