Masternet, Hemant Gaule

IT Project Management Failure of MasterNet, Bank of america

Presented ByGroup 9, Section C

MasterNet  Was to consist of a large trust accounting system, called TrustPlus  Eight smaller systems that augmented the core system  Each system was to provide the full complement of trust automation

and would be accessible to remote clients on a real-time basis.

 BofA ultimately wanted to sell the trust accounting services of the

system to small and mid-size banks

 Initial budget was 420 million, due to complete by December 31,

1984

Failure  One and a half years behind the initial deadline, the bank

believed the project was making progress  More and more bugs came up every day and employees were

working overtime to fix all the issues, with no results.  The system was finally put to real work in March 1987 and

didn’t perform as promised  The bank fell three months behind in delivering account

statements

Failure  It began to lose credibility with customers, and its trust business

deteriorated

 Corporate customers withdrew accounts worth $4 billion

 Finally, the bank of America’s management cancelled the project and

transferred 95% of the $34 billion trust accounts, to service bureau system in Seattle

 Remaining 29 clients, representing BofA’s largest and most complex

accounts were given outright to State Street Bank and Trust Co.

 The whole trust business was lost

Risk Assessment  Financial Risk  Completion of work – Failure of MasterNet forced the bank to

perform services in an ad-hoc manner. Misreported transactions had to be sorted out by hand  Inaccurate Transaction Recording – Since the system

recorded transactions inaccurately the bank had to resort to “blind settling”, which resulted in overpayments to counterparties.  Inaccurate Asset Tracking – MasterNet was designed to track

the asset position of its accounts. BoFA managed assets worth $38 billion and exposure to mistakes was significant.

Risk Assessment  Financial Risk  Loss of Managed Assets – Managed assets had slid from $38 bn

to $34 bn which represented an approximate revenue loss of 10%.

 Loss of the Business – The giveaway of the institutional business

to Seattle-First National and State Street represents a total loss of all future cashflows.

 Loss of Peripheral Business – The press coverage of the

MasterNet project damaged BofA’s reputation.

 Litigation and Fines - In the regulated trust business, banks can

be fined by the government for not adhering to the regulations.

Risk Assessment  Technical Risk  The development task was enormous and extremely expensive.  Everything had to built from scratch and  New hardware, software and communications had to be developed

and integrated  This led to high technical risk.

Risk Assessment  Project Risk  Of people managing MasterNet project, some lacked technical or

banking knowledge  During the period of MasterNet implementation BofA

underwent management shuffling which resulted in loss of continuity and control  The project lacked guidance and direction of a strong upper

management

Risk Assessment  Functional Risk  The diversity of interests in MasterNet caused developers to

accommodate all needs instead of limiting functionality  There is evidence that system functionality was not sufficiently tested.  Emergence of increasingly sophisticated financial instruments and

the broad needs of many groups.  In an attempt to satisfy everyone, the project became bogged down in

massive amounts of code that contributed to its downfall.

Lessons Learned  Unenthusiastic upper management: That lacked

motivation, dedication and technical soundness to guide the project strongly  Continual investment: Through the 1970s, BofA neglected

its systems development and expected to jump back in and immediately catch up with its competitors  Disregard: for Modular design, limited functionality, and full-

load testing