More than 10 years ago, Jack Brennan, with his CIO by his side, told the assembled ranks at The Vanguard Group that there was no such thing as IT and business\u2014just business. On Brennan\u2019s watch as chairman and CEO of Vanguard, IT and business have joined forces on a massive integration project that\u2019s replacing disparate, siloed systems and databases with a single Web portal supported by an enterprise database. Enabled by disarmingly simple technology, this project is driven purely by a business need to give customers seamless service, regardless of channel. Virtual from the onset, Vanguard has always plied its wares\u2014mutual funds, annuities, 401(k)s and the like\u2014and served its customers by phone and by mail instead of face-to-face. When the Web came along, the decision to do business online was a no-brainer. By 1998, customers were using Vanguard.com to open new accounts, purchase and redeem fund shares, and receive electronic statements. The Valley Forge, Pa.-based company continued to invest heavily in its website as many of its high-value clients migrated to the Web to manage their portfolios. It was a wise investment. Today, Vanguard\u2019s Web customers tend to invest 150 percent more and turn over less frequently than non-Web customers, while the cost to serve them online is just 5 percent of what it costs when a human is involved. However, Vanguard did so well designing top-notch Web tools that it soon outstripped the systems used by its employees (or crew members, as the company calls them). Vanguard had itself a classic case of channel disparity.When customers with online accounts called Vanguard\u2019s toll-free number for help in the late 1990s, they spoke with employees who were relying on 13 old, siloed client\/server systems. Those systems had been built to serve different lines of business and therefore didn\u2019t interoperate. Customer service employees had to toggle among as many as 10 different systems to answer customer inquiries or, worse, transfer callers to other employees because they couldn\u2019t find the answer themselves. "We made a very robust channel, but all the other channels lagged behind, and we were putting our associates at a disadvantage," says Managing Director of Information Technology Tim Buckley. "Clients had an enterprise view of their data, more robust capabilities and a more efficient channel." In short, customers had a clearer, more comprehensive view of their holdings through the website than did the Vanguard employees who were supposed to be helping them. Something had to change. "We were staring at a large investment to replace [the crew members\u2019] platform," says Jeff Dowds, principal of Vanguard Direct Investor Systems and project lead for the integration effort. Many in Vanguard\u2019s shoes would have heeded the siren call of CRM vendors. As Dowds, Buckley and the late Bob DeStefano, Vanguard\u2019s longtime CIO until his death in 2001, stared at the numbers, though, a radically different approach suddenly seemed to make sense. After much internal debate, they persuaded themselves and Brennan that the customer service employees should use the same Web interface that had lured so many of its customers online in the first place.If It\u2019s Good for the Customer...It was a brilliantly simple solution. Using the same interface internally and externally would result in channel parity and seamless customer service, and let Vanguard avoid the expense of acquiring and integrating a third-party CRM system. It would also yield jaw-dropping annual savings by letting all channels capitalize on Vanguard.com\u2019s use of a single enterprise database and its enablement of straight-through processing. That meant any change entered online would be made automatically in the appropriate back-office systems with no human intervention. Buckley jokes that Dowds pushed hard for the idea out of pure self-interest, since managing only one system would make his life easier.This decision ultimately led Vanguard to a three-tiered architecture: the internal\/external Web interface linked to standard midtier business objects running on a single enterprise database for all channels. "People made the case, and it seemed to me so obvious after the fact that I wondered why didn\u2019t I think of that," says Brennan. "I wish I had."The key reason for using the Web interface internally, in Brennan\u2019s view, is that it lets Vanguard offer seamless customer service, regardless of which channel (or channels) a customer uses. "It gives us clarity internally and externally so the crew member and client are on the same footing," he says. "That\u2019s very important." Using the same interface makes it easier for employees to talk with customers about what they\u2019ve done online. Since they know the website so well, employees are also more apt to encourage customers to use it. When customers are handling mundane tasks like address changes online (which lowers Vanguard\u2019s costs), customer service reps can devote more of their phone time to higher-value conversations about investments."There\u2019s a benefit for everybody if the routine stuff happens on the Web and the value-added happens with humans accentuated by the Web," says Brennan. Vanguard\u2019s customers are indeed gravitating to the Web. Buckley says that in 1999, Vanguard handled 100,000 calls a day. Today, it gets 40,000 calls daily\u2014and 150,000 log-ons to Vanguard.com. More than half of Vanguard\u2019s transactions are now conducted online. Using the Web interface as the corporate portal also changes the focus of Vanguard\u2019s training efforts. Because the Web interface was designed to be intuitive (after all, customers don\u2019t get trained), Vanguard no longer has to subject employees to four to six weeks of training on the old client\/server systems. "You don\u2019t waste your time training people on systems," says Buckley. "Instead you train them on investments, which is where we want to spend the time." Having an intuitive interface also helps when call volumes and wait times spike and Vanguard activates its so-called Swiss Army, calling on all qualified personnel (from the CEO on down) to help man the phones....It\u2019s Good For The EmployeeIronically, the very intuitiveness of the customer Web interface made the customer service employees wary. How could a system designed for customers be robust enough for on-the-job use eight to 10 hours a day? Dowds and his team overcame that reluctance by turning the customers\u2019 confirmation page into a power user page. Employees can go directly to the summary page that lets customers review and edit information before they confirm a transaction. The internal version of the website also includes two CRM tools: an extensive contact history (customers only see an abbreviated version) and a coaching tool from Epiphany that helps employees suggest relevant tools and services, such as the website\u2019s personal financial planning tool, for a given customer. Extensive usability testing confirmed that giving employees access to everything they need to help clients through a single Web interface would make their lives easier. As of May, when 90 percent of the Web desktops were scheduled to be fully rolled out internally, toggling between systems became a thing of the past. By the end of 2004, Dowds and his team will have retired at least 12 client\/server applications.By turning the confirmation page into a power user page and adding the two CRM tools, Vanguard was able to reuse about 80 percent of the Vanguard.com interface internally. Besides saving the expense of buying and integrating a third-party CRM system, it greatly simplifies internal system maintenance. Dowds and his team discourage requests to modify the internal page because each variation must be designed, programmed and tested. "The moment that there\u2019s the outside page and an inside variant of that, you lose the merit of a common user interface," he says. "There must be an absolutely justifiable reason for variations." Painless ProcessingOne of the most tantalizing benefits of using the Web interface internally is that other channels benefit from the straight-through processing built into Vanguard.com. Although an early version of the site seemed fully automated, customer data still had to be printed out, which triggered a five-step manual process to reenter data into back-end systems before processing a transaction. "It would have been no different than if you had sent it to us through the mail," says Dowds. "From a processing perspective, the effort inside Vanguard was the same."In expanding the Vanguard.com site, Buckley\u2019s team developed objects that let Vanguard fastidiously apply standard rules at the point of data entry. That way, information customers type online goes directly into the back-end systems with no employee intervention. Similarly, when employees enter data through the Web interface, it too goes straight through instead of triggering a manual, back-office process. That process eliminates both the hefty labor cost of having employees rekey data and the inherent opportunity to introduce errors. Dowds says that 98 percent to 99 percent of Web-originated traffic requires no support from a Vanguard employee. "It\u2019s just a very cheap way to do business," he says. "Whenever we add new functions and features, it\u2019s a guiding principle in our design approach that it has to go straight through. It\u2019s just the way we do things now." Reusing the middle tier of standard business objects initially developed for the Web makes maintaining channel parity easier and less expensive. Since all channels use the same objects, Buckley\u2019s team can add a new feature or make a change once in an object, and that change will be reflected across all channels. Although Vanguard\u2019s interactive voice response system can\u2019t make use of the Web user interface, it too will eventually be tied in to the standard business objects.One Big DatabaseThe introduction of transaction capability on Vanguard.com also marked the beginning of the company\u2019s push toward an enterprise database. Since a plethora of systems and databases had sprung up to support Vanguard\u2019s different lines of business, a single customer\u2019s data might have been stored in 10 different spots. That data was often defined differently from one database to the next, necessitating a lot of what Buckley calls "non-value-added reconciliation" between databases. The effort to eliminate disparate databases is expensive and not always visible, Buckley says. It was well worth the hassle though, he adds, since the existing tangle of databases was expensive to keep consistent and accurate. So as the IT team expanded Vanguard.com, it also created a comprehensive customer database that would be the single repository of all Vanguard\u2019s customer data. Identifying consistent definitions for some 4,000 data points wasn\u2019t easy. After all, the businesspeople who built those disparate systems think about customers differently. Still, Dowds doesn\u2019t regret the hours spent hammering out a consensus. As a result of all that wrangling, Vanguard is in the process of retiring 12 databases, which makes for more consistent, seamless and faster service for clients and employees alike. The single database has cut response time for Web-based clients in half, Dowds says. Employees\u2019 response time has been slashed by 60 percent to 70 percent. The task of updating and maintaining databases is also exponentially easier. With fewer systems and databases to administer, Vanguard has been able to trim its roughly 800-person IT staff by about 75 through attrition. "Four to five years out, we will have less software to support and less data to support," says Dowds. "The fact that we have to manage this data once\u2014rather than 10 times\u2014that\u2019s an annuity for life. A little painful to get there, but...."Ending BalanceAlthough Vanguard undertook this integration project primarily to improve customer service and achieve channel parity, the project is reaping impressive savings. "In cost savings alone, this will have paid for itself in three to three and a half years," says Buckley. Savings from straight-through processing and lower systems maintenance costs are expected to add up to $30 million annually. Integrating systems is also likely to generate revenue. By improving service, Vanguard can increase customer loyalty, an important advantage in the turbulent market. Early results are so promising that Buckley says he should have done it sooner. "It would have been great to do it concurrently as we built out the Web," he says. Although the price tag on this project was undeniably large, Brennan believes it\u2019s been a wise investment. While Vanguard wouldn\u2019t specify the overall costs, with the annual operating cost savings of $30 million, the internal rate of return is more than 20 percent. "There are a ton of benefits, but it\u2019s not cheap. You\u2019ve got to be pretty confident that you\u2019re going to get a good ROI on this," he says. "I\u2019m a numbers guy, and I\u2019m very confident that we\u2019re already getting very good ROI on the Web broadly and on the integration effort as well. The integrated channel concept is absolutely core to who we are, and will be forever."