When Halifax and Bank of Scotland (BoS) concluded their merger in September 2001 to form HBOS, the company had to work fast on delivering on its promise to the City: achieving £300m in cost savings.

One of the sources of cost reduction was the bank's purchasing department, which controlled an annual spend of £1.7bn.

To gain a single view of the spending across both companies, HBOS created a supplier relationship management tool - HBOS SRM - that integrates data from a range of different databases.

What were the business objectives of the project?

The bank's main objective was to achieve cost savings in its procurement arm and improve business efficiencies, says Des Quigley, procurement systems manager at HBOS.

'We knew we could achieve significant cost savings by consolidating some of our 32,000 existing suppliers and leveraging our combined spend to negotiate better pricing,' he said.

What were the key milestones in the implementation?

After an initial study determined that modifying existing systems was going to be too costly, HBOS began working on a new approach in November 2001.

The bank worked with systems integrator Acuma to develop the HBOS SRM system that integrates, stores and manages data from various systems, allowing consolidated management information to be produced and analysed.

Implementation began in February 2002 and the first phase was completed by May, says Sharon Reason, procurement performance manager.

Phase two, which was completed in January 2003, added the bank's eprocurement and fleet management system, providing a more holistic view of its procurement activity, says Reason.

What technology was used?

Software from Ascential collects data from various HBOS databases and loads it into data warehousing software from Kalido.

A consolidated view of the data is sent to Business Objects InfoView, a reporting tool that provides procurement staff with a web-based client application for accessing information.

How did you manage the business change and people issues involved?

During phase one of the implementation, Acuma consultants ran a skills transfer programme, training the HBOS team on how to maintain the new SRM system, says Quigley.

'Previously, our staff used various manual methods within applications like Microsoft Excel to build the various reports required. With HBOS SRM, they simply have to enter the parameters of the report required and the system creates it automatically,' he said.

What results were achieved?

HBOS SRM enables the procurement department to consolidate and analyse supplier data sourced from various incompatible systems, providing users with a consistent view of all procurement data across the company.

'The system allows our staff, across five different locations, to all see the same information,' said Reason.

HBOS has developed a consistent group-wide commodity structure, consolidating and re-ordering 17,000 account codes into 27 commodities across 142 categories.

'This makes complex procurement information much easier to understand and analyse,' said Reason.

What were the lessons learned?

The project was delivered quite smoothly, without exceeding its cost or time targets, says Quigley.

'The biggest issue for us was understanding the source data, which is located in three different accounting systems,' he said.

What were the business benefits?

The project contributed to HBOS achieving its cost reduction goal of £300m.

The bank can now keep a much closer eye on its spending patterns, which will help its managers make more informed purchasing decisions.

'Because of the flexibility of the system, we are also able to react very quickly to changes in the business environment,' said Reason.

How do you plan to build on the project?

Phase three of the project is in the design phase.

'This will move us to a balanced scorecard view of our procurement process, adding more detailed invoice and contract information, which in turn will help us to negotiate better deals with suppliers,' said Quigley.

Computing says:

Mergers present a unique challenge for IT departments. Integrating disparate and often incompatible systems was a vital part of consolidating the operations of the two banks. HBOS has delivered a consistent view of its purchasing with minimum disruption, demonstrating how IT can be used to achieve significant cost savings during a major corporate merger.