It seems Morgan Stanley (NYSE:MS) and Citigroup Inc. (NYSE:C) may have
jumped too quickly to close their $14 billion brokerage joint venture. The companies closed the deal, which merged Morgan Stanley's brokerage with Citi's Smith Barney unit, on June 1, months ahead of schedule.
Now, though, the
Financial Times is reporting that the JV is having trouble integrating the parent companies' technology platforms. That's a big snag because it will prevent the JV's more than 18,500 brokers from cross-selling products, a major driver of projected revenues.
As we noted when the JV was announced in January,
IT integration is always tricky, but it's particularly so in banking. Getting complex finance and accounting software and other back-office functions operating on a single platform requires huge investments of time and resources. And getting it wrong can drive jittery customers to what they view as more stable competitors.
Morgan Stanley and Citi, both acquisitive firms, recognized the IT challenges going in. They appointed Jim Rosenthal, who heads technology and operations for Morgan Stanley, to
co-lead the integration. But perhaps in their zeal to close, they underestimated how long it would take to merge the technology systems. According to the FT report, the JV's brokers are frustrated that it may be months before they can sell "a full suite of products to their wealthy clients."
Morgan Stanley and Citi have always said that a full integration could take months, perhaps up to two years. It's possible that message never reached the rank-and-file brokers, who are now frustrated. Whether that is in fact the case doesn't really matter. The bigger issue is that in addition to getting those tech platforms merged, now the JV management may have a frustrated workforce to deal with as well.
- Suzanne Stevens
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