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Did Information Systems Cause Deutsche Banks to Stumble

Case Study 1

Did Information Systems Cause Deutsche Banks to Stumble?

ITM102 - Business Information Systems I

Summary of the case:

Information systems are taking control of businesses in today's world. Billions of people use technology and social networks in their daily routines to stay connected and updated on everything that is happening around them. Information technology benefits each individual in its way as well as helps businesses to improve their services and maintain a competitive advantage. A business with modernized IT can stay connected to its consumers, store all the important information which helps with decision making, as well as develop new products and services. 

Using an antiquated technology may cause downfalls in business instead of improving it. For instance, Deutsche Bank is one of the biggest worldwide financial companies that contribute to the economics of Germany. This global financial institution needs to invest in modernized information systems to achieve all six strategic business objectives to be successful. Unfortunately, Deutsche Bank’s use of out-of-date technology was ruining their reputation and getting them into lots of trouble. For example, in 2016 CFTC complained that Deutsche Bank’s,  “swap data reporting system experienced a system outage”, which led to numerous subsequent reporting problems. CFTC believes these issues occurred because the financial institution neglected to have sufficient business congruity and the lack of supervisory systems set up. Deutsche Bank was not able to run the business accurately since the information that was being provided by the outdated technology was incorrect. Since Deutsche Bank experienced many years of mergers, “spaghetti balls were created” because the bank could not afford new systems and left old systems to handle the work. The bank's antiquated technology made it hard to provide the client’s information and any other information that was required to run the business. Out-of-date technology means that numerous tasks were being handled manually which was a waste of money and time. That is why in 2015, the new CEO of Deutsche Bank made a ten year, multibillion-dollar deal with Hewlett - Packard to, “standardize and simplify banks IT infrastructure, reduce costs, and create a more modern and agile technology platform for launching new products and services”. By replacing all the possible antiquated software applications and improving all the information technology, it was expected to reduce the costs by 800 billion euro, but it was difficult to get back the profitability. Despite all the updates in the information systems, the bank was not able to improve its profitability, instead of that in 2018 Deutsche Bank lost approximately $900 million.

Questions

  1. Identify the problem described in this case study. What management, organization, and technology factors contributed to this problem?

The main problem described in this case study is very outdated systems that were mostly manual. Antiquated technology was the reason the banks were not provided with the right information to run the business. In addition, there was no “customer and supplier intimacy” because of the information systems that were used. 

Management factors were used when the CEO of the bank made a deal with Hewlett-Packard to reduce costs and to create a more modern technology platform in order to launch new products and services. The upgraded technologies helped to make a better relationship with clients, stay more organized and improved decision making. Overall, it helped to gain and improve strategic business objectives.

  1. What was the role of information technology at Deutsche Bank? How was IT related to the bank’s operational efficiency, decision-making capability, and business strategy?

Before information technology was improved its role was to deal with great number of transactions and sums of money. IT was not in the best form that is why the operational efficiency, decision-making capability, and business strategy weren't as good. For example, the information was inaccurate which may have resulted in misallocation of resources and poor response times.

  1. Was Deutsche Bank using technology effectively to pursue its business strategy? Explain your answer.

In my opinion, Deutsche Bank could have used technology more effectively to pursue its business strategy. The bank had to upgrade its information systems before they got too old and the prices raised. Deutsche Bank had a disaster recovery plan and was missing supervisory systems, all because of the antiquated technology. In addition, for the bank to use their technology effectively, employees had to be trained before getting to work. “Only 6 percent of the board of director members and 3 percent of CEOs at the world’s largest banks had professional technology experience,” which means the rest of the workers have no idea how to effectively use the technology.

Sources

Laudon, K. C., & Laudon, J. P. (2020). Management information systems: managing the digital firm. Hoboken, NJ: Pearson.

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