BNY MELLON: REDESIGNING IT

FOR DIGITAL TRANSFORMATION

Jeanne W. Ross, Ina M. Sebastian, and Cynthia M. Beath

APRIL 2017 | CISR WP NO. 416 and MIT Sloan WP No. 5229-17 | 15

PAGES

CASE STUDY
an in-depth description of a firm’s approach to an IT management issue
(intended for MBA and executive education)

DIGITAL TRANSFORMATION BNY Mellon, a 230-year old investment management and financial asset
custodian company, embarked on a digital transformation in 2012. The
SERVICE OWNERS
company’s ability to deliver new digital services was dependent on build-
IT INFRASTRUCTURE ing new technology and business capabilities. A transformation of the IT
IT ARCHITECTURE unit spearheaded the development of these capabilities. This case de-
DASHBOARDS scribes the early stages of the transformation, particularly the redesign of
the IT unit and the development of common business services.

© 2017 Massachusetts Institute of Technology. All rights reserved.

 Ross, Sebastian, and Beath | CISR Working Paper No. 416 | 2

CONTENTS

Background................................................................................................................................................. 4

Envisioning a Digital Company............................................................................................. 4

Overhauling the Technology Environment ........................................................... 5

Designing and Developing NEXEN................................................................................. 6
Introducing Services....................................................................................................................... 6

Making Data Meaningful............................................................................................................ 7

Assigning Accountabilities for IT Services............................................................... 9

Transforming the Business..................................................................................................... 12

Looking Forward................................................................................................................................ 13
 Ross, Sebastian, and Beath | CISR Working Paper No. 416 | 3

BNY MELLON: REDESIGNING IT FOR DIGITAL

TRANSFORMATION

In mid-2016 leaders of large, established financial services

companies were well aware that new digital technologies—
and the fintechs they spawned—were disrupting the industry.
At BNY Mellon, a company that had been a force in financial
services for over 230 years, management believed that
industry changes demanded bold actions.

As modern-day stewards of our institution, we recognize that in

order to thrive, we need to embrace inherent uncertainties, contin-
uously innovate and transform our organization to remain import-
ant to our clients and be successful in the competitive marketplace.1

To address the disruption, in 2012 BNY Mellon leaders had initiated a dig-
ital business transformation built around the company’s mission of “im-
proving lives through investing.” BNY Mellon delivered products and ser-
vices across every step of the investment life cycle. Management sought
to differentiate the company by reimagining the customer experience
across every one of those steps. This would mean providing seamless
access to all BNY Mellon products, as well as to complementary products
from many fintechs and other partners. It would also mean redesigning
customer interactions to drive personalized insights from real-time data.
Technology was a critical component of the BNY Mellon vision. The
company was developing NEXEN, a platform that facilitated an integrated
view of its products and enabled rapid introduction of internal, customer,
and partner solutions.

NEXEN embodies innovation, both in its use of leading-edge technol-

ogy and its establishment of a digital ecosystem for financial services.
We believe NEXEN is a real game-changer for us and our clients.2

1  BNY Mellon, 2015 Annual Report, February 26, 2016, p. 2, from BNY Mellon Newsroom,
https://www.bnymellon.com/_global-assets/pdf/investor-relations/annual-report-2015.pdf.
2  Ibid., p. V.

This case study was prepared by Jeanne W. Ross and Ina M. Sebastian of the MIT Sloan Center
for Information Systems Research (CISR) and Cynthia M. Beath of the University of Texas at
Austin. The case was written for the purposes of class discussion, rather than to illustrate
either effective or ineffective handling of a managerial situation. The authors would like to
acknowledge and thank the executives at BNY Mellon for their participation in the case study.
© 2017 MIT Sloan Center for Information Systems Research. All rights reserved to the authors.
 Ross, Sebastian, and Beath | CISR Working Paper No. 416 | 4

Four years into the transformation, BNY Mellon had implemented key elements of NEXEN. As company leaders
started to take advantage of growing digital capabilities, they felt that the company was on the brink of generat-
ing dramatic benefits.

BACKGROUND
The Bank of New York was founded in 1784 by Alexander Hamilton, a Founding Father of the United States.3 A
2007 merger with Mellon Financial Corporation created The Bank of New York Mellon Corporation, commonly
referred to as BNY Mellon, which in 2016 was the world’s largest custodian of financial assets and one of the
world’s largest investment management companies. In December 2016, the company claimed 52,000 employees
and assets of $31.5 trillion under custody, administration, and management.4
Reflecting its history of acquisitions, BNY Mellon had traditionally operated in product silos. Although these silos
had allowed individual business units to succeed, the net effect was suboptimal.

Today, the clients that consume more than one product feel like they're dealing with separate companies.
—Jim Walker,
Service Leader, Enterprise Business Architecture

BNY Mellon’s transformation was targeted at creating a more integrated, more helpful customer experience. The
company intended to leverage digital technologies to deliver that experience.

ENVISIONING A DIGITAL COMPANY

In 2011, Gerald Hassell became Chief Executive Officer and Chairman of BNY Mellon. One significant area of
focus for Hassell was ensuring that the company remained an industry leader well into the future. Realizing that
technology was the crucial enabler for BNY Mellon’s continued strength, he brought in Suresh Kumar, Chief Infor-
mation Officer at Pershing (a BNY Mellon subsidiary) as corporate CIO to help envision the company’s future and
build a strategy to get it there.
In his tenure at Pershing, Kumar had led the implementation of a new technology platform that allowed IT to
operate as a value-added utility. He and his team had reconceptualized IT as a set of services—a radically new
paradigm for managing technology at Pershing.

In those days, people looked at you like you were crazy when we talked about technology services.
You had to get past that hurdle of just educating people. At Pershing it took about three years before
the start-up costs started to pay back, in terms of people finally saying, “Now I get it. Now I see why
this was important.” Then there was that mass rush of buy in, because people started to see that this
actually does help them to develop things faster. —Jim Walker

Walker, who followed Kumar to BNY Mellon,5 estimated that the transformation at Pershing took eight years.
Notable outcomes included significantly lower IT costs and much faster digital innovation. By 2012, Pershing was
regularly winning awards for IT-related accomplishments like international service excellence, client satisfaction,
and best mobile investment application.6
Armed with the lessons he learned at Pershing, Kumar set the ambitious goal of making BNY Mellon the indus-
try leader in technology and client experience. To do so, he looked outside of the financial services industry for

3  “Who We Are,” BNY Mellon, https://www.bnymellon.com/us/en/who-we-are/.

4  “4Q16 At a Glance,” BNY Mellon, December 31, 2016, https://www.bnymellon.com/us/en/investor-relations/at-a-glance.jsp.
5  To ensure the cultural knowledge transfer from Pershing to BNY Mellon, Kumar brought several other IT leaders with him from Pershing,
including Lucille Mayer, Head of Client Experience Delivery and Global Head of BNY Mellon Innovation Centers; Jim Walker, Service Leader,
Enterprise Business Architecture; and Neil DiCicco, Product Manager, NEXEN Gateway.
6  “Awards,” Pershing, https://www.pershing.com/about/awards.
 Ross, Sebastian, and Beath | CISR Working Paper No. 416 | 5

inspiration, immersing himself, his technology teams, and even the company’s top executives in the emerging
technologies and unique collaborative culture of Silicon Valley.
The path forward for BNY Mellon quickly became evident: Kumar proposed to digitize the company, centered on
an open-source digital platform that would allow the company to accumulate a growing inventory of value-add-
ed, digitally enabled business services.

This whole strategy is about creating an engine that’s capable of understanding what [internal and
external] clients want, and capable of building something—not something perfect, but something like
a “step one”—and then you give it to the client, and you learn from that.
—Suresh Kumar, Chief Information Officer

To that end, Kumar offered the vision for NEXEN, a digital platform that would serve as a single source of truth
for transactions, processes, products, and relationships. He described NEXEN as a constantly expanding set of
capabilities. The architectural design for NEXEN did not offer an end state; it would evolve.

We know that change is coming. It has been coming. What we can do as an organization is make sure
we have the right building blocks, the right processes, and the right people, and we have willingness to
try something new, to fail, and to leverage our client’s involvement to understand. —Suresh Kumar

Ultimately, NEXEN would change the way BNY Mellon did business. Members of the executive committee quickly
saw the importance of NEXEN’s capabilities in enabling BNY Mellon to deliver on its strategy.

The vision for NEXEN is aligned to our business strategy. NEXEN provides a technology platform to de-
liver the full suite of BNY Mellon business solutions and easily integrate third-party solutions across the
investment process. NEXEN propels us forward towards our goals of being the highest-value provider
of investment services globally, the industry productivity, quality and client experience leader, and the
investment industry leader through a client-driven lens. —Brian Shea,
Vice Chairman and Chief Executive Officer, Investment Services

Kumar believed the change would start within IT. In 2016, he was pursuing IT changes on three fronts:
1. Overhaul of the technology environment, including new hardware, new vendor arrangements, and new reusable
applications
2. Instrumenting of workflows, to ensure data accessibility and meaningfulness
3. Assignment of clear accountabilities, to empower individuals to create and improve business and technology
services

At Pershing, Kumar had an IT unit of 1,800 employees. In his new role, Kumar oversaw a staff of 13,000. It was
this team that would deliver and run the engine that would transform BNY Mellon into a digital business.

OVERHAULING THE TECHNOLOGY ENVIRONMENT

Over the years, as BNY Mellon had built and acquired businesses, it had adopted IT applications to support each
business’s products. These product-aligned applications were built on an assortment of often outdated technolo-
gies. To build the NEXEN platform, the company first needed to provide a more powerful and adaptive technolo-
gy infrastructure—one that separated application development from infrastructure choices.
Toward that end, the technology team introduced a hybrid cloud, called BXP (BNY Mellon Extreme Platform). An
evolution of a platform as a service solution that had originated in Pershing, BXP established a set of critical infra-
structure services such as processing, storage, networking, and security, some provided internally and others
by vendors. BXP allowed IT to consistently optimize the technology infrastructure without disturbing existing
 Ross, Sebastian, and Beath | CISR Working Paper No. 416 | 6

applications. Meanwhile, application developers could call on infrastructure services as needed rather than build
applications to run on particular infrastructure technologies.7

Ultimately, our hybrid cloud is getting our application developers out of the business of understanding
the infrastructure. They don't need to! Just like with AWS [Amazon Web Services], they ask for capacity
and performance. [Developers] don't need to know what's happening in the cloud infrastructure, be-
hind the scenes. This makes us portable. —Lucille Mayer,
Head of Client Experience Delivery and Global Head of BNY Mellon Innovation Centers

In its third generation in mid-2016, BXP would continue to evolve. But when BXP was introduced in 2012, Kumar
and his team had already started to create a plan for what would soon be known as NEXEN.

Designing and Developing NEXEN

At the center of the NEXEN target state was the NEXEN Gateway, a single portal for both employees and custom-
ers providing access to all of the company’s products and services. [See appendices 1 and 2 for a comparison of
BNY Mellon’s legacy environment and the key components of NEXEN.] The NEXEN Gateway was revolutionary
because as the company had built out applications for each of its products, it had designed separate customer
and employee interfaces for each application. NEXEN would be replacing individual portals for products like
clearing services, broker-dealer services, hedge fund services, and treasury services.

There are multiple portals, multiple user interfaces. Officially we usually say about sixteen…but there
are also others, less prominent. —Lucille Mayer

BNY Mellon was gradually migrating its existing applications from their product-aligned portals to NEXEN Gate-
way. Some of the businesses’ unique applications were relatively easy to move onto the new gateway. Most
applications, however, had to be refactored (i.e., recoded).

When we migrate features from the legacy portals to the Gateway, we decompose the functions, we
make it an API component, and then we instrument it, so we can check the performance of the code.
We have performance standards on the Gateway, which we've never had before. If it’s not good
enough to go to production, we say, “Let’s go back and refactor it.” —Lucille Mayer

Introducing Services
A critical step in refactoring was identifying and extracting common business services. A common business service
was a unit of functionality that many products needed (e.g., opening an account, completing a payment, reconciling
a transaction, selling an equity instrument). Historically, such functionality had been developed within each product.
This localized approach had created significant non-value-adding redundancy in the company’s IT applications.
Lucille Mayer’s team was charged with developing common business services and making them available as
APIs through the NEXEN Gateway. By developing a repository of common business services, the company would
reduce redundancy and accelerate development.

If you think about it in composable terms, you want to get to the place where you can actually build
things just using the services that are there. —John Weir,
Head of Application Platform and Services

As they migrated product-specific applications from business unit portals to the NEXEN Gateway, developers were
asked to recognize where they could apply common business services that Mayer’s team had already made avail-

7  This platform as a service (or PaaS) type of developer environment supported rapid development.
 Ross, Sebastian, and Beath | CISR Working Paper No. 416 | 7

able in the API store. At the same time, Mayer worked with development teams in the business units to identify
new functionality that could be created as a common business service rather than as part of a local application.

Basically, we’d say, “Okay, decompose your application. Now, these four pieces, they're business ser-
vices. Of those four, go build these two and put them into the API store, according to our standards.
You don’t need to build the other two because we either already have [them] in the API store or they're
shared services. Just use them.” —Lucille Mayer,
Head of Client Experience Delivery and Global Head of BNY Mellon Innovation Centers

Recognizing that the migration to NEXEN would involve rewriting [refactoring] much of BNY Mellon’s existing
code, management needed to prioritize and stagger the work. It also meant finding pragmatic technology solu-
tions rather than trying to rebuild all of BNY Mellon’s applications.
If we'd tried to refactor everything at once, it would have taken us a couple of centuries, and things
would change in that amount of time. The approach that we took was to build a front-end platform
to be a single point of integration. Then the existing legacy back end was wrapped in RESTful services.8
Then the people that own those functions can start refactoring them independently, without a central
group taking responsibility for it. —Leon Shklar,
Service Leader/ Architect UI Platform

Although NEXEN was radically changing the technology environment, the bigger adjustment for the IT staff was
the change in work processes. In particular, the pace of change had accelerated.

NEXEN represents a big culture shift in the organization. We now work in an agile development model.
We go to production every other week. You're talking to product managers who had put out a 2016
plan with three major releases a year; now it's every two weeks. —Neil DiCicco,
Product Manager, NEXEN Gateway

Many developers were excited about the possibilities of continuous delivery (as opposed to release management).
But they weren’t necessarily skilled in the new technologies and techniques. IT leaders were investing in both train-
ing and certification programs to ensure that technical staff had the skills to build and support NEXEN, as well as
the underlying BXP base. The speed of development of NEXEN capabilities depended in part on leaders’ ability to
recruit and develop appropriate skills. [See appendix 3 for position descriptions for BXP and NEXEN developers.]

[Developers] come up and tell us, “We want to start it tomorrow!” But we need to ensure they have
the expertise. So we’ve developed an online Coursera curriculum that developers need to take, and
we’re having some do individual training, because there is no magic. If developers don't have the right
background, they're not going to build anything service based or reusable.” —Leon Shklar

MAKING DATA MEANINGFUL

In addition to business applications and common business services, the IT unit was building a set of shared
services to support the efficient and effective flow of data through the company. Shared services included en-
terprise reporting, enterprise data storage, document management, and workflow management. One of those
shared services, Digital Pulse, was particularly important to empowering customers and employees with infor-
mation and insights.
Built in-house by a small, self-funded team, Digital Pulse included a repository that stored selected digital trans-
actions and events for analytical purposes. Individuals in the business units could identify relevant transactions

8  REST (REpresentational State Transfer) is a set of architectural principles that is frequently used in the development of web services.
RESTful APIs allow users to interact with cloud services. “REST (representational state transfer,” TechTarget, http://searchsoa.techtarget.com/
definition/REST.
 Ross, Sebastian, and Beath | CISR Working Paper No. 416 | 8

or events (e.g., web page views, downloads, clicks to subsequent web pages), so that activities could be dis-
played in a customized dashboard. Just as the NEXEN Gateway was transforming customer access to BNY Mellon
products and services, Digital Pulse was transforming how BNY Mellon collected, interpreted, and used data to
achieve business objectives.

Think of it as the analytics as a service component of NEXEN. The dashboards are built using NEXEN
screens, NEXEN look and feel, Gateway, etc. —Gerry Verrilli,
Service Leader Reconciliation Systems and Custody Architecture Services/Digital Pulse Usage,
Trade Capture Process

One of the first enterprise applications of Digital Pulse was the instrumentation of custody systems whereby
every transaction lifecycle event was captured within Digital Pulse. The business could now utilize self-service
analytic dashboards to gain real-time insights.

We're not just capturing transaction data [such as] “it's an equity trade with an associated price.”
We're capturing data detailing the entire process. For example, we capture log file data, key strokes,
timestamps, and workflow. —Jennifer Cole,
Head of Client Collaboration/Digital Pulse

This event-driven data allowed business leaders to better understand the customer experience, opportunities for
operational efficiencies, and risk mitigation in the trade capture process.

If an instruction for a trade came in and it remained in part of the process for too long or it fell out of
one of our straight through processes, we can now analyze it, and proactively understand why. Was it
the region, the security type, the person that processed it, the way it came in, etc., or some combina-
tion? And then [we can] act on that information. —Jennifer Cole

Verrilli designed and implemented a trade capture engine (TCE) that provided a single place to capture and
repair client trade instructions. The TCE was helping BNY Mellon reduce the number of breaks in the company’s
straight through processes, and it engendered trust between BNY Mellon and its clients.

We monitor transaction activity to better utilize our service delivery capacity based on arrival patterns
of client instructions. We leverage the data to determine operating model improvements and how we
can work with clients to improve instruction quality resulting in improved processing time.
—Ranjani Iyer,
Trade Capture Strategy and Implementation

Increasingly, data from trade capture is being analyzed alongside relevant data from other processes. The Digital
Pulse big data analytics platform could access data from more than 140 production systems.

We have a trade capture process, but we also have other processes, such as overnight tri-party repo
market, securities lending, [and] corporate trust. ... Now we have the data in a single ecosystem, and
[we] can draw insights globally across our lines of business, across our clients, across our systems.
—Jennifer Cole

Digital Pulse also supported the company’s Digital Workplace initiative, which aimed to improve the BNY Mellon
employee experience through technology. One application of Digital Workplace was the capture of internal
transactions, which summarized individual employee activities such as travel and expense, and also tracked their
performance goals related to revenue and cost. In June 2016, to promote an evidence-based decision-making
culture, this Digital Workplace service—called “My Dashboard”—was rolled out to IT.
 Ross, Sebastian, and Beath | CISR Working Paper No. 416 | 9

My Dashboard is the way we bring transparency and accountability to all of Suresh's organization.
—Gerry Verrilli,
Service Leader Reconciliation Systems and Cash Architecture Services / Digital Pulse Usage,
Trade Capture Process

As with other NEXEN capabilities, BNY Mellon developed Digital Pulse incrementally and collectively. The Digital
Pulse team grew the data repository by training IT staff in the businesses on how to add content when they saw
opportunities.

A small team created a protocol, a set of standard instructions, a play-by-play to ingest data. We made
it as simple as possible, and then disseminated the work and governed the process. [Now] we host
boot camps and help the business teams write their code correctly and ensure there is value in the pay-
load. The technology team that's responsible for Digital Pulse does not write each one of these inges-
tion protocols because if we had structured it that way, we never would be able to capture 1.5 billion
events monthly like we do today. —Jennifer Cole,
Head of Client Collaboration/Digital Pulse

BNY Mellon’s distributed, incremental approach to the development and use of Digital Pulse and other NEXEN
capabilities accelerated benefits realization while limiting the risks of its transformation initiatives. It also em-
powered growing numbers of people to find new opportunities for value creation at BNY Mellon.

ASSIGNING ACCOUNTABILITIES FOR IT SERVICES

In order to empower more people to build more capability, CIO Kumar redesigned the IT unit. When he arrived,
IT unit resources were allocated to the individual business units. As a result, the business units focused their IT
resources on their specific requirements.

If you wanted to get something done and you had to deliver by a certain time, you wanted to have all
the resources report to you, because you have much more control over what you’re trying to get done.
You built everything yourself. The priorities for each team were determined by the different business
units. The focus was on delivering that business’s solution when they needed it. There wasn’t an over-
arching consideration for how it was being built, whether it was reusing existing components. In the
short term, people were building good solutions, but a few years down the road, we had data centers
full of redundant applications, which is costly and inefficient. —Lucille Mayer,
Head of Client Experience Delivery and Global Head of BNY Mellon Innovation Centers

Kumar restructured the IT unit to rebuild the company around the NEXEN strategy. After that restructuring,
approximately 32% of staff reported to enterprise IT, which took responsibility for enterprise infrastructure and
common NEXEN services. The other staff were distributed to the business units to build local applications, lever-
aging enterprise services as appropriate. [See exhibit 1 for an organizational chart of Client Technology Solutions
at BNY Mellon.] To ensure an effective balance between development and reuse of enterprise versus local ser-
vices, Kumar introduced a new approach to managing IT.
 Ross, Sebastian, and Beath | CISR Working Paper No. 416 | 10

Exhibit 1: BNY Mellon Client Technology Solutions Organizational Chart

Source: BNY Mellon. Used with permission.

In order for us to do this right, we’ve got to have the right people—at least people with a different mind-
set than they had before—and the organizational design needs to change. It can no longer be hierarchi-
cal, command and control. It needs to be flatter and more empowered, and with relatively small teams.
—Suresh Kumar, Chief Information Officer

To signal the mindset shift he was seeking in the IT staff, Kumar began redesigning existing staff workspaces and
building new ones to emulate the team-oriented open workspace design of start-up tech companies. This global
network of Innovation Centers, as they were called, would facilitate more interaction among the teams that sat
within them. It would also facilitate collaboration between Innovation Center members and clients and business
partners. More importantly, Kumar introduced the role of service leader as the IT unit’s key organizing principle.
He assigned his eleven direct reports to three service groups: (1) the Technology Services Group, or infrastruc-
ture; (2) Client Technology Solutions, or shared services and technology product management for NEXEN; and (3)
services specific to the lines of business.
A key challenge in organizing around services was defining the services. Ideally, a service could be isolated in a
way that the service leader had end-to-end responsibility for a deliverable. High-level service leaders, such as
the Alternative Investment Services technology service leader or the Digital Pulse service leader, could break
their services into smaller components—each with its own service leader. The number of services and service
leaders changed as the need to decompose services or the opportunities to consolidate them became clear. For
example, Mike Keslar, Head of Investment Services Technology, had fifty service leaders, each of whom devel-
oped local business services and apps. This number had dropped from seventy-four as Keslar gradually consoli-
dated services that were shared.
 Ross, Sebastian, and Beath | CISR Working Paper No. 416 | 11

Service leaders were, in effect, CEOs of their services. [See exhibit 2 for key elements of BNY Mellon’s service
management culture.] Each service leader maintained a service strategy document with current status and a one-
to three-year strategy for improving total cost of ownership, revenue or usage, resources, and functionality.

Exhibit 2: BNY Mellon’s Service Management Culture

Source: Suresh Kumar, “Fintech: Friend or Foe” (presentation, April 21, 2016). Used with permission.

[If you’re the service lead], you’re the person who’s actually putting together the app stack that your
team is working on. You worry about who your clients are, how well they’re using it, how you are re-
covering the cost of your team, what are the features you need, what’s coming up in your next release.
You’re thinking very much like a software house producing software to be consumed. —John Weir,
Head of Application Platform and Services

This approach to IT unit design made service leaders accountable for the outcomes of their efforts. In addition, it
reshaped the role of IT leaders from directing to coaching.

I’m trying to run [IT] as if the leadership team was a VC, trying to get a bunch of startups to make things
happen. You could think of us as an incubator, with the various service leaders running their fintechs.
—Suresh Kumar,
Chief Information Officer
 Ross, Sebastian, and Beath | CISR Working Paper No. 416 | 12

The services themselves were highly interdependent, so service leaders had to work together and be responsive
to each other. For example, service leaders in Jim Grech’s9 Technology Services Group provided basic infra-
structure services like connectivity and storage that were essential to the business apps service leaders in Mike
Keslar’s organization.

My services are dependent on these other services, and if they aren’t available, or we're having scal-
ability or performance problems, it's evident to the client, but they see it through my applications. So I
have to have a lot of dialog on a regular basis with Jim Grech's service owners. —Mike Keslar,
Head of Investment Services Technology

These interdependencies played out at the highest levels within IT. Some conflicts were inevitable as NEXEN
gradually matured while business needs continued apace. On occasion, Lucille Mayer had relaxed some NEXEN
standards to enable Keslar’s teams to meet urgent business needs. IT executives met regularly to iron out these
kinds of issues and establish priorities.

Suresh has a meeting once a week where Jim Grech and John Weir and Lucille Mayer, as well as my
folks, we all share, for the purposes of assessing each other’s performance and for understanding each
other’s services strategies. This is a dynamic that continues to evolve, because unless all the services
hold each other accountable, this won’t work. That constant interaction, scorecarding, and open dialog
is necessary to advance this model. —Mike Keslar

The service leader model was challenging to implement. Service leaders were measured on user experience,
including how easy it was for other service leaders to consume their services and coordinate with them. The CIO
estimated that early on, only 30–40 percent of service leaders were successful. IT adopted a maturity model to
guide development of service leaders.

We came up with a model that spit out a ranking, 1 to 5. We say, “Hey, if you did these and these
things, that means you are at Level 2 or Level 3.” We use that as a way to set annual goals, as well as
track progress. —Suresh Kumar,
Chief Information Officer

Divisional CIO Mike Keslar reviewed two service leaders each week to check their strategies and track progress.
He hoped to coach service leaders to help them mature. Over time, he hoped to bring non-IT people into these
discussions.

I’m just making sure the service leaders are looking forward, and going through all the right sort
of thought processes, but I really want the businesses partners to be sitting down and talking with
them, too. —Mike Keslar

CIO Kumar wanted everyone at BNY Mellon to think in terms of services:

It’s a mindset. I tell people, “Listen, if I meet somebody after a town hall, and I ask them what service
do they offer, they need to be able to give me the name of the service, they need to be able to explain
what their goals are for 2016, and they need to have an understanding of the cost.” It took us a while
to get this into the vocabulary. Now I'm trying to do the same on the business side. —Suresh Kumar

TRANSFORMING THE BUSINESS

While the BNY Mellon transformation originated within IT, the implications were company-wide. The changes
emanating from the development and use of NEXEN were gradual, touching only a few people outside IT in the

9  Jim Grech was head of the Technology Services Group at BNY Mellon until November 2016.
 Ross, Sebastian, and Beath | CISR Working Paper No. 416 | 13

early going. But eventually, product and line managers within the business units started to recognize—and em-
brace—changes in the delivery of new capabilities.
One of the first businesses to embrace NEXEN was Alternate Investment Services (AIS). AIS’s 2500 employees,
who were located in twenty global offices, supported more than 350 hedge funds and trusts. Frank LaSalla, CEO
of AIS, adopted NEXEN as an ecosystem for external customer relationships. Early NEXEN functionality focused
on the display of customer accounts and transactions, enabling customized views and alerts.

The reason we can get to some of this development is because we’re leveraging some of the founda-
tional functionality that’s been built out. We’re adding some business functionality on top of that, get-
ting to what is never a finish line, but getting to a more mature state along the way. —Sanjay Chojar,
Service Leader, Alternative Investment Services Technology

Business and IT people were working iteratively with AIS’s external customers to develop functionality to address
their needs. They were also engaging external customers in defining requirements for client communications.
But this effort was just the first step in leveraging the NEXEN environment. In the near term, AIS continued to
use established applications (e.g., Geneva for fund accounting, Ipreo for transfer agency), but eventually these
too would be migrated to NEXEN.

We’re overhauling those systems, too. They have to perform optimally, and when you put them in the
NEXEN ecosystem, that’s when you really get the total bang for your buck. That's where we want to be.
Once they are in the NEXEN system, any changes we want to make, we can make, and it will be invisi-
ble to the client. —Frank LaSalla,
Chief Executive Officer, Alternative Investment Services

One of the first NEXEN business services that AIS planned to use was reconciliation. AIS had long performed rec-
onciliation manually, using spreadsheets. LaSalla was anxious to roll out the NEXEN-based reconciliation service
to his organization.

When you tell somebody, “You’re not going to do a reconciliation manually (meaning comparing a
thousand lines on one spreadsheet to another) but we’re going to give you a report, and you're just
going to look at the ten items that are broken”—that's a big deal! —Frank LaSalla

The process of building and adopting NEXEN functionality was slower than AIS leaders would have liked, but it
was inexorable. NEXEN was becoming BNY Mellon’s platform for doing business.

I think most industry-leading organizations have gotten the memo and they know they have to do some-
thing. There are a couple that may be ahead of us, some that may be behind us, but I think we're in the
pack. No doubt, our competitors see it. I think the banking industry in general tends to be slow to adopt
these kinds of things. But I think we're coming to realize that this is a must-have to be competitive.
—Frank LaSalla

LOOKING FORWARD
In mid-2016, BNY Mellon’s API store held forty-eight common business services. Approximately two hundred
developers were using NEXEN, and adoption was accelerating. IT had a schedule for conversion to the NEXEN
platform by business by quarter. More significantly, business CEOs had new goals related to NEXEN (e.g., the
number of APIs used, the number of portals eliminated) that were driving the transformation. Eleven thousand
people were using NEXEN Gateway.
 Ross, Sebastian, and Beath | CISR Working Paper No. 416 | 14

Through 2016, IT had self-funded the investment in NEXEN by cutting IT costs. In two years, they had reduced
costs $152 million annually. Service leaders could show, by service, how much cost had decreased and why. The
consensus among IT leaders was that the transformation was starting to take off.

I think what you're going to see in 2017 is just an explosion of the adoption of this service culture, as
well as the progress made on the NEXEN framework. Our clients are going to see more and more that
this is viable and this is going to work. I think you're going to see the service strategies and culture and
the NEXEN framework come together. It's going to be very powerful. —Mike Keslar,
Head of Investment Services Technology

The ultimate goal was to create a digital ecosystem of services linking BNY Mellon with its customers and exter-
nal partners. All ecosystem parties could develop services and put them in the API store, where they would be
used, and reused, by multiple stakeholders.

Our opportunity is to get people to contribute to NEXEN. First we are trying to get the 13,000 internal
IT people on board, then we are trying to get our business people, then we are trying to get the clients,
then we are trying to get the fintechs. —Suresh Kumar,
Chief Information Officer

This goal would continue to frame the IT unit challenge—and larger business opportunity—as BNY Mellon con-
tinued its digital transformation journey. 

Appendix 1: Legacy IT Environment

Source: BNY Mellon. Used with permission.

 Ross, Sebastian, and Beath | CISR Working Paper No. 416 | 15

Appendix 2: Target IT Environment

Source: BNY Mellon. Used with permission.

Appendix 3: Sample BNY Mellon IT Job Postings, Q1 2017

Job posting for a BXP developer: BXP is a platform as a service providing a self-service application runtime
environment for BNY applications. We will be running all apps in the future and placing them in various clouds.
Our goal with our next version, currently in development, is to embrace containers and public cloud and create
a great user experience for BNYM developers. This means we are using forward-looking technologies to lead
BNYM application development into a containerized future. This tech includes Docker, Mesos, Kubernetes, and
other incredibly awesome things.
Job posting for a NEXEN developer: The NEXEN Development Team is a collaborative group of passionate and
talented engineers based out of our Jersey City Innovation Center. We are actively working on designing and
implementing a comprehensive service delivery platform that not only provides our clients with a consistent and
efficient way to access our services, but gives them an ability to make our services available within their own
platforms. We embrace Agile methodology and Open Source technologies. We are firm believers in continuous
integration and delivery. Our stack includes Java, Spring, REST, Apache, Tomcat, SQL and NoSQL databases, and
AngularJS. We are working to replace multiple legacy portal applications with a new, comprehensive, next-gen-
eration platform. The platform design is as an ecosphere of business services that can be exposed to end users
through a responsive UI and/or RESTful API services.
Source: Internet job boards.