IT Project Management

Failure of MasterNet, Bank of america

Presented By-
Group 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