More Than You Want to Know About State Street Bank’s Technology Strategy Part 3

This article is a continuation of my earlier analyses (Part 1, Part 2 here) where I waded into State Street’s strategy for Technology Infrastructure, IT Capability and Staffing, Information Risk & Security, Stakeholder Requirements, and Project ROI. In this final part of my three part series I will broach the company’s strategy for Data Acquisition, Social Media, Organizational Change Management and Project Strategy. State Street’s cloud implementation and virtualization initiative is a worthy example of business strategy/need influencing the firm’s information technology strategy.

State Street: Strategy for Data Acquisition and Impact on Business Processes:

The nature of State Street’s business as a custodian bank with trillions of dollars under custody management and multiple clients distributed worldwide means that the organization houses and processes a tremendous amount of data (internally generated and externally collected). The sheer volume and complexity of this data presents challenges as the bank looks to file regulatory reports and provide data back to its clients. The company receives an untenable 50,000 faxes a month from its client base (Garber, 2016). According to consulting firm Accenture, “(State Street) was unable to adequately track trades through each step in the trading lifecycle because there were multiple reconciliation systems, some reconciliation work was still being done manually and there was no system of record. To maintain industry leadership and comply with regulations, the company’s IT platform had to advance” (Alter, Daugherty, Harris, & Modruson, 2016).

The bank’s cloud initiative helped facilitate and speed up the burdensome process of transferring data back and forth between its clients. In addition, (as of 2016) a new digital initiative (code named State Street Beacon) will potentially help drive more cost savings. The cloud architecture project was a boon to data analysis capabilities as it enabled clients to access their data in the State Street cloud and subsequently enrich the data from multiple sources to support forecasting (Camhi, 2014). In this case, the bank’s infrastructure as a service (IaaS) enabled platform as a service (PaaS) capabilities.

The bank has embarked upon the development of 70 multiple mobile apps and services that support its PaaS strategy. In one case, the bank developed a tablet and mobile accessible app for its client base named State Street Springboard. This application put investment portfolio data in the hands of its client base. Additionally, “Since State Street’s core competency is transaction processing, its Gold Copy app is one of the most important new tools it offers: The app lets a manager follow a single ‘gold’ version of a transaction as it moves through all of the company’s many departments and office locations — say, as it makes it way through trading, accounting, and reporting offices globally” (Hogan, 2012). This capability of the Gold Copy app enables more effective management of counterparty risk as an asset moves through the trading process.

State Street’s new infrastructure and massive data collection provides the bank with new big data capabilities that can better inform business units in the area of risk management. Data insights can potentially fortify stress testing, “What-If” and “Black Swan” scenario modeling. As we’ve seen in the recent 2016 case of Britain’s pending withdrawal from the European Union (i.e. “Brexit”), uncertainty in global financial markets is a certainty.

State Street: Strategy for Social Media/Web Presence:

State Street has traditional Facebook, LinkedIn and Twitter social presences but it has also used other social platforms to support various aims such as employee interaction and brand awareness. The bank was named a “Social Business Leader for 2013” by Information Week. As part of a “social IT” strategy (in which technology supports a collaboration initiative), the company held an “Innovation Rally” on its eight internal online forums to gather employee ideas on how best to improve its business. From 12,000 total submitted postings, employees could attempt to build a business case around the best ideas for executive management to implement (Carr, 2013). The company also launched an internal “State Street Collaborate” platform with the aim of crowdsourcing employee knowledge to help people find an appropriate in-house expert regarding diverse work related topics of interest.

Additional social initiatives include a partnership with TED to provide employees the opportunity to give a “Ted Talk” in front of their peers; the aim is to promote knowledge sharing within the organization. The bank also experiments with a presence on the (almost defunct) video sharing platform “Vine” where it can showcase the organization in quick six second sound bites. This approach caters to clients and the future millennial talent base.

State Street: Strategy for Organizational Change Management, Project Strategy and Complexity:

As stated earlier in this series, 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). The standardization and virtualization aspects of cloud infrastructure that the bank implemented is conducive to agile development. Standardization and a reusable code approach reduces complexity by limiting development choices, simplifying maintenance and enabling new technology staff to get up to speed on fewer systems. Developers are placed in agile teams with business subject matter experts to provide guidance and to increase stakeholder buy-in. Per Perretta, “We circle the agile approach with additional governance to ensure that the investments are paying off in the appropriate timeframe” (High, 2016).

Another key approach the State Street uses to gauge project complexity is that of predictive analytics. The bank can help its internal business teams better understand the project costs and delivery timetables by analyzing historical data on all of the projects implemented over the years. The predictive analytics model uses inputs such as “…scope, team sizes, capability of the team, the amount of hours each team member spent, and ultimately, how well it delivered on these programs” (Merrett, 2015). As the business teams list their project requirements, the predictive model is created in real time which provides all parties with additional clarity.

Finally, it would be remiss to mention banking and transformation in the same breath without mentioning the requisite layoffs and outsourcing activities. For all the benefits of the bank’s cloud computing initiatives, technology workers who do not fit in with the new paradigm find themselves subjected to domestic and non-domestic outsourcing activities. A standardized infrastructure platform leads to fewer distinct systems in the technology ecosystem, an emphasis on code reuse and increased automation. This perfect storm of efficiency gains has lead to roughly 850 IT employees shuffled out of the organization to either IBM, India based Wipro or outright unemployment. Staffing cuts occurred amongst the employees who maintained and monitored mainframes and worked with other non-cloud based infrastructure systems. The bank was interested in shifting fixed costs for variable costs by unloading IT staff who were perceived as not working on innovative cutting edge technologies. The layoffs amount to “21% of State Street’s 4,000 IT employees worldwide” (Tucci, 2011b).

Revisit earlier analyses here:

References:

Alter, A., Daugherty, R., Harris, J., & Modruson, F., (2016). A Fresh Start for Enterprise IT. Accenture. Retrieved from https://www.accenture.com/us-en/insight-outlook-journal-fresh-start-enterprise-it

Camhi, J. (2014). Chris Perretta Builds Non-Stop Change Into State Street’s DNA. Bank Systems & technology. Retrieved from http://www.banktech.com/infrastructure/chris-perretta-builds-non-stop-change-into-state-streets-dna/d/d-id/1317880

Carr, D. (May 30, 2013). State Street: Social Business Leader Of 2013. Retrieved 6/25/16 from http://www.informationweek.com/enterprise/state-street-social-business-leader-of-2013/d/d-id/1110179?

Garber, K. (February 29, 2016). State Street doubles down on digital. SNL Bank and Thrift Daily. Retrieved from Factiva 6/20/16.

High, P. (February 8, 2016). State Street Emphasizes Importance Of Data Analytics And Digital Innovation In New Role. Retrieved from http://www.forbes.com/sites/peterhigh/2016/02/08/state-street-emphasizes-importance-of-data-analytics-and-digital-innovation-in-new-role/#a211b1320481

Hogan, M. (September 3, 2012). State Street’s Trip to the Cloud. Barron’s. Retrieved from Factiva 6/20/16

McKendrick, J. (January 7, 2013). State Street’s Transformation Unfolds, Driven by Cloud Computing. Forbes. Retrieved from http://www.forbes.com/sites/joemckendrick/2013/01/07/state-streets-transformation-unfolds-driven-by-cloud-computing/#408e1acf64cf

Merrett, R. (April 2, 2015). How predictive analytics helped State Street avoid additional IT project costs. CIO. Retrieved from http://www.cio.com.au/article/571826/how-predictive-analytics-helped-state-street-avoid-additional-it-project-costs/

Tucci. L. (July, 20, 2011). State Street tech layoffs: IT transformation’s dark side. Retrieved from http://searchcio.techtarget.com/blog/TotalCIO/State-Street-tech-layoffs-IT-transformations-dark-side

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