Jeremy Kraner - Advantage WaMu

Source:  Advantage WaMu:  The Check Isn't In the Mail

J Nicholas Hoover, InformationWeek; 9/17/2007 Issue 1154, p71-72, 2p

This article discusses and examines how a strong emphasis on IT development has allowed Washington Mutual, otherwise known as WaMu, to become one of the most successful banks in the country.  Having one a large number of awards for applying newer forms of IT to make online banking easier for consumers, WaMu is often times used as a model for how other banks can improve their IT.  Whereas, however, most banks have complicated views of e-commerce, WaMu takes a far more simple approach when attracting consumers.

The article also examined WaMu's Enterprise Decision Engine, a group of systems used to determine if a customer should get a loan, and if so, for how much.  This engine is built upon six different systems that calculate everything from credit scores, risks, to appropriate lines of credit.  It then compounds all of this information onto one single platform.  Since the implementation of this engine, loan decisions have been made far more quickly and consistently.  This is because all decisions are based upon the same credit risk information instead of other methods that often relied upon human intuition.  Before, where a decision could take anywhere from weeks to over a month, now a small business loan decision can be made in as little as 16 seconds.  This is all due to the Enterprise Decision Engine.

Unlike many other banks, WaMu is always looking to upgrade and overhaul its website in order to better attract consumers.  Whereas other banks are more hesitant to change their websites, WaMu is always trying to make their more easily accessible and navigated.  For instance, just two years after the previous website overhaul, WaMu is planning for yet another overhaul.  When asked as to why another overhaul was planned so quickly, especially in the light of all the recent awards, WaMu's director of e-commerce was quick to comment "Well, that's innovation".  One of the more popular "innovations" recently implement was a blog run by Stephen Rotella, chief operating officer of the bank, which received over 4500 replies in its first four months of operation.  This is all made even more impressive by the fact that the e-commerce team is made up of just over 200 employees, which is noticeably smaller than some of its competitors.  

Overall, I found myself very interested and impressed in the steps taken by WaMu to improve their IT.  These days, more and more banks are far more concerned with spending money on appearance and prestige as opposed to focusing more of their funds on advancing their technology and making it easier for consumers to access the banks features.  However, WaMu seems to be more focused on making online banking far simpler and allowing its customers greater freedom.  I believe more banks should follow WaMu's lead by pushing the envelope a bit more instead of relying on older technologies to carry them through an ever changing online community.  Maybe then, other banks wouldn't have to try so hard for their e-commerce to be like WaMu.

John Robinson III Open Access

Open Access
Anita Hawser. Global Finance. New York:Jun 2007. Vol. 21, Iss. 6, p. 37-39 (3 pp.)
http://proquest.umi.com.proxyau.wrlc.org/pqdweb?did=1294726761&Fmt=4&clientId=31806&RQT=309&VName=PQD

The article explains how Sarbanes Oxley has made companies push for more transparency when documenting their finances. To help manage their treasuries companies have put together treasury management systems (TMS). The TMS helps companies manage their cash, cash forecasting, finance and investments, ensures sufficient funds for acquisitions, and interest rate and FX management functionality. TMS seems like a great tool for companies because the IT allows more control and away to forecast or choose projects a company should invest in. In addition, TMS is suppose to replace excel spreadsheets.
I think TMS is a great tool for companies looking to get an edge in their perspective industry. However, with all the new financial tools emerging it seems companies will have to expand their IT budgets. It seems like every few months there is a new financial tool coming out and companies are forced to go out and purchase it to maintain transparency and to abide by the Sarbanes Oxley Act. In addition, if TMS is suppose to replace spreadsheets companies are going to have to spend more money on training their employees to run the system and it could lead to the lost of jobs and creating new jobs.
To help companies who may not have the funds to support TMS a company called Salesforce.com started delivering software applications via the Internet through a system called ASP, which means software on demand. Companies can go online and use the different software applications to help maintain their financial departments without drastically cutting into their IT budget. Furthermore, if a company has faulty software they can determinate the service or uninstall the software immediately. It is basically a pay as you go approach.
Even Wall Street is investing in the ASP systems. The Wall Street Sytems invested millions in upgrading the infrastructure and enhancing its capabilities. The ASP system has over 30 custormes including Adidas and other MNC. Moreover, ASP providers are experimenting with offering separate application model. It allows companies to use many different hardware resources but it is shared among many companies. The problem that arises is that not all of the applications differ among the ASP. It is hard to maintain the connectivity between the applications. SunGrad and AvantGrade found a solution called eTreasury eXchange (eTX). eTX allows for the connectivity between banks and corporations uses the software. The problem that I see is security. How are they going to maintain a secure connection between banks and corporations using the software? Banks and Companies are dealing with trillions and trillions of dollars everyday and someone could hack the system and steal pennies here and their right under the ASP systems nose.

Fatou Coulibaly - "Paving The Way For E-Invoices"

Paving The Way For E-Invoices
Adam Rombel. Global Finance. New York: Mar 2007. Vol. 21, Iss. 3; pg. 21, 2 pgs
http://proquest.umi.com.proxyau.wrlc.org/pqdweb?did=1240499851&sid=5&Fmt=4&clientId=31806&RQT=309&VName=PQD

This article mainly discusses the increasing introduction and adoption of e-invoicing by companies not only the United States, but also worldwide, with the example of Europe. According the Entrepreneur.com’s definition of invoices, they represent “an itemized list of goods shipped or services rendered, stating quantities, prices, fees, shipping charges, etc. Also known as a bill."

More specifically, the article refers to the use of corporate Electronic Invoice Presentment and Payment (also called EIPP) which constitutes the e-invoicing system that mostly large companies are acquiring. If the introduction of EIPP was not as successful and rapid as it was thought to be at the beginning (because “businesses still receive more than four of five invoices in paper format and make two-thirds of their payments with a check.”), this trend is changing now. I believe more companies (large businesses) are making use of EIPP because of the various advantages it offers compared to traditional invoicing. It is said to have become an indispensable tool because “companies are using e-invoicing to obtain reductions in labor, paper, printing, postage, delivery and other costs associated with manually processing invoices.” These companies are also benefiting of more efficient payment routing and approval processes as well as high-speed dispute resolution with e-invoicing. There has been some evidence that they significantly reduced their processing costs, and invoice-related expenses with EIPP (these expenses can result for instance from trying to reissue misdirected, misplaced or lost invoices.)

I strongly agree that due to the fact that there are a lot of companies that are better managing their cash flows, with greater amount of dollars (millions) transactions through account payables, providers of business-to-business e-invoicing services are noticing the growing number of buyers and suppliers. For example, the specific OBIO e-invoicing network states that it has 80 buyers and 40,000 suppliers in both of its headquarters in Europe (London) and the US (San Francisco). Other networks such as OB10 provide e-invoicing technology to great companies such as HP, Procter & Gamble, Johnson & Johnson, and General Motors just to name a few, that generate substantial annual revenues averaging $800 million. The article mentions couple of more networks of technology vendors such Ariba, Pleasanton, and Bottomline Technologies that are all considerably increasing their number of suppliers and business-to-business transactions, and thus their revenues because of the growing e-invoicing’s success.

Since it is more economical to receive invoices electronically, I believe it shouldn’t be only large companies that can use e-invoicing (even if they have been until now the primary and single users). I find that it would be very beneficial for smaller -to mid-sized corporations as well to acquire the EIPP features. These companies express apparently barriers such as the lack of financial abilities to afford such a technology. But hopefully with the use of Accountis company’s ebPrinter which is the Electronic Business Printer, it is certain that “EIPP is gradually making its way down to smaller firms” according to Thayer Stewart, the Vice President of Marketing and Business Development at OBIO.

Ajai Murali - Chinese Banks Head for the US

Source:

Tachang, Chi Chu. "Chinese Banks Head for the US." Businessweek 12 Nov. 2007: 28-30.

UCBH Holdings is a San Francisco based bank that servers a large Chinese-American customer base. Recently, it needed $205 million for an acquisition, so it teamed up with Minsheng Bank in China, which took up 9.9% ownership in UCBH. Chinese banks are starting to eye the US for expansion and an increased global presence as a provider of various financial services. It is an interesting phenomenon, especially since China only joined the World Trade Organization in 2001. The CEO of Minsheng Bank says it is eyeing the US simply because it’s cheaper. It’s almost a reverse outsource, if you will. Soon after Minsheng’s deal, Citic Group based in China bought 6% ownership in Bear Sterns.

US Regulators face a problem with the interest of Chinese banks to buy into US banks. While it encourages investments from overseas and it must approve all deals involving ownership greater than 5%, it is facing a different situation with Chinese banks. This is because of the regulatory environment that existed in China until very recently, and still exists in some cases. The regulatory environment is known to be lax and tends to engage in more corrupt practices than any US bank. The US regulators are supposed to be welcome to cross-border deals, and are certainly very involved when a US bank has interest in a Chinese bank. Eight of the twenty five largest bank-holding companies in the US by total deposits are owned by foreign companies, as we see global cross-border investments increasing.

China has been doing a lot of cleanup work to help privatize a lot of its institutions including banks as they moved away from centralized institutions. As Chinese banks become more knowledgeable, they are buying into countries in which their existing customers did business. Then, they are moving to areas where they are comfortable—such as Minssheng’s comfort with the Chinse-American management team at UCBH. China’s 3 top banks rank among the top 20 in the world as far as market value. Their average price to earnings ratio is 41.3, whereas US banks average 10.6. Investments in the US are brave ones, since the recent subprime credit problems as well as home loan defaults have made it a more turbulent market than usual. It helps the Chinese banks that the US dollar is as weak as it is, but not as much as the article reports because I believe the Chinese Yuan is pegged to the US dollar. It is important that the US change its attitude towards business practices in China, since China’s business practices have entirely changed. Each country must be given same treatment when it comes to investing in America.

This article is interesting because it plays a reverse role on the famous outsourcing to China trend. The Chinese banks are taking advantage of a vulnerable US market and US dollar, and will continue to invest here as long as the Fed continues to approve. It is also interesting that Chinese banks are looking to become full service financial centers, as we have seen transformations of big firms such as Schwab and Merill to try to become a full financial powerhouse as well. Foreign competition is healthy, but ultimately the chief banking regulator of China reports that if the US continues to cooperate, China will raise its caps on foreign investment. It will be interesting to see how this all plays out, and how different communication, currency, and management barriers are overcome. Of course, the IT is all there and there will be a technology transfer as more Chinese banks invest in the US.

Michael Moronta- The Importance of IT security

INTERNET LAW - Data Privacy and Data Security: The New Imperative

http://www.ibls.com/internet_law_news_portal_view.aspx?s=latestnews&id=1904

This article stresses the importance of IT in the survival and flourishing of a company. IT over recent years has ruled the business world, and it makes businesses a lot more efficient and integrated. Companies that continue to evolve and make advances use IT as a competitive advantage, while those that do not, see their way slowly going out of business. This electronic information which contains the companies backbone (assets, trademarks, key information etc.) is essential. If this information were to get in the wrong hands it could be devastating to a company. Some of the consequences may include damage of reputation, lawsuits, and severe financial penalties.

The importance of IT to a company makes it even more crucial that a company protect there electronic information from those who may try to sabotage it. This may include employees, hackers, or competitors. I believe that in order for company to survive in a competitive business world they must set aside a hefty budget just for the improvement and monitoring of IT systems in the business. Monitoring an IT system from potential attacks has grown to be a very difficult task than in past times. The systems must be monitored on a daily basis insuring the confidentiality of a companies information.

The article states that a regular auditing committee will not be effective in surveillancing the IT systems because their strength is in financial statements. I agree with the article in that the best method to monitor systems is creating a committee that comprises of specialized technology personnel with limited oversight by an auditing committee. The personnel in the specialized technology committee will be the best suited for the task because they understand the systems and know how to work with them. The difficulty lies in selecting individuals that are trustworthy. This proves to be not as easy as it sounds because many people are driven to improve their own situations.

Nonetheless, IT is a critical part of a company. Its constant evolution and monitoring are the keys to success in a company. Many companies that have failed to do this have suffered dearly. For instance, ChoicePoint suffered a 15-20 million dollar loss in sales because of a data breach. Companies must make IT a priority if they do not wish to suffer the same fate.

Jessica Davison "Offshoring Fortunes Fluctuating" & "Offshoring in Reverse"

Kenney, Brad. "Offshoring in Reverse." Industry Week Vol. 256. Issue 10. Oct 2007 41-42. 9 Nov 2007 .

Murray, James. "Offshoring Fortunes Fluctuating." IT Week. 7 May 2007 19. 9 Nov 2007 .

I chose two related articles in order to look at the influence of currency fluctuations on IT firms. Specifically, these articles examined the business model of Indian IT firms and how recent U.S. currency fluctuations have the potential to change Indian IT firms’ business models. These changes may lead to dramatic changes for U.S. firms as well.

“Offshoring in Reverse” discussed that Indian IT firms are starting to hire U.S. firms in order to capture more U.S. market share. This additional investment is worth it to these firms to gain market share. “Offshoring fortunes fluctuating” pointed out that one of the major reasons for this change is the weakening dollar and the relative appreciation of the Indian rupee. As of May 2007, the rupee had increased in value by 10% relative to the dollar; the most dramatic improvement ever. The article stated that if the trend continued, U.S. firms would likely pay the price because Indian firms would increase their prices in order to maintain their 25% profit margins.

These articles also discussed that since most of Indian firm’s expenses are in rupees, but now those expenses are increasing since the rupee is appreciating; the additional expense of hiring U.S. IT professionals is declining for these Indian firms. To me this demonstrated the important role that foreign exchange markets play in business. Prior to the weakening dollar, the reason that Indian firms were able to be so profitable was because the rupee was valued so low, so expenses were less; yet the Indian firms were billing in dollars which were worth substantially more. I never really thought about how Indian IT firms were so profitable because only the lower labor costs are what are publicized.

I thought these two articles were extremely interesting. Lately on the news it seems that every day the dollar is weakening in value. Although it is fairly obvious that this has tremendous implications for the U.S., I did not ever think about the connection to IT. In this respect, I thought these articles were interesting because it now appears that Indian IT firms that are used by U.S. companies are now hiring more and more U.S. IT professionals. It seems to me that if the U.S. companies were more aware of this trend, they might shy away from outsourcing this function to the middle man (in this case the Indian firms) and just hire U.S. IT professionals directly. However, either way this trend seems to present a good opportunity for U.S. IT professionals since they are now being sought after instead of being replaced by other less expensive professionals from abroad.

I also thought that these articles were interesting because both discussed that this trend is not just important for the U.S. but for other countries as well. One example given was the importance this has for the U.K. and Europe. Since the value of the pound and Euro are still strong, Indian IT prices have not risen; however, European countries have noticed the trend that is emerging in the U.S. and is on alert for future currency fluctuations that could affect them directly.

It also struck me as very interesting that the Indian IT firms were not willing to cut into their bottom lines even though this industry averages a 25% profit margin in India. It made me wonder if these companies are basing their business model off of past trends of U.S. companies. I kept thinking about Exxon Mobil’s profits last year – the highest ever despite record oil prices. Perhaps the Indian IT firms have observed that record profitability can still be realized even when the costs are passed on to customers.

Deepak: Setting Sights on China

By Jim Middlemiss

http://www.wallstreetandtech.com/showArticle.jhtml;jsessionid=MMCMY42Y0Q0QCQSNDLPSKH0CJUNN2JVN?articleID=59301331

In this article, the author explores the growth opportunities and challenges faced by China’s stock market. China as with many rapidly developing economies, is experiencing growth in its stock market, yet it needs vital technology to support its growth. The growth in the Chinese stock market is because the country of 1 billion people is experiencing an industrial revolution with an annual economic growth rate of 10%, and a more free-market capitalist approach to business. With six stock exchanges currently in operation in China, there are great opportunities and need for western companies to offer their IT services in maintaining a well-functioning capital market. For example, an opinion expressed in the article was that there is a multitude of opportunities for technology firms to offer “the latest and greatest in trading solutions.” When China first developed its trading platforms it was on a “proprietary basis.” This is changing however, and they realize the benefit they could gain by partnering and contracting out the work to experienced foreign financial firms.

A key player in providing the technology and platform to support such market activity are companies like Accenture and its partner Deutsche Borse, who provided technology to the Shanghai Stock Exchange. For example, Accenture and Deutche Borse, used its Xetra trading system as a platform and then adapted it for the Chinese market. Accenture’s vision was to create a “robust, scalable trading platform for future innovations and new products.” It won the contract from the Chinese, over IBM, Hewlett-Packard and AtosEuronext.

China also uses western technology, in its Securities Trading Automated Quotations System (STAQ). STAQ is based on the Nasdaq and National Electronic Trading System (NET). Technology provided by western firms, have also benefitted China’s foreign exchange market. The China Foreign Exchange Trade System (CFETS) chose Reuters to help develop its global foreign exchange system.

China’s technological infrastructure is conducive for growth, as major financial corporations find it easy to setup and get their office running, with the availability of internet technology with high speed lines. For example, in the article it mentions “Depository Trust and Clearing Corp,” which heavily relies on technology for its security business, which had no trouble in setting up its operations in Shanghai. The company developed an internet-based system to handle corporate actions such as stock splits, elective dividends and tender offers.

Although China can be seen as a great growth opportunity in expanding financial markets globally, it is still relatively regulated by the Chinese Government and investment by foreign investors is limited to Joint venture (JV) companies. It is however creating opportunities for foreign firms in transforming China’s ambitions into a reality. They need the skills, expertise and technological know-how of western companies to expand its financial markets. With a limited stake in ownership of 33%, foreign companies can partner with local companies through a joint venture. Morgan Stanley and Goldman Sachs for example, are able to penetrate the Chinese market through such measures. They can partake in IPO deals, underwriting, advisory services and creating trading programs. However, the brokerage services industry is not accessible to foreign firms, as the article mentions, it is strictly reserved for the “approximately 120 licensed domestic broker-dealers.”

In the article, I found conflicting views, in that some companies view China as an easy place to do business in terms of its technological infrastructure, and later in the article, traders, describe the volatile situation of China’s trading business, because they are lacking in their internet technology. Bob Ray, senior vice-president of business development at the Chicago Board of Trade (CBOT) believes that there is still an area of weakness in China’s telecommunications infrastructure. Another interesting fact, highlighted in the article, was that the Chinese authorities do very well is their ability to learn from overseas companies and leverage the IT skills that foreign firms can bring. I believe that the Chinese financial markets have greatly benefitted and will continue to benefit from the technology developed by western firms, which have more experience and know-how from developed markets such as the NYSE, Nasdaq and CBOT.