Back when Ike was still President and cars had fins, the predominant
business model was to create a single, monolithic business entity that
did everything imaginable in-house. That approach relented to a "lean
and mean" strategy of focusing on core competencies, leaving the rest
for expert third parties. The past decade has proven the wisdom of the
"lean and mean" approach, but, as with anything, a modest reverse swing
of the pendulum eventually occurred.

Unfortunately, cars will never have fins again; however, business models
have advanced significantly since that time and we've learned to let go
of our processes to some degree. Incorporating the wisdom of the ages
into new approaches, Mellon Financial Corp. has come up with quite
possibly the best possible strategy for balancing the
in-house/outsourcing dichotomy.

Mellon is a very large financial services institution focused primarily
on asset management and corporate servicing. Within the organization,
they have approximately twenty different lines of business. Since their
growth model primarily depends on acquisition, the company's
technological underpinnings could very easily get out of hand as
disparate platforms, frameworks, and computer systems all attempt to
deliver e-commerce services under the corporate umbrella. But Mellon's
SVP in charge of e-commerce, Matt Thornton, is up to the challenge.

Thornton and his team created a single platform through which each line
of business can deliver their own e-commerce capabilities. He sees the
platform as a "utility" and works with the various line of business to
develop their applications that ride on top of this shared
infrastructure. "The reason for doing it was primarily [that] this stuff
is fairly expensive and complicated to build and manage. We didn't want
to spend money on things like redundant firewalls, multiple networks and
so forth any more than was necessary."

Like today's predominant business model, this shared utility lets the
various lines of business focus on their core value proposition without
having to worry about the infrastructure. The business units, Thornton
says, "get no points for making sure the firewall works, but they get a
lot of demerits when the firewall fails. What we wanted to do is to
allow our internal businesses to be able to focus on their core value
proposition, so their only focus is on their applications, and not on
all the plumbing." The only difference is, the lines of business are
outsourcing the plumbing to an internal business unit, instead of to an
external entity.

Wearing the outsourcer's hat, Thornton and his team strive to be
competitive in offering the services to the other business units. "In a
lot of companies, technology is costed out based on function, so you get
a MIPS charge for the mainframe, and a server charge for Unix, and so
forth," explained Thornton. "We decided to do the internal costing on
the basis of services that were available in the marketplace." Besides
keeping the prices charged to the other business units at or under
market price, Thornton's unit also gives the lines of business an
opportunity to compare apples-to-apples for different kinds of
e-commerce services. As a result, he provides services in bundles, which
make sense to each line of business for their own specific needs.

Thornton's strategy allows each business unit to truly analyze whether
an e-commerce service is going to drive incremental revenue, cost
savings, or "just another channel that we have to support because our
customers demand it." Each service may have different purposes so Mellon
is able to bundle their infrastructure costs in such a way that the new
product or line of business has the information they need to make an
accurate prediction of their future cost structures.

It's been very successful, says Thornton, "The platform is composed of
probably 15 different technical services. The line of business manager
can just walk through that, and say 'my application does this and this
and this,' and check off the boxes. You get an estimate that's within
10-20% of the platform cost in half an hour, so it allows for informed
decision-making for all the businesses, without forcing each business to
do exactly the same thing with their technology."

Overall, this marks another trend in information technology: Being able
to measure return on a technology investment. The days of cool
technology for its own sake are over,; a platform like Mellon's brings
fine-grained control over technology ROI for every business unit.

» posted by ITworld staff

ITworld

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