How the Private Sector Accomplishes EBusiness

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How the Private Sector Accomplishes E-Business

• Paul Munson

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Todays Objectives

• eBusiness and Market Trends in Financial Services
• State Streets eBusiness Evolution
• Lessons Learned

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State Street Corporation is a leading financial
services company providing Investor and
Investment Management services to companies
worldwide.

• Establishment
• Founded in 1792 in Boston, Massachusetts
• Offices in 23 countries, serving clients in 55
  countries
• 19,600 employees
• 6.1 trillion in assets under custody
• 727 billion in assets under management

• Leadership
• Number 1 servicer of U.S. mutual funds
• Number 1 investment manager of U.S. pension
  assets and a major player globally
• Number 1 servicer of U.S. pension plans
• Number 1 provider of foreign exchange services
  worldwide
• Number 7 investment manager worldwide

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• eBusiness and Market Trends in Financial Services
• State Streets eBusiness Evolution
• Lessons Learned

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What is eBusiness?


According to Forrester Research, eBusiness is
defined as Online and traditional business
activities that use Internet technologies to
support communication, collaboration, service and
trade



























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State Streets Definition of eBusiness

We see eBusiness as part of a profitable
business model providing better service, more
choice, more use of State Street products, and
more revenues. - David Spina, Chairman and CEO

• The role for eBusiness is to
• Act as a conduit for information delivery to
  clients
• Provide a channel for the execution of
  transactions
• Facilitate customer self-service
• Broaden and deepen client relations

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Global eBusiness is rapidly changing the
environment in which companies operate.
Global eBusiness Trends

• The Internet is not only about making physical
  business models virtual it is about new business
  models that strategically optimize the balance
  between physical and virtual assets
• Proliferation of wireless and screen-based
  services will enable users to exchange
  information remotely and conduct eCommerce via
  the Internet

Clicks and Mortar
Disruptive Business and Pricing Models

• Online vertical and horizontal marketplaces/exchan
  ges are revolutionizing traditional business
  models

Network Externalities

• Much of the value of Internet business models is
  based on the size and liquidity of the network
  itself and less on the underlying assets or
  technology infrastructure

Industry Convergence and Consolidation

• Deregulation, complex customer needs and
  disruptive technologies are driving
  cross-industry convergence and consolidation
  within industries

• Strategic alliances between competitors will
  expand to provide global scale and broad scope
• Web-based technology has broken up the value
  chain through commoditized products and services
  that invite competition from non-traditional
  competitors

Co-opetition and New Competitors

• Product/service bundles are easily disaggregated
  via the Internet, while vertical portals will
  allow clients to reaggregate best-in-class or
  proprietary products/services into customized
  personal bundles

Client Empowerment
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Worldwide Internet use is expected to grow to
nearly one billion users by 2005.
Worldwide Internet User Growth, 2000-2005
Internet Users (M)
1000
900
800
700
600
500
400
2000
2001
2002
2003
2004
2005
Source International Data Corporation - April
2001 Number of people who access the Internet
a minimum of once a month via a personal
computer, Internet access device, or mobile
phone.
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Worldwide business-to-business eCommerce revenue
will grow to nearly 4.4 trillion by 2005.
Worldwide B2B eCommerce Revenue, 2001-2005
Commerce (T)
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
2001
2005
2003
2002
2004
Source International Data Corporation - 2001
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The number of shares traded over electronic
communications networks (ECNs) have increased
150 since Q2 1999.
Source Top ECN trading reported by Securities
Industry News, August 6, 2001 extrapolated to the
entire market
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In addition to eBusiness trends, industry changes
are also impacting the financial services
community.

• Changing Demographics
• Aging population and growth of pensions
• Increasing technology literacy
• Increasing ratio of dissavers
• Increasing wealth transfers

• Changing
• Mandates
• Shorter settlement cycles
• Deregulation
• Pension privatization
• Emerging markets
• European monetary union
• New exchanges being established outside
  traditional regulatory environments

• Technological
• Innovation
• Internet/eCommerce
• Straight-Through Processing
• Increasing information access and transparency
• Alternative trading networks
• 24 hour trading and real time settlement
• Online information trading
• Significant cost reduction opportunities

Financial Services Marketplace

• Globalization
• Rapidly increasing global capital flows
• Cross-border consolidation
• Exchange and depository alliances/networks
• Bonds/derivatives trading OTC vs. exchanges
• Clearing and settling of foreign securities
• Single European currency

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As a result, financial services companies are
striving to enable customer focused operating
models through eBusiness.
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To date, these efforts have evolved from an
experimentation and rapid development phase to
rationalization and cost justification.
Internet Development and Investment Phases
Growth in Investment
2010
1995
2005
2000
Source Forrester Research, Inc.
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• eBusiness and Market Trends in Financial Services
• State Streets eBusiness Evolution
• Lessons Learned

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State Streets eBusiness strategy centers around
six key vision themes.
eBusiness Vision Themes
Create a global Internet gateway for all users
that leverages and combines ebusiness brands and
assets across State Street
One eEnabled State Street
Serve all State Street Constituencies
Address the information and application needs of
all State Streets customers, employees and the
public
Provide a convenient central entry point for
customers to all State Street and third party
aggregated services, either at the State Street
web site or embedded in the clients hosted site
Easy Access
Differentiated Customer Experience
Create a customer-centric experience by
personalizing and customizing each users
experience to meet their individual needs
Technology Leader
Position State Street as a cutting-edge provider
of new technology in the industry
Enhanced Employee Productivity
Provide employees with the tools and resources
they need to better serve our clients and to
increase efficiency in day-to-day activities
across State Street
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State Street has established a cross-organization
structure to support its eBusiness development.
Key Roles
B
eBusiness Board Decision-making (including
funding) strategy and policy setting
eBusiness Advisors
eBusiness Board
A
eBusiness Advisors Initiative evaluation,
prioritization, and sponsorship Issue resolution
B
Business Line
Business Line
Business Line
C
C
C
C
Business Line Groups focus on transferring
aspects of the business to eBusiness
Corporate eBusiness
D
Corporate eBusiness Business and technology
groups manage initiatives across the entire
organization
D
Information Technology (Network and Data
Management)
E
Information Technology Oversee/manage
technology solutions that enable a leverageable
infrastructure across all of State Street
E
Marketing
F
Marketing Oversee branding and advertising
creatives and policies
F
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Commitment to development of eBusiness consumes
approximately 2 of State Streets revenues
annually and is devoted to several areas.
eBusiness Development Requirements
People and Resources
Infrastructure
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Our approach to development is to maintain a
balance of initiatives across four strategic
categories.
State Streets eBusiness Journey
DEFEND
INNOVATE
lower risk, information focus
intermediate risk, transaction focus
higher risk, new business models

• Design discontinuous initiatives whose organizing
  principle is eBusiness
• Attack new customer segments, product sets, and
  geographies

• Quick hit initiatives to counter competitive
  moves
• Protect existing products and brand structure

INFRASTRUCTURE
common infrastructure and technology elements
that support eBusiness initiatives across lines
of business
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State Street has established a portfolio of
capabilities which represent defend, extend and
innovate strategies.
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Products and Applications
SL PerformanceAnalyzerSM
FX Connect
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Customer Facing Websites
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This broad approach has challenged us to provide
an integrated environment for our clients.
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In order to provide easier access and navigation,
portals and platforms have been established
across State Streets offerings.
Portals and Platforms Aggregates applications
and content capabilities in one location for ease
of access for clients
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Portals and Platforms
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Each portals infrastructure is based on a set of
core capabilities.
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SSgA.com provides sophisticated, customized
investment solutions backed by the experience and
technology required in todays investment
environment.

• Business Objectives
• Support business development needs and brand
  awareness with content and communication services
  
• Provide self-service access to account
  information
• Provide value added research, commentary and
  product information
• Integrate SSgA relationship Manager through
  messaging services
• Client Users
• Institutional Investors (200 users)
• Individual Investors (6,000 high net worth
  clients)
• Advisors (750 users)

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SSgA.com has incorporated state of the art
research and account information capabilities.

• Key Features/Capabilities
• Research - provides an extensive array research
  and analysis content via streaming media
  presentations from key investment personnel
• Account Information - provides easy access to
  client account information
• monthly activity
• performance
• transaction activity
• daily units values
• portfolio transition management s
• Detailed information on SSgA's investment
  capabilities

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Global Link empowers the next-generation global
investor with integrated research, analytics, and
order management on one platform.

• Business Objectives
• Integrates best of breed research, analytics,
  order management and trade execution tools on a
  single digital platform
• Provides portfolio flow data, analytics,
  optimization technology, strategy formulation and
  implementation
• Users
• Over 400 asset management companies, including 17
  of the worlds top 20

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Global Link provides digital transaction
capabilities, as well as, the tools and analytics
necessary to augment investment decisions .

• Key Features
• Research analyzed proprietary data derived from
  State Streets trillions of dollars of portfolio
  holdings
• Analytics - tools to empower professional
  investors to turn financial data into an
  essential strategic investment input
• Order Management - digital transaction
  capabilities in multiple asset classes, markets,
  currencies and counter parties
• Market Chat - a real-time community in which
  customers can exchange views and interact with
  research staff or customers can establish private
  chats

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my.statestreet.com focuses on enabling State
Street as a client-driven organization.

• Business Objectives
• Provide a global internet gateway that leverages
  brands and assets across State Street
• Enable clients easy access to aggregated
  information
• Provide differentiated customer services and
  enhance employee productivity
• Client Users
• US Plan Sponsors - 121 users

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my.statestreet.com provides aggregated accounting
and custody data to investment servicing clients.

• Key Features/Products
• Accounting Information provides easy access to
  account information
• Total NAV, holdings and performance summary
• Market Data, global market information and
  security exposure reports
• News Headlines
• Resources and Contacts enables easy navigation
  to key contacts and market information
• Market performance, market calendar and press
  releases
• Link to other State Street sites
• State Street relationship and technical contacts
• Internal contacts

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In addition to enabling continued integration,
our long-term vision is to provide continued
innovation across State Streets eBusiness
capabilities.
Renewed Innovation
Description

• Provide interactive and self service channels
• Provide collaboration capabilities to facilitate
  client service across State Street
• Utilizes customer Insight to provide proactive
  customer service based on clients information
  and activities

eService
eEnable end-to-end sales process and provide
sales representatives tools and self-directed
sales capabilities
eSales
User Tracking Insight
Collect and analyze data on customer behavior,
the market and operational usage to better
understand and meet customer needs
Content Portability
Enable multiple delivery mechanisms for clients
to interact with State Street on the web
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Going forward, the State Street eBusiness
community will work to understand how best to
distribute content across the portals to further
streamline users access.
Investment Servicing
Investment Trading
Investment Management
Corporate Enterprise Portal
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• eBusiness and market trends in financial services
• State Streets eBusiness evolution
• Lessons Learned

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Several challenges and lessons have resulted from
State Streets efforts thus far.

• Strategic development and positioning with
  cross-organization goals
• Technology Architecture, infrastructure and
  security
• Governance and organizational alignment

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Strategy

• Challenge
• Prioritization Organizations often feel the
  need to orchestrate their web sites differently
  than their ongoing business capabilities
• Customers Prioritizing and scoping content and
  capabilities can be difficult considering client
  breadth
• Politics At times, corporate politics can
  influence or even drive eBusiness strategies
• Partners and Alliances eBusiness strategists
  are sometimes quick to establish partnerships and
  alliances to expand their capabilities

• Lessons Learned
• Ensure your eBusiness strategy supports your
  corporate strategy
• Design and roll out capabilities on a client
  segment by client segment basis. As new segments
  and users are added, expand and deepen
  capabilities to meet the new users needs.
• Focus all decisions on customers and their needs
• Perform in-depth due diligence on potential
  partners to ensure they share your business
  objectives and goals and that they have the
  capabilities and experience expected

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Technology

• Challenge
• Architecture - Providing web capabilities will
  expose infrastructure and operational challenges
  (e.g., scalability, decentralized content)
• New Technology New technologies are
  continuously available. Many organizations are
  quick to adapt new technologies to be the first
  provider
• Security Complex web capabilities may require
  varying levels of security for different
  applications or transactions

• Lessons Learned
• Ensure the release plan and rollout plan coincide
  with the sites capabilities
• Focus on customer needs when assessing and
  prioritizing new technologies
• Evaluate potential solutions that will work
  across applications and capabilities to provide
  secure single sign on

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Governance

• Challenge
• eBusiness capabilities often require
  cross-functional teams, which dont typically
  come together naturally in hierarchical
  organization with distinct ownership
• Greater complexity in the eBusiness environment
  requires quick decisions, but with broad input
  and communication

• Lessons Learned
• Establish a governance strategy with leadership,
  organization structure and operations
• Emphasize dedicated eBusiness staff with clear
  and prosperous career paths
• Establish responsibilities for strategy, content
  and capabilities and standards
• Establish service level agreements with
  operational staff to ensure ongoing maintenance
  and support for the site
• Implement standard templates (e.g., business
  plans), decision processes, metrics and
  milestones.

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In summary, your eBusiness initiatives should be
a natural extention of your ongoing business
operations.

• Always focus on your customers needs
• Base all initiatives on their strategic value and
  financial impact
• Pursue a balanced set of eBusiness initiatives
  that defend, extend and innovate your capabilities

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• Questions?