Royal Bank of Scotland took on one of the biggest integration challenges ever when it bought NatWest

The complexity of the RBS/NatWest integration programme illustrates the huge challenges major banks face when they merge. When RBS took over NatWest it committed itself to a gigantic programme of integration aimed at delivering the shareholder value promised to justify the deal. It had to integrate hundreds of proprietary systems as well as take control of much larger operations – both in retail and wholesale markets. Although our case study focuses on the integration of retail systems, it highlights the extent of the issues banks in any area of the marketplace face following a merger. Quite simply, it is a case of good practice – which is always worth examining, wherever it occurs.

At one stage, RBS had 4,200 staff working on IT integration. They were led by John White, director, group technology. The decision-making hub was the technology integration directorate (TID), whose role was to guide the programme and make quick decisions.

The key decision was to migrate the NatWest customer database over to the RBS systems as quickly as possible. This was a huge challenge as NatWest was a substantially larger bank. However, RBS did not want to run the risk of being stuck with dual systems into the medium term. The critical factor was that the bank had an environment that could scale up to meet the volumes required. Without that it would have been compelled to introduce a completely new system. That would have entailed enormous direct costs as well as the ongoing indirect costs involved in running dual systems.

The conversion was made during a single weekend in October 2002. More than 9,200 milestones were tracked, with 120 systems monitored and 1,168 business checks. Over the weekend, 4,200 people were involved, covering the business and group technology.

As part of the process:

• The bank had to scale up 200 RBS systems to process five times the previous transaction and data volume.

• Migration of the RBS mainframe systems to the group software infrastructure – the new production environment built to hold the RBS Group IT systems. This also involved the migration of 644 RBS branches, 5,100 ATMs, 5.5m customer accounts, and 10 terabytes of storage capacity.

• A new branch teller system was rolled out into 1,512 NatWest branches involving 6,005 workstations and training for 12,000 staff. An enhanced platform called Early Sales involved rollout to all 1,524 branches (2,239 workstations).

• The bank converted 3.8m RBS cardholders from First Data Europe (FDE) systems to Total Systems (TSYS). Some 4.4m NatWest cardholders were also moved on to the same system. A total of 14.6m debit cards were transferred to the RBS platform. RoyNet merchant customers were moved onto the Streamline platform and over 20,000 bank-owned card acceptance terminals were removed and replaced with new state-of-the-art machines.

• All 3,345 NatWest ATMs were migrated to the RBS platform at an average of 250 per week or around 50 migrations per day.

• NatWest internet banking customers were transferred to the RBS platform which increased the total Internet customer base on this system to 1.4m customers.

• RBS consolidated four data centres in Edinburgh and the Midlands occupying 96,000 sq feet to two in Scotland, occupying 45,000 sq feet. The process included the acquisition, fit-out and commissioning of a new 27,300 sq feet data centre.

Within 942 days both RBS and NatWest were running on the single RBS Group IT platform. The bank had promised shareholders an IT saving of £350m per annum following the merger. The outcome is estimated to be £400m.

Royal Bank of Scotland’s IT integration programme is shortlisted for the Most Innovative Application of Technology Award in the BT/ifs Innovations Awards taking place on 27 November. For more information about the Innovations Awards click here or for a full list of the nominees click here.

Read more about how BT restructured its own data centres in TRANSITIONS 4, Building Corporate resilience