Month: March 2017

More Than You Want to Know About State Street Bank’s Technology Strategy Part 2

This article is a continuation of my earlier analysis (Part 1 here) where I waded into State Street’s strategy for Technology Infrastructure and IT Capability and Staffing. In this second part of my three part series I will broach the company’s strategy for information risk and security, stakeholder requirements and project return on investment. State Street’s cloud implementation and virtualization initiative is a good example of business strategy/need influencing the firm’s information technology strategy.

State Street: Strategy for Information Risk & Security:

State Street has acquired a substantial client base and houses sensitive financial data that is subjected to regulatory scrutiny. Given the sensitive nature of its data and operations, the cloud infrastructure that the bank chose to implement was that of a virtualized private cloud. Former Chief Innovation Officer Madge Meyer stated, “We’re totally virtualized, our network is a virtual private IP network. Our servers are 72 percent virtualized and our storage is all virtualized for structured/unstructured data” (Burger, 2011). For State Street, a private cloud offers the benefits of a public cloud with the added benefit of being owned and operated by the bank (i.e. exclusive dedication). While no architecture is 100% secure, the risk of an information breach is mitigated as the controlling organization’s data can be completely isolated from the data of another organization.

Additionally, the cloud implementation and virtualization initiative gave rise to shared services that are centrally managed but enforced across the enterprise. This single security framework can be applied across all of the application touch points precluding the need for multiple security frameworks across disparate systems.

State Street: Strategy for Stakeholder Requirements, Testing & Training/Support:

The architecture group within State Street works together with the business to tie together strategic objectives. The idea to embrace cloud implementation (and the additional data functionality it enabled for the bank’s clients) emanated in the architecture group. Thus, the business and the board of directors were key stakeholders in the initiative. The board of directors has a special dedicated technology committee that receives “a complete rundown of the technology strategy and the work that we (IT group) are doing in terms of digitizing the business” (High, 2016). According to Perretta, “They (architecture group) created a proof of concept with an eye toward: Here are the capabilities that our entire organization is going to need, here are the technologies that we can deploy, and here’s how to make them operational” (Camhi, 2014).

State Street started migrating its new cloud applications to production by selecting those with low volume and low complexity and then gradually ramped up to migrating the more complex applications (McKendrick, 2013). Dual pilots of the cloud architecture were conducted using roughly 100 machines. Once favorable results were achieved, a larger pilot consisting of 500 machines was stood up. Approximately 120 use cases were tested in the pilot in order to let the development team understand the failure points of the system (Tucci, 2011a).

The standardization and virtualization aspects of the cloud infrastructure the bank implemented was conducive to agile development. Virtual machines on the cloud allowed development teams to spin up multiple server instances as opposed to physically installing a new box in the legacy non-virtualized environment. Contention between teams waiting for server use is virtually eliminated. “When adding cloud computing to agile development, builds are faster and less painful, which encourages experimentation” (Kannan, 2012). The relative ease at which development and testing servers can be instantiated promotes “spur of the moment” experimental builds that could yield additional innovative features and capabilities.

State Street: Project ROI and Key Success Measures:

Prior to State Street’s cloud infrastructure upgrade initiatives, potential operating cost savings were projected to be $575 million to $625 million by the end of 2014; which State Street is on track to achieve. “The bank had pretax run-rate expense savings from the initiative of $86 million in 2011, $112 million in 2012, and $220 million in 2013” (Camhi, 2014).

When the IT group makes a budget request for substantial investments, they must lay out the potential benefits to the business. Some of the benefits are timely payback, regulatory compliance, data quality improvement and faster development cycle times (providing features and functionality with re-use and less coding). The ultimate aim is to connect the IT strategy to business results in a way that yields advantage for the organization.

In 2011, State Street published a matrix on the advantages of cloud computing vs. traditional IT. The following figure provides insight into State Street’s IT and business unit considerations with respect to making an investment in a fixed or variable cost infrastructure (Pryor, 2011).

Traditional IT Cloud Computing
Cash Flow Hardware / software purchased upfront Costs incurred on a pay-as-you-go basis
Risk Entire risk taken upfront with uncertain return Financial risk is taken incrementally and matched to return
Income Statement Impact Maintenance and depreciated capital expense Maintenance costs only
Balance Sheet Impact Hardware / software carried as a long-term asset Cost incurred on a pay-as-you-go basis

From a funding perspective, State Street employs the chargeback funding method for its private cloud initiative. Architectural capabilities empower end-users to automatically provision virtualized servers for usage. There are policies in place that determine how long a virtual server may remain instantiated and how much load balancing is performed across the infrastructure. Server usage is monitored, measured and chargeback is calculated based upon end-user processing time. Subsequently, the usage is billed back to the end-user’s respective business unit. “In short, it puts a management layer of software over the virtualized servers and operates them in a highly automated, low touch, fashion” (Babcock, 2011).


Babcock, C. (November 9, 2011). 6 big questions for private cloud projects. Information Week. Retrieved from Factiva.

Burger, K. (October, 1, 2011). Riding The Innovation Wave; Technology innovation has been key to State Street Corp.’s success, according to chief innovation officer Madge Meyer — and she’s been willing to take some risks to prove it. Bank Systems + Technology. Retrieved from Factiva

Camhi, J. (2014). Chris Perretta Builds Non-Stop Change Into State Street’s DNA. Bank Systems & technology. Retrieved from

High, P. (February 8, 2016). State Street Emphasizes Importance Of Data Analytics And Digital Innovation In New Role. Retrieved from

Kannan, N. (August 20, 2012). 6 Ways the Cloud Enhances Agile Software Development. CIO. Retrieved from

McKendrick, J. (January 7, 2013). State Street’s Transformation Unfolds, Driven by Cloud Computing. Forbes. Retrieved from

Tucci. L. (July, 2011a). In search of speed, State Street’s CIO builds a private cloud. Retrieved from

Michael Porter’s Generic Differentiation Strategy Explained

I previously touched upon Michael Porter’s generic cost leadership strategy here. Porter asserts that a business model can’t offer the best product or service at the lowest price and maintain a sustainable competitive advantage. An organization employing a strategy that attempts to be “all things to all people” will become stranded in mediocrity (i.e. earn less than industry average profitability).

A differentiation strategy advocates that a business must offer products or services that are valuable and unique to buyers above and beyond a low price. The ability for a company to offer a premium price for their products or services hinges upon how valuable and unique these offerings are in the marketplace. A differentiator invests its resources to gain a competitive advantage from superior innovation, excellent quality and responsiveness to customer needs. [1]

“It should be stressed that the differentiation strategy does not allow the firm to ignore costs, but rather they are not the primary strategic target.” [2]

If you could boil the differentiation strategy down to a manageable sound-bite, it would look something like this; differentiation enables a firm to command a higher price.

Starbucks coffee doesn’t taste materially better than offerings from rival Dunkin’ Donuts, but Starbucks has crafted the “Starbucks Experience” complete with intimate environments, sustainable sourcing and mobile ordering to differentiate itself with a cult-like following (i.e. command higher than industry average prices for a commodity item).


Differentiation allows a firm to build brand loyalty, obtain customers who exhibit less price sensitivity and increase its profit margins. As opposed to cost leaders, differentiators are not as concerned with supplier price increases. Differentiators can more easily pass on price increases to their customers because customers are more willing to pay the increases.

Differentiators are protected from powerful buyers since only they can supply the distinct product or service offering. Differentiators are also protected against the threat of substitute products in that a new competitor must invest substantial resources to both match the capabilities of the differentiator and break customer loyalty.

“Differentiation is different from segmentation. Differentiation is concerned with how a firm competes—the ways in which it can offer uniqueness to customers. Such uniqueness might relate to consistency (McDonald’s), reliability (Federal Express), status (American Express), quality (BMW), and innovation (Apple). Segmentation is concerned with where a firm competes in terms of customer groups, localities and product types.”[1]


Porter assets that there are risks to the differentiation strategy.

  • “The cost differential between low-cost competitors and the differentiated firm becomes too great for differentiation to hold brand loyalty. Buyers thus sacrifice some of the features, services, or image possessed by the differentiated firm for large cost savings;
  • Buyers’ need for the differentiating factor falls. This can occur as buyers become more sophisticated;
  • Imitation narrows perceived differentiation, a common occurrence as industries mature.”

All differentiators should be on guard for firms that seek to imitate their distinct offerings while never charging a higher price than the market will bear [1].

The differentiation strategy should not be mistaken for providing unique products simply for the sake of being unique; rather the differentiation should be tied to customer demand or willingness to pay.


[1] Hill, Charles. W. L., & Jones, Gareth. R. (2007). Strategic Management Theory. Houghton Mifflin Company

[2] Porter, M. E. Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: Free Press, 1980.

Picture Copyright:  urubank / 123RF Stock


Create a Well Designed Pareto Chart in Tableau

In this video I will show you how to visualize Vilfredo Pareto’s namesake chart in Tableau. The Pareto Principle defines the 80/20 rule in that roughly 80% of the effects come from 20% of the causes.

I will use sample Tableau Superstore data to determine which states are responsible for 80% of sales. I’ll start with a basic Pareto chart and then move on to a visualization with a little more flair. This video should serve you well in your future data analyses.