Chapter 5 Case- Merrill Lynch Connects Past and Future Technology

1.) Why did Merill Lynch need to update its IT infrastructure?

Merill Lynch needed to update its IT infrastructure in order to remain competitive. One of the most important ways to do so was to provide customers with Internet-based applications that provided them with up to date access to portfolios and the tools needed to work with those portfolios. There are many competitors in the financial management industry and if Merill Lynch cannot maintain its technological edge then those competitors will take advantage by offering a more user friendly web interface and variety of tools for customers to take advantage of. Merill Lynch also needed to consider its IBM mainframe and how to include it in the update of its IT infrastructure. The mainframe provided a strategic advantage in terms of processing power but did not have compatible software for implementing Internet-based applications that were needed to stay competitive.

4.) Do you think that Merill Lynch's decision to sell off its successful technology initiatives was a good idea? Why or why not?

I think that over the short term it was a good idea for Merill Lynch to sell of the technology. It gave the firm a large amount of money to re-invest in IT or other areas of the company and helped recoup some of the $1 billion in costs that the firm spent over a three year period to update the financial advisers' financial management applications. However, in the long-term it might leave Merill Lynch at a competitive disadvantage because now its competitors have access to this new IT infrastructure. The competition can now go to SOA Software and purchase the system for $125,000, which is a lot less then the $1 billion plus that Merill Lynch invested to develop and launch X4ML. If the competition is able to take advantage of the applications of this IT system in the same way that Merill Lynch did then Merill Lynch could loose its competitive advantage. Merill Lynch may have been better off licensing the technology to different companies, at lease then it would have had some control over whether competitors had access to the technology.