1. Centralised or Federated:
Balancing shared IT
& Operations with
business ownership
Top Ten Challenges for
Investment Banks 2015
06
CentralisedorFederated:
BalancingsharedIT&Operations
withbusinessownership

2. 06
Centralised or Federated: Balancing shared
IT & Operations with business ownership
All major investment banks have experienced cost pressures
in recent years, leading many of them to embark on
significant simplification programmes. Attempting to
centralise Operations and IT has been a crucial part of
many such programmes. However, there continues to be
considerable debate on whether this centralised model
actually delivers for the business or whether a more
federated model offers greater flexibility and responsiveness.
There are clearly benefits to both
approaches, and finding the appropriate
balance requires consideration. The main
driver in striking this balance is where the
organisation is on its simplification journey.
Those just beginning are likely to need the
synergies that can be achieved through
greater co-ordination, whereas those who
have spent several years cutting costs are
likely to have reached a natural limit for
how much centralisation can be achieved.
A further consideration is the influence
of the functions that Operations and IT
are designed to serve in the first instance
– whether that is specific to product
divisions, risk and finance, or even HR and
procurement functions. If these functions
are driven as group-wide shared services
then it makes sense for operations and IT
to be set up in the same way. If they are
divisionally separated, a more tailored
approach is likely to be needed. Finally,
an additional challenge is evaluating the
position of the investment bank’s
shared services in the
context of the wider
banking group.
Different
investment banks
have different
needs, but the
challenge for all
is finding the
balance between driving efficiencies
without adding further complexity to
already inherently complex
organisations.
2

3. Centralised vs. Federated
A centralised model is designed to give
more transparency, provide opportunities
to reduce costs, simplify reporting
structures and instil consistent governance
and control on architectures. Leading
global investment banks have typically
been moving towards this type of powerful
shared service model, increasingly reliant
on third-party providers, as they progress
their simplification journeys. At its most
extreme this can be a form of integrated
business service that spans all elements
of the organisation and delivers consistent
services across the globe in a fully
integrated fashion (see Fig 1).
In direct contrast a federated model allows
for different geographies and / or lines of
business to focus their IT and operations
functions on their own specific needs.
These models are not always the product
of conscious decisions but can often result
from rapid organic (or inorganic) expansion.
This model can offer significantly more
autonomy to specific business lines by
offering a bespoke service, but comes at
greater expense and complexity.
3
This model can offer
significantly more autonomy
to specific business lines
by offering a bespoke
service, but comes at greater
expense and complexity.
Figure 1: Shared services maturity model
Source: Accenture Research
Performance
Maturity
1. Discrete Shared Services 2. Multi Function Shared Service (MFSS) 3. Global Business Services (GBS) 4. Integrated Business Services (IBS)
Service Innovation
Global Service Owners
Integrated Delivery Network
Integrated Service Management
Americas EMEA APAC
IBS Lead
Commercial Services
Supplier Services
Employee Services
Financial Services
Analytic Services
Other
Global Process Owners
Global Delivery Network
Global Service Management
Americas EMEA APAC
GBS Lead
Finance
HR
IT
Other
Common Service Management
Americas EMEA APAC
MFSS Lead
Finance
HR
IT
Other
Finance
HR
IT
Other

4. 4
3yrs
BTG Pactual transitioned from a Brazilian bank
into a true continental bank in less than
Striking a balance
Using some of the more successful
emerging market investment banks as case
studies offers interesting insight on the
centralised vs. federated debate. They have
been grappling with the same pressures
faced by mature markets competitors but
are often less hampered by legacy systems.
This offers the opportunity to be more
innovative as they expand.
As well as cutting costs and allowing
economies of scale, centralising also
makes it easier to enact enterprise-wide
decisions and define strategies quickly.
Latin American investment banks tend to
be centralised in hub countries with
federated IT and Operations organisations
only where a country or business unit has
a unique requirement (see Fig 2).
BTG Pactual is an example of an
organisation that has adopted an
approach that creates synergies in its
back-office, but allows branches and
front-office to choose the best-of-breed
system or structure that will bring most
benefit. This move has facilitated a very
fast time-to-market, allowing the bank to
open offices and new business units, and
has resulted in BTG Pactual transitioning
from a Brazilian bank into a true
continental bank in less than 3 years. Their
success is derived from a strong enterprise
architecture strategy which balances the
costs and opportunities of each country
model and the overall Group position.
Figure 2: Centralised vs. Federated IT Operating Model
Source: Accenure Research
Global Excellence
Business Innovation
Process Maturity
Optimization
Independent IT Services
per single countryA
Central IT Governance
with country specific
IT ServicesB
Centralized common IT
infrastructure with country
specific applicationsC Full Centralized
IT ServicesD Centralised
Federated
InfraAppsITArchITGovCountryA
InfraAppsITArchITGovCountryB
InfraAppsITArchITGovCountryZ
...
Headquarters
InfraAppsCountryA
InfraAppsCountryB
InfraAppsCountryZ
...
Headquarters
IT Gov IT Arch
AppsCountryA
AppsCountryB
AppsCountryZ
...
IT Infra
Headquarters
IT Gov IT Arch
CountryA
CountryB
CountryZ
...
IT Gov - Apps
IT Arch - IT Infra
Headquarters
ExampleStrategicdrivers

5. 5
The limitations of centralisation
Whilst centralisation can be successful
in many instances there are limitations.
Centralisation often meets resistance when
business leads feel they have lost control to
central functions and decision makers have
become too removed from the revenue
generating front line. This requirement to
strike a balance and ensure buy-in from the
business means any investment bank with
ambitions to be multi-jurisdictional and
multi-disciplinary needs to run a mixture
between centralised and federated models.
The inflection point comes when
centralisation leads not to greater simplicity
but to greater complexity. In recent years
many investment banks have tried to push
the centralisation agenda too far and
consequentially tipped the balance.
To return to Brazil, one leading investment
bank tried to centralise their entire product
catalogue but reverted after realising the
inflexibility it would have created. Their
subsequent business-led approach was
more successful, as they centralised the
intelligence and taxonomies of their
products using market standards creating
a common language, but gave autonomy
across all markets to allow customisation.
Finally, local regulation and guidelines can
also drive bespoke solutions. When a large
European bank, who successfully runs a
very powerful and heavily centralised
model, entered the Brazilian market they
found it necessary to adopt a more
federated approach and develop local
systems and operations in order to cope
with local market regulations and
product peculiarities.
Whilst there has been a lot of momentum
behind the centralisation agenda in recent
years, it is not a panacea and many have
retreated from this absolutist approach.
Having said this, there are some common
parallels and best practices that can
be adopted. A hybrid approach between a
centralised model where industrialisation is
needed and there is limited market
differentiation, and a federated model
where respect for idiosyncrasies and
time-to-market is required, is key to
reach this goal. This means finding
the right balance, ruled by a well
understood enterprise architecture
strategy, targeted to bring value to
the business.
In recent years many
investment banks
have tried to push the
centralisation agenda too
far and consequentially
tipped the balance.
Whilst there has been a
lot of momentum behind
the centralisation agenda
in recent years, it is not
a panacea and many
have retreated from this
absolutist approach.

6. About Accenture
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consulting, technology services and
outsourcing company, with more
than 305,000 people serving clients in
more than 120 countries. Combining
unparalleled experience, comprehensive
capabilities across all industries and
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net revenues of US$30.0 billion for the
fiscal year ended Aug. 31, 2014. Its home
page is www.accenture.com.
Accenture Experts
To discuss any of the ideas presented
in this paper please contact:
Fabio Rodacki
Managing Director
Capital Markets, San Paulo
fabio.rodacki@accenture.com
+55 11 5188 4317
Wagner Simao
Managing Director
Capital Markets, Mexico City
wagner.o.simao@accenture.com
+55 11 5188 3710
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