Managing Information Technology

Scalability

Cost

Performance (response time, concurrent users)

Reliability

Partnership (including customization for external partners)

Marketplace Differentiation

Quality (robustness, customer satisfaction)

Technology/Architecture

Customer Service Security

Flexibility

Compliance

Functionality Differences

Vendor Relationships

Resource Skill Set (including market availability)

Recoverability

Interdependencies

advanced. Since no consensus recommendation could be
reached, the loan-servicing system decision was put into
the hands of the senior officers of the company, who de-
pended heavily on the advice of their merger consultants.
Integration risk issues began to weigh heavily on the
final decision by top management. One major risk factor
was the need for extensive manual review during the con-
version process due to transaction complexities that had
been coded into the systems to accommodate special situa-
tions. For example, updates involving retroactive changes
(such as student status changes) required access to record
histories, and unique decision rules (for student payment
amounts) had been coded into the Unity loan processing
system for lenders who had implemented incentive pro-
grams for timely student payments. Another major risk
factor stemmed from the fact that these systems were serv-
icing a population with little financial management experi-
ence (i.e., undergraduate students): System changes visible
to customers therefore typically resulted in significantly
higher service call volumes.

McKinsey weighed in heavily in this decision. They

generally agreed with us that the Unity system was

better, but there wasn’t enough difference in func-

tionality for them to break their standard decision

rule: adopt the system of the dominant company in

order to reduce the merger risks.

—Greg Clancy, Chief Information Officer

The final point came down to risk and timing. If the

conversion was to be done by April, it simply wasn’t

possible to convert $50 billion in loans from Class to

Unity, within the time constraints required, without

presenting serious problems to our operational areas.

—Larry Morgan, Senior Vice President, Application

System Development

Although the employees of both companies fought

hard to keep the custom systems they had developed, and

the battles were fierce, once the application decisions were

made, they began working together to implement them. In

the end, about 78 IT employees were retained in Reston to

maintain the Class system. The plan was to add new Web

functionality and to complete the implementation of an

advanced call-center capability for the Class system within

the second year of the new merged company.

When you build a system, it becomes a part of you...

both sides wanted to keep their system alive, and the

battles were fierce. I was fortunate enough to have

worked with both the Class and Unity teams in the

construction of those systems. I was an insider to both

teams. I also had established relationships with the

new senior management team.... I had perhaps the

easiest job during the integration period.

—Larry Morgan, Senior Vice President, Application

System Development

In contrast, implementation time was not the same

critical concern when the back-office system for the finance

function was selected. USA Group had implemented

PeopleSoft modules for both finance and human resources

during the second half of the 1990s. Sallie Mae was using

an older and clearly less functional package for finance

(Walker Interactive). Here the key trade-off was between

capturing cost savings as quickly as possible by converting

to the Sallie Mae package, or postponing these cost savings

in order to have a more robust packaged solution that would

be newly configured for the combined company.

Since this was a back-office application, rather than a

customer- facing application, the Sallie Mae executive team

accepted the technical team recommendation to adopt the

PeopleSoft suite for both finance and human resources for

the new Sallie Mae. By delaying the implementation until

the fall of 2001, the company would also be one of the first

large corporations to implement a Web-based version of the

PeopleSoft package (version 8.0).

Retaining IT Staff

At the time when the company announced that the bulk

of IT operations would move to Indianapolis, the HR

616 Part IV • The Information Management System

EXHIBIT 2 Gap Analysis Criteria for Loan Servicing
Applications