problems were lightweight rather than dramatic and The company plans further improvements in this
far-reaching, and that his decisions were based on area so that brokers will have access to all relevant
protecting his job rather than improving the firm. client data at once, including transaction history,
He was succeeded by John Mack, a former Morgan contact history, and portfolio performance.
Stanley president who had left the company in 2001 Consolidating all of these features will require
as a result of a power struggle with Purcell. several years of work. The company also rolled out a
With new leadership in place, Morgan Stanley has new tax-reporting application that automatically
finally begun to address the issue of technology in its reconciles gains and losses and allows users to
Retail Brokerage division, which has been renamed download information from its client Web site into
the Global Wealth Management Group. In October popular tax programs. Before that time, customers
2005, the firm hired Eileen Murray as its head of had to wade through a confusing maze of figures to
Global Operations and Technology. She works add up gains and losses on their year-end tax reports.
directly under Chief Executive John Mack, with In response to customer demands, Morgan
whom she has a strong professional history. Murray Stanley scheduled an upgrade of its Web site for
has committed to boosting Morgan Stanley’s invest- May 2006, which analyst Doyle described as a par-
ment in technology for retail, saying, “We expect to ticularly weak area for the firm. The services avail-
make substantial improvements” that “will ultimately able online to Morgan Stanley customers dated
help our financial advisors better serve our clients, back to pre-2000 technology. Doyle sees the Web
while also helping our clients better manage their presence as a major challenge because Morgan
relationship with us.” As proof, the technology and Stanley has been focusing more on its wealthiest
operations budget for the Global Wealth Management clients than on the rank-and-file small investors.
Group for 2006 exceeded $500 million. Mack also The firm had previously assumed that these top
brought in a new boss for the group. It is now under clients weren’t interested in online services
the leadership of James Gorman, who performed a because they get the direct attention of brokers
successful parallel makeover at Merrill Lynch’s (whereas investors with portfolios under $100,000
brokerage division. must deal with call centers). Research by Forrester
Mack has been under some pressure to sell the has shown the opposite to be true: wealthy
retail division, a choice he has been reluctant to customers actually want more hands-on control of
make. He subscribes to the view that ownership of a their portfolios, and therefore want more tools and
retail brokerage business is an investment in the firm services available online. These customers prefer
because, in addition to providing revenue from to approach their brokers with their own ideas.
individual investors, it gives Morgan Stanley a direct Gorman, as head of retail brokerage, must not lose
channel for selling its own investment banking sight of the significance that online technology
products. Mack’s goal is to increase the profit margin holds for his division.
of the Global Wealth Management Group retail Mack and Gorman must also take measures to
brokerage, which ranges from 11 percent to 20 repair the schism that developed after the merger
percent, which would make it as profitable as rivals’ with Dean Witter. Mack has been addressing the
businesses. issue of a “one-firm culture.” The firm is trying to
Mack has stated both publicly and privately that stem the loss of productive brokers. Increasing
some of Morgan Stanley’s businesses had not salaries and expense accounts are not enough.
received the technology they needed, and he intends The top brokers still feel they can fulfill their earning
to make the necessary investments. In the firm’s potential better and hold jobs longer at other firms.
2005 annual report, Mack said, “We are committed to It’s not just that their print queue gets jammed; it’s
addressing underinvestment,” and “We’re going to that they question how much the company values
upgrade our technology platforms and provide our them if it’s not willing to support them in such a way
financial advisors and investment representatives that they can best perform their jobs.
with a tool kit that is as competitive as that of our By the spring of 2006, signs of progress were
leading peers.” evident. In June 2006, Morgan Stanley generated
Some of the overwhelmed broker desktop second-quarter net income of $1.96 billion. The
workstations have been replaced. The new systems retail brokerage division posted $157 million in
are better integrated with backend systems so that pretax profit, the largest profit since the first quarter
brokers have a better view of client portfolios. of 2005.
Chapter 1 Information Systems in Global Business Today 3
Sources: Edward Cone, “Morgan Stanley: Trading Sideways,” systems? (Review the six strategic objectives of
“Return on Noninvestment,” and “Follow the Money,” CIO Insight, information systems discussed in section 1.1.)
April 4, 2006; “Morgan Stanley’s Mack Attack,” Business Week,
June 22, 2006; George Stein and Gregory Cresci, “Morgan Stanley 4. If you were James Gorman, the new head of
Soars as Mack Delivers in 2nd Quarter (Update2),” Global Wealth Management Group, what informa-
Bloomberg.com, June 21, 2006; and www.morganstanley.com, tion systems would you invest in? Why? Do you
accessed June 21, 2006. think Morgan Stanley’s plans for an integrated
client information system are worthwhile? [Hint:
CASE STUDY QUESTIONS Think of the services you would like to receive
1. Why did Morgan Stanley underinvest in informa- from your banker or stock broker.]
tion technology? 5. Aside from new systems, what changes in man-
2. Why was the merger with Dean Witter disruptive agement and organization are required to restore
for the company? revenue and profit growth at the Global Wealth
3. Why was Dean Witter and Retail Brokerage a Management Group?
good place to increase spending on information