Team essay information system final

DOES IT PAYOFF? STRATEGIES OF
HSBC & CITI BANKS
CASE STUDY REPORT
COURSE: MN5123 - INTERNATIONAL INFORMATION SYSTEM
JANUARY 23, 2014
SCHOOL OF MANAGEMENT
ROYAL HOLLOWAY, UNIVERSITY OF LONDON

Does it payoff? Strategies of HSBC & CITI banks
1
Table of Contents
Introduction ...................................................................................................................................... 2
Strategic Alignment model: IT Strategies & Implementation.............................................................. 3
Vertical Linkage – Strategy fit......................................................................................................... 3
Business strategy & Business Process......................................................................................... 3
IT strategy & IT Process.............................................................................................................. 4
Horizontal Linkage – Functional Integration................................................................................... 5
Business Strategy & IT strategy .................................................................................................. 5
Business Process & IT process.................................................................................................... 6
Cross Linkage................................................................................................................................. 7
Business Strategy & IT process................................................................................................... 7
IT strategy & Business Process ................................................................................................... 7
Successful IT Investment & Implementation Strategy: ....................................................................... 8
IS Success: DeLone and McLean IS model....................................................................................... 9
Information Quality....................................................................................................................... 9
System Quality .............................................................................................................................. 9
Service Quality............................................................................................................................. 10
Intention to Use........................................................................................................................... 10
User satisfaction.......................................................................................................................... 11
Net benefits................................................................................................................................. 11
Conclusion....................................................................................................................................... 11
Group Conflicts & Managing Strategy.............................................................................................. 12
Exhibits ........................................................................................................................................... 15
Bibliography.................................................................................................................................... 16

2
Introduction
Perhaps it is the cliché that over last few decades, the role and influence of Information
Technology (IT) on organisations has meaningfully changed. IT is surpassing its old-
fashioned “back office” role and is progressing toward a “Strategic” role through a wide
gamut of markets and countries, with the potential to support business strategies and
also to shape new business strategies (Konsynski & McFarlan, 1990). In spite, there is
growing anxiety that the expected value of the investment in IT is not being realised
(Roach, 1991). One of the enduring and important problem in Information System (IS)
discipline is the alignment of business and IT strategies (Galliers, 2004) and for the last
two decades this has persisted as top concern for IT managers and organisations
(Luftman & Kempaiah, 2008). A successful strategic alignment between IT and business
strategies enables a firm to obtain competitive advantage, realize business objectives,
organisational goals and also it reinforces cognizance and benefits of information
systems (Lederer & Mendelow, 1988).
Therefore, as Tallon (2007), mentioned for banking organizations such as HSBC and CITI,
which attain multi-focused strategies, information technology (IT) plays a crucial role as
a source of value. In this case study report, we will be discussing about IT strategies and
its successful integration into business goals of two banking giants namely HSBC and
Citigroup. In first section we will be analysing IT and business strategies using Strategic
Alignment Model (1993). In the second part, a study will be made to understand the
successof IT alignment with business strategies using Delone and Mclean (2003) updated
Information System (IS) model. At last, conflicts arising during the storming stage of
group development along with few strategies to manage group conflicts will be discussed.

3
Strategic Alignment model: IT Strategies & Implementation
Strategic Alignment Model (SAM) (Henderson & Venkatraman, 1993), is one of the
prevailing and most often cited model for IT alignment (Chan & Reich, 2007),
conceptualises IT alignment to include both the integration between business and IT
domains and the fit between strategy and structure. The effective alignment of business
and IT strategies involves ‘four major domains of strategic choices’ which forms SAM i.e.,
business strategy, IT strategy, business process (organisational infrastructure) and IS
process (IS infrastructure) (Henderson & Venkatraman, 1993).
(Further to below detailed analysis, please refer Exhibit section for consolidated analysis of
HSBC and Citigroup’s IT strategies using SAM model).
Vertical Linkage – Strategy fit
This first linkage called ‘strategic fit’, is the vertical linkage between use of strategy and
infrastructure of business. This lay emphasis on executing the market-positioning
strategy by structuring internal factors and the necessity to make choices that position
the enterprise in an external marketplace (Van de Ven. II & Drazin, 1985).
Business strategy & Business Process
A firm’s business strategy refers to choices of strategy related to firm’s business scope,
distinct competencies and governances (Harindranath, 2007). Citigroup’s primary
business strategy was to follow a “diversified financial services business” model
conglomerating different sectors of business like stock brokers, banks and insurances.
Citibank organised itself in three major business groups, to fit its strategies: Expanding
distribution; Transferring expertise; Investing in people and technology; Allocating
capital to maximize returns; Embracing shared responsibilities, and to obtain competitive
advantage in terms of Global presence and reach, valuable brand name, scale and

4
efficiency and the wide range of products (Citigroup, Annual Report;, p. 2006). For
example, CitiFinancial, Citigroup, Corporate and Investment Banking, Citigroup
Investment Research division and Citigroup Alternative Investments (Farhoomand,
2007). Citibank’s goal of being one of largest retail banks; fit their strategy expanding
distribution.
On the other hand, HSBC’s business strategy of “Managing for Growth” relates to its
business process objective of being recognised for offering customers fair deal (HSBC,
2007). In views of using technology to enable customers the ease of doing business, HSBC
Global Technology (GLT) was established in 2002 to quality technology solutions accost
efficiently. In order to support online banking and service-improvement, HSBC hired
more number of staffs, which resulted in 1.2 million customer’s registration for personal
internet banking and 177,000 for TV banking. Among the eight global pillar strategies
established by HSBC in 2007 & 2008, allocating responsibility and delegation authority
implied to its key business value of delegating authority and making accountable.
Similarly other key business values like, fair dealing, truth, minimum bureaucracy at all
levels were emphasized in instituting employment policies strategy (ibid).
IT strategy & IT Process
Citibank exhibited integrated IT strategy and governance approach throughout its global
divisions. Integration of IT strategy with its IT process were evident throughout its IT
investment and development over years. Citibank made strategic investments in
customised software’s and packages to enhance its strengths and to facilitate exchange
of knowledge across its global branches (Rapp, 2002). While the bank retained its control
on its core system architecture and tools used, it outsourced in a very minimal way, its
non-core activities like implementation to EDS and Digital Equipment Corporation. Its

5
‘round-the-clock’ telephone service, e-Citi commerce solutions, MyCiti.com, “Citi on the
Net” and other tools provide its customers with convenience, value and also improving
efficiency, fitting its IT strategy: ‘better serve clients and lower costs’ (Farhoomand,
2007).
Comparatively, HSBC’s first TV banking – Interactive Financial service integrated
technologies of banks with most common technologies available with customers. It made
many such creative utilization of technology to serve customers with new and simple
services. Realisation of IT strategies like development of IT was observed with the launch
of other HSBC products like mobile banking, cable & wireless KHT, Mondex card, Secure
Netpayment Solutions during 1999’s correlates with its IT processes. HSBC’s
establishment of regional technological services (HUB) in nearly 63 countries to provide
global implementation, services and meet local technological needs in line with its IT
strategy of offshoring processing to respective countries, making it “the world’s local
bank”(ibid).
Horizontal Linkage – Functional Integration
Horizontal linkage also called ‘functional integration’, is the alignment of business and IT
process. Functional integration provides IT the opportunity to deliver competitive
advantage (Horner & Benbasat, 1996).
Business Strategy & IT strategy
Citigroup’s business strategy is ‘diversified financial service’, which means provide large
range of products to meet varies of customers’ needs under one roof. Their IT strategy is
to create a common system to benefit customer a better service. Both of Business and IT
strategy has same view on meeting customer satisfaction. Also, centralised IT system will
offer customers and employees more convenient and easier access.

6
The alignment of business strategy and IT strategy in case of HSBC was well defined by
creating separate entities like IT development, IT operations, IT general and CIBM IT HK
based on type of end users served and applications. These individual entities enabled to
improve banking experience of customers. Use of technology efficiently can also be
observed in its development of online banking portals like hsbc.com, “Yahoo! PayDirect
from HSBC”, to provide consumers with person-to-person payment money transferring
and a range of transaction banking and treasury services (Farhoomand, 2007).
Business Process & IT process
Alignment between business and IT process are essential as they are the infrastructure
of business. It includes day to day transactions, management skills, organizational
systems, etc. IT process gives a great support to business process as it increase efficiency.
Business process drive IT process to be developed to meet increased competitive and
customers’ requirements. By looking at Citigroup’s case, we can see this linkage clearly.
In 2006, Citi invested an electronic communication network that provided state-of-the-
art technology for immediate access to liquidity. It reduced the number of its data centres
by 20% and consolidated its call centre for greater efficiency (Citigroup, Annual Report;,
p. 2007).
HSBC invested regularly in keeping up the technology updated regularly and up-to-date.
An example being, after the initial development of its hsbc.com website in 2000, the bank
invested around USD $2 billion on its dotcom initiatives and launched new generation of
hsbc.com, adding a major number of new services into old system. Again in 2001, HSBC
invested USD $164 million in hsbc.com alone and a second generation of strategic
internet business banking platform (hsbc.com) was launched to include common
presentation and capability to all HSBC’s services and any type of its customers. This was

7
its first business application. Consecutively this continuous investment in IT for
technology updating resulted in 76,650,000 number of customers visiting HSBC website
across 150 countries in 2001 (Farhoomand, 2007).
Cross Linkage
Business Strategy & IT process
IT process and Business strategy are interrelated to each other. IT process can support
implementation of business strategies effectively and also result in enhanced business
strategic goals. For example, in 2002, Citi group upgraded Citi Direct Online banking,
available in 90 countries, and process more than 39 million transactions worldwide in
2004. This IT process helped Citigroup manage daily transactions more efficiency, make
their business strategy as ‘largest retail bank’ more realistic (Farhoomand, 2007).
In terms of HSBC’s, business strategy and IT process were strongly related and in many
instances has shown positive compliments. The introduction of HSBCnet in 2004, showed
the increase in number of customers in commercial banking by 43% (HSBC, Annual
Report, p. 2005). Business growth in terms of internet sales raised by 25% in 2006
resulting in USD $5.7 billion profits and with nearly 250,000 new online saving accounts
created after introduction of 2G Innovative Business Solutions (HSBC, Annual Report, p.
2007). It was also evident with 116% increase in online transaction and 24% increase in
new customers when HSBC incurred an additional expense on IT expenses.
IT strategy & Business Process
IT strategy of Citigroup is to develop group-wide platforms to enhance the organizational
strength. As Citi is an international bank, they are fully aware the importance of local
conditions of each branch. Therefore, they believe integrated local system to their

8
existing global centralised system is the adequate one to use. The reason they are
choosing this kind of system is depends on the nature of business process, which is their
business scope, customers, and markets. On the other hand, IT strategy also helps their
business process, such as, their global centralised credit card system and call centre,
make customer manage their own card easily. This fit their IT strategy as ‘better serve
clients and lower costs’ (Farhoomand, 2007).
HSBC with its “the world’s local bank” strategy successful established regional
technological services to meet local customer’s needs, like HSBC Universal banking
System. The establishment of new dealing room concept employing the use of latest
technologies to enable coordination between HSBC Futures, Securities and Market,
during 1998, enabled to achieve HSBC’s “Manage for value” strategy. Further in 2001
HSBC also made investment in customer relationship management along with its online
banking platform, to provide with additional intelligent services to customers (ibid).
Successful IT Investment & Implementation Strategy:
A successful IT implementation is considered to have many positive implications to firms
business and on future IT investments. It increases projects (Jenkin & Chan, 2006), IT
investment (Byrd, et al., 2006) and organizational performances (Chan & Sabherwal,
2006). As per Burn & Szeto (1999), the degree of IT success will certainly influence the
level of communication between business and IT planning processes and the connections
between business and IT executives, also it improves business relationships at all levels
of organisation. Greater the “fit" or alignment between firm's IS strategy and business
strategy infers that the Information systems are directed on critical areas of positive
business performance (Das, et al., 1991).

9
IS Success: DeLone and McLean IS model
One possible way to study IT success is analysing the six dimensions as proposed in
Delone and Mclean (2003), updated IS success model. Further we will be using this model
to analyse Citigroup’s IS model.
Information Quality
The first dimension, can be observed in Citigroup’s performance in many ways. The use
of the system in e-banking procedures is volitional and users are able to do it in the way
they want and in the time they are comfortable with. Therefore, the quality of information
can directly encourage customers to continue using the system or make a transaction, or
discourage them (Pérez-Mira, 2010). Within Personal Finance Services, Citigroups was
able to use new technologies in order to gain improved targeting and to meet customer
needs and consequently increase the sale (Farhoomand, 2007). With the objective of
assuring trust, security and privacy, whilst developing innovative services and products,
Citigroup along with its group companies centralised its approach to e-commerce with
the investment of around USD $1 billion during 1997 to 1999 (Farhoomand, 2007).
System Quality
The second dimension, measures the degree of success in the way software and hardware
work together (Pérez-Mira, 2010). Citigroup introduced many specialised departments
globally, this allowed a rapid handling of different data that can be seen as a positive effect
on the overall structure. With the launch of e-Citi in 1997 and e-Citi commerce in 1998,
partnering with all Citigroup businesses globally, Citi was one of the bank to offer round-
the-clock telephone access in many countries, account information, research and email
exchange. The internet corporate banking service, Citibank Commerce enabled clients to

10
order products, monitor order status and complete settlement. PC banking products of
Citigroup were the highest-rated products by SmartMoney magazine way back in 1998,
indicates the successful integration of technology in its products and services
(Farhoomand, 2007).
Service Quality
This third dimension, in banking environment is about the support IT people offer to the
users before, during and after the transaction or operation cycle. Providing customers
with superior quality service at lower cost using technology was one of the business
strategy of Citigroup (Citigroup, Annual Report;, p. 2006). Early strategic alliances with
AOL, Oracle, Mobile One and Lava Trading, and leveraging the technologies by its
acquisitions, allowed Citibank to provide financial services, online banking, insurance,
mortgage services and other investment tools to its customer. Additionally, its
globalisation by targeted acquisitions and joint ventures allowing to offer high yield
services and rapidly increase its customer base. It was also the first financial firm to
globally introduce enhanced authentication over internet and other online channels for
sensitive transactions. Citigroup was first to offer its customer with the facility of account
aggregation after the introduction of MyCiti.com in 2000.
Intention to Use
The forth category, can be separated into two parts of, and Use. Intention to use, which is
an attitude, can be considered as an individual level construct. The IT investment of Citi
was intended to “have more common systems and standards across Citigroup”, and “better
serve clients at lower costs” (Citigroup, Annual Report;, p. 2007). The other part, Use,
which is behaviour, can be measured by different ways, such as the frequency of use.

11
Overall, customers adopted quickly to newly introduced technologies as seen within the
biometric credit card or the e-banking platform that was launched in 2006, and increased
its commercial customers.
User satisfaction
The fifth category is the level of user’s satisfaction with “Citi on the Net” and other web
sites, Global transaction services, reports and support services. In 2004, with the
introduction of Citi Direct, customers responded favourably to the enhanced online
banking service, processing more than 39 million transactions globally (Farhoomand,
2007).
Net benefits
Finally, the sixth category, , which was introduced as impact in the original Delone and
Mclean model and shows the balance between negative and positive impacts of the firm’s
operation on all stakeholders. Citibank accelerated itsgrowth worldwide in itscredit card
business after acquiring ten strategic companies and having the best-in-industry
technology platform, it was successful in getting 100 million accounts. Further with its
“Citi on the Net” strategy, creating new units like e-Commerce, e-Business and e-Capital
Markets it could acquire more than 800 million accounts.
Conclusion
On an overview, Citigroup has been successful in multi-channel expansion in number of
ways to deliver products and services, such as telephone, PCs, Internet, customized voice
response, and more smart ATMs. Referring to Appendix 1 of case study, Citigroup was
able to increase its market capitalisation from USD $17 billion to USD $269.1 billion in

12
ten years and triple its net profits. Though HSBC with its decentralised IT strategy could
achieve success in terms of IT integrations and attain business goals, in terms of product
and service delivery, Citi’s emphasis on globally centralised technology development is
more responsive to competitive advantage over its competitors.
Group Conflicts & Managing Strategy
Tuckman (1965) proposed four stages in group development; Forming, the orientation
or testing phase, Storming, the conflict zone, Norming, where the group starts to
overcome resistance or conflict and Performing, where roles become functional and
collective energy is channelled into the task.
This essay seeks to address conflicts, which arise during the Storming stage and highlight
two most effective strategies to manage conflict.
The Storming stage, labelled intragroup conflict, is characterized by lack of unity, hostility,
and emotional responses to group tasks as each member tries to express their
individuality (Tuckman, 1965). Two types of intragroup conflict have been observed in
groups; Task-focused Conflict and Relationship-focused Conflict (Jehn, 1997). Task
focused conflicts tend to raise challenges, constructive criticism in a bid to improve
productivity and decision making. Conversely, Relationship focused conflicts often create
an atmosphere of negativity and un satisfaction, decreasing goodwill and mutual
understanding which could have detrimental effects on the performance of the group
(ibid). Several conflict management styles have been identified and adopted till date.
Typically, most leaders tend to adopt the style that best suits their team, whilst bearing
in mind that the team may consists of persons with diverse work styles or philosophies

13
as may be described by the Belbin (1981) , Myers-Briggs(1985) or any other
psychometric or personality tests (Furnham, et al., 1993)
Rizzo, et al., (2000) highlighted Thomas and Kilmann’s five management styles;
Competitive, Compromising, Avoiding, Accommodating and collaborating, which are
effective for handling conflicts depending on situation.
Competitive Style is more of a win or lose approach to conflict (Rizzo, et al., 2000). Often
times, it involves pushing one view point at the expense of another and it provides quick
resolution. However, it may leave team members feeling bruised or resentful (ibid).
Compromising, often termed lose-lose approach, tackles conflict with a concern for the
Task as well as Relationships. It seeks to take the middle ground which results in reduced
tension, however, it leaves members unsatisfied with the outcome (Rizzo, et al., 2000).
Conversely, Collaborating, often referred to as the most effective approach to conflict is
termed the win-win approach. It seeks to satisfy the needs of all conflicting members with
a particularly high concern for Tasks and Relationships. In Collaboration, high
cooperation and low confrontation is adopted to yield a mutually acceptable solution that
reinforces mutual trust, respect and effective collaboration in the future (ibid).
In Avoidance approach to conflict, a low cooperation and low confrontation is adopted so
as to evade the conflict, especially when it may seem trivial (ibid). However, as a manager,
evading the conflict may be misconstrued as not knowing how to manage the situation.
Accommodating approach is another most commonly adopted method to handling
conflict. It involves high cooperation and low cooperation by playing down the
differences and celebrating the similarities so that conflicting members become willing
to accept each other’s views (Rizzo, et al., 2000).

14
As a manager, Collaborating and Accommodating conflict management styles may appear
to be the most effective, however, effective conflict management resides in knowing
which style is most suited, while being aware of the team dynamics; personalities, and
work styles (Furnham, et al., 1993).

15
Exhibits

16
Bibliography
Burn, J. M. & Szeto, C., 1999. A comparison of the views of business and IT management on success
factors for strategic alignment. Information & Management, Volume 37, pp. 197-216.
Byrd, A., Lewis, B. & Bryan, R., 2006. 'The leveraging influence of strategic alignment on IT
investment: An empirical examination'. Information & Management, 43(3), pp. 308-321.
Chan, Y. & Reich, B., 2007. 'IT alignment: What have we learned?'. Journal of Information
Technology, Volume 22, pp. 297-315.
Chan, Y. & Sabherwal, R., 2006. 'Antecedents and outcomes of strategic IS alignment: An empirical
investigation'. IEEE Transactions on Engineering Management, 53(1), pp. 27-47.
Citigroup, Annual Report;, 1997-2007. s.l.: Citigroup.
Das, S., Zahra, S. & Warkentin, M., 1991. "Integrating the Content and Process of Strategic MIS
Planning with Competitive Strategy". Decision Sciences, Volume 22, pp. 953-984.
DeLone, W. H. & McLean, E. R., Spring 2003. The DeLone and McLean Model of Information Systems
Success: A Ten-Year Update. Journal of Management Information Systems, 19(4), p. 9–30.
Farhoomand, A., 2007. Does IT Payoff? Strategies of Two Banking Gaints. Asia Case research Center,
The University of Hong Kong, pp. 1-15.
Farley, S. & Prager, H., 2010. Transforming IT managers into becoming strategic internal business
partners. Strategic direction, 26(11), pp. 12-14.
Furnham, A., Steele, H. & Pendleton, D., 1993. A psychometric assessment of the Belbin Team Role
Self Perception Inventory.. Journal of Occupational & Organizational Psychology (Online), 66(3), pp.
245-57.
Galliers, R., 2004. 'Reflections on information systems strategizing',in C. Avgerou, C. Ciborra and F.
Land (eds), The social study of information and communication technology. London: Oxford
University Press.
Harindranath, G., 2007. Chapter 4: "Aligning Information System with the Business", London, UK:
University of London press.
Henderson, J. & Venkatraman, N., 1993. "Strategic alignment: Leveraging information technology for
transforming organisations". IBM Systems Journal, 32(1), pp. 4-16.
Holland, C. P. & Westwood, J. B., 2001. Product-marketing and Technology Strategies in Banking.
Communications of the ACM, 44(6).
Horner, B. & Benbasat, I., 1996. Measuring the linkage between business and information
technology objectives. MIS Quarterly, pp. 55-82.
HSBC, Annual Report, 1997 - 2007. Annual Report, s.l.: HSBC.

17
HSBC, 2007. 2007 Bank Technology Forecast: Challenges and Opportunities", s.l.: Bank Systems and
Technology.
Jehn, K., 1997. A Qualitative Analysis of Conflict Types and Dimensions in Organizational Groups..
Administrative Science Quarterly, 42(3), pp. 530-57.
Jenkin, T. & Chan, Y., 2006. 'Exploring the IS project alignment construct', s.l.: Queen’s School of
Business (working paper).
Konsynski, B. R. & McFarlan, W., 1990. "Information Partnerships - Shared Data, Shared Scale".
Harvard Business review, 68(5), pp. 114-120.
Lederer, A. L. & Mendelow, A. L., 1988. "Convincing Top-Management of the Strategic Potential of
Information Systems". MIS Quarterly, 12(4), pp. 525-544.
Leonor, S., 2013. Centralization of Multi-Domestic Activities in the banking sector. [Online]
Available at: http://www.wseas.us/e-library/conferences/2011/Meloneras/SOMMEM/SOMMEM-
23.pdf
[Accessed 23 Nov 2013].
Luftman, J. & Kempaiah, R., 2008. 'Key issues for IT executives 2007'. MIS Quarterly Executive, 7(2),
pp. 99-112.
Pérez-Mira, B., 2010. VALIDITY OF DELONE AND MCLEAN’S MODEL OF INFORMATION SYSTEMS
SUCCESS AT THE WEB SITE LEVEL OF ANALYSIS. [Online]
Available at: http://bsd.nstru.ac.th/~wichit/new/Perez-Mira_diss.pdf
[Accessed 17 December 2013].
Rapp, W., 2002. Information Technology Strategies: How leading Firms use IT to gain an advantage.
Oxford: Oxford University Press.
Rizzo, J., Tosi, H. & Mero, N., 2000. Managing Organizational Behaiviour.. 4th ed. Oxford, UK:
Blackwell Publishers Inc..
Roach, S. S., 1991. "Services under Seige - The restructuring Imperative". Harvard Business Review,
69(5), pp. 82-91.
Sabherwal, R. & Kirs, P., 1994. "The Alignment Between Organizational Critical Success Factors and
Information Technology Capability in Academic Institutions". Decision Sciences, 25(2), pp. 301-333.
Tallon, P. P., 2007. Does IT pay to focus? An analysis of IT business value under single and multi-
focused business strategies. Journal of Strategic Information Systems, Volume 16, p. 278–300.
Tuckman, B., 1965. Developmental sequence in small groups.. Psychological Bulletin (online), 63(6),
pp. 384-99.
Van de Ven. II, A. & Drazin, R., 1985. The concept of fit in contingency theory, in: L.L. Cummings, B.M.
Staw (Eds.), Research in Organizational Behaviour. 7 ed. CT: JAI Press.

Team essay information system final

Recomendados

Recomendados

Mais conteúdo relacionado

Mais procurados

Mais procurados (20)

Semelhante a Team essay information system final

Semelhante a Team essay information system final (20)

Último

Último (20)

Team essay information system final