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Credit Suisse’s New Approach to Fintech

Stephen Hilton, Credit Suisse's managing director and CIO of technology infrastructure, takes a no-nonsense approach to delivering innovative technology and support for the business.

Historically, the IT industry has been mostly a reactive unit. Enterprise IT departments were essentially order-takers that were quick to adopt the latest programs. Stephen Hilton, managing director and CIO of technology infrastructure for Credit Suisse, will have none of that. Known for his stick-to-itiveness and indifference to flavor-of-the-week technology, Hilton has shown leadership in building a unified culture and developed a reputation for his steady pace of improvement.

As most Industry leaders know, since 2007 capital markets revenues have decreased rapidly, resulting in budget cuts across the board. At the same time, most financial institutions had built up significant fixed costs during the prior decade when revenues were high and budgets were bloated. "People were surprised that IT was not as variable as they thought it would be," says Hilton, whose firm has a market capitalization of $42 billion and $1.3 trillion in assets under management.

At Credit Suisse, only 30% to 40% of IT cost was allocated to staffing, reports Hilton. "A lot of the budget covers other IT assets, obligations, liabilities and licensing costs we built up over the years that just are not variable in a short period of time." The only way you can really drive the cost base down is through business process reengineering, he says, and that's exactly what his team has been working toward.

"It was quite a learning process for people to understand that. And if I'm honest, that realization, a very good realization, has actually changed the business attitude," Hilton says. "They're having different conversations with us now." Business leaders are aware that asking for "please do it quickly and just get it in"-style requests aren't acceptable anymore. "They have to be more patient and more strategic in their decisions."

Challenge Silliness

While the old way of approaching technology may have been fitting given the short lifespan of IT and massive innovation cycles, things began to change in the mid-2000s. For Credit Suisse the focus shifted to optimizing the company's massive, complex infrastructure and improving end user productivity. As CIO of technology infrastructure, Hilton prepared to make tough decisions to meet company goals.

"My view is that at the scale we now run at, process efficiency is key. I am a technologist, but my master's degree is in mechanical engineering and making manufacturing decisions. So I learned back in the late '80s about industrialized processes and how to optimize factories. Those skill sets are what I've applied in the last five years." He adds, "I very much encourage my teams to be challenging partners. I've spent five years really empowering them, saying, 'Look, you're the experts. Challenge inefficiencies whenever you see them.'"

When reviewing the latest technologies and widgets, Hilton agrees it can be difficult to aggressively manage vendors, but in his view the success of a new project is ultimately when it has replaced the old. "We have some very, very tough conversations around 'Yes, that technology is great. Yes, it's absolutely better than what we've got today; however, if you look at how long it's going to take us to adopt it, it's not worth doing it, and we'd better optimize what we have instead.' It can take two to three years to implement something at scale these days; you can't just shove it in in three months. I think if you accept that, you think very differently."

A Focus On Execution

A large part of Hilton's agenda is still efficiency and cost reduction. Hilton's team is working on delivering a multiyear commitment by 2015, which includes automating many business processes, eliminating legacy systems, redesigning or sunsetting inefficient technologies, and working to build a more robust process for managing infrastructure. Under Hilton's leadership, Credit Suisse has seen significant success in cost reduction. "We've taken over 10% of our cost base out and about 30% of our variable cost base out by doing that. This covers hundreds of millions [of dollars] effectively."

Early on in his career at Credit Suisse, Hilton was part of initiatives to create an internal compute fabric with the capacity to be used by any application anywhere. Today, this is commonly known as internal cloud, but back when Hilton was working on it cloud computing wasn't even a term in IT. The foundations of the compute fabric project are still showing benefits today. Credit Suisse is building out commodity hardware to virtualize the Credit Suisse environment and eliminate legacy platforms. "We're delivering in excess of $100 million saved by doing that, a very significant value given back to the firm," says Hilton. "We've seen our footprint come down significantly, we've seen data center power come down, our capital costs have come down, and we've seen flexibility in our compute grid go up. We're not done, we're not sure if we'll ever be done, and we continue to grind out that strategy."

The results speak to the value of early adoption, as Hilton claims about 60% of the Credit Suisse environment is now virtualized along with about 80% of net new data center capacity. "We believe that's probably better than anyone else. And it's really changing people's mindset of how they consume infrastructure. … It required a ruthless focus on execution for the past four to five years, but it's really paying dividends now," he adds.

Bring Your Own Mobile

Hilton's push to develop better end user technology hasn't ended there. Credit Suisse is one of few large firms with bidirectional video capability on every desktop, and Hilton is helping to roll out and an aggressive mobile strategy that defies the norm. "Typically at a large organization like mine, we're programmed to control, control, control, restrict, restrict, restrict, and only let one device do one thing. In the mobile space we really had to reverse our thinking, and it's been very, very successful."

Hilton says it's a fool's game to manage the mobile device. Instead, the future is in managing the data. Under the new-generation mobile platform, the users -- employees of Credit Suisse -- can buy their own hardware. An iPhone, iPad, Android -- it doesn't matter. The firm will provide a suite of applications so users can do their work on their own devices.

Becca Lipman is Senior Editor for Wall Street & Technology. She writes in-depth news articles with a focus on big data and compliance in the capital markets. She regularly meets with information technology leaders and innovators and writes about cloud computing, datacenters, ... View Full Bio

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Greg MacSweeney
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Greg MacSweeney,
User Rank: Apprentice
10/29/2013 | 9:57:55 AM
re: Credit Suisse’s New Approach to Fintech
tkeene334, total cost of information (TCI) is an interesting metric. That makes a lot of sense when you think of how a firm uses technology to gather and utilize information. TCI, though, could be a very complex and advanced method of calculating costs. I wonder how long it will take any firm to get to that type of metric. Many are making strides in that direction, but it may be a few years before we see TCI in practice.
Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Author
10/28/2013 | 4:26:18 PM
re: Credit Suisse’s New Approach to Fintech
Sometimes it feels like there's a race going on in who can become the most efficient while cutting the most costs. Sounds like Credit Suisse is in a good place in that race. I'd expect that more large organizations are going to be looking into internal clouds for clouds for that reason.
tkeene334
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tkeene334,
User Rank: Apprentice
10/28/2013 | 12:13:24 PM
re: Credit Suisse’s New Approach to Fintech
Stephen HiltonG«÷s comments could be called prophetic:
"My view is that at the scale we now run at, process efficiency is key. I am a technologist, but my master's degree is in mechanical engineering and making manufacturing decisions. So I learned back in the late '80s about industrialized processes and how to optimize factories. Those skill sets are what I've applied in the last five years."

His approach to Fintech and to user acceptance of mobile devices portends the final inflection point in the maturing of the computer industry. Optimization is no longer just about the infrastructure. With the advent of the smart mobile device, led by the Apple iPhone and iPad, the final step in computing as a mass commodity market is here.

The user interface has been bifurcated from the data transformation technology; servers, applications, middleware and data. The result is a consumer interface that can access information anywhere, anytime, about anything. Stephen was spot-on when he empowered his users (pronounced customers) to take control of their interface to Credit SuisseG«÷s information. ItG«÷s the information that is the commodity. Being a trained manufacturer, Stephen understands that his mission is to provide information to his customers when they need it, where they need it, in a form that they can use, at a price they are willing to pay. His key focus is securing it along the way.

I propose that his efforts should next be to focus on capacity utilization in his information manufacturing factory, that place everyone else is still calling the data center. In any manufacturing plant, return on assets is a key indicator of efficiencies. In the information manufacturing business, capacity utilization is that return on assets. Virtualization is a critical factor in the information plant. But fully virtualized servers only running at an average CPU utilization of 15%-20% is a trivial return on those expensive assets. Most plants strive for 85% utilization. That might be his next goal. It would pay astounding returns.

Rather than being measured on capital expenditures or cost of operations, classically called TCA and TCO, StephenG«÷s manufacturing plant would be measured on the total cost of information, the TCI, to his customers. The maturing of the computer industry would then be complete.
IvySchmerken
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IvySchmerken,
User Rank: Author
9/28/2013 | 3:05:50 AM
re: Credit Suisse’s New Approach to Fintech
IT cost reduction is still the focus in large firms like Credit Suisse. HIlton has successfully saved costs by eliminating legacy systems, retiring old technologies and automating business processes. It seems that new technology is evaluated for how long it takes to implement. If adoption takes 2 or 3 years at a large scale, it may be worth optimizing existing systems. Hilton's compute fabric used by all applications is actually an internal cloud that has saved the firm $100 million.
Greg MacSweeney
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Greg MacSweeney,
User Rank: Apprentice
9/28/2013 | 1:03:36 AM
re: Credit Suisse’s New Approach to Fintech
Two IT leadership trends have been emerging in the past couple of years: a greater focus on detailed IT costs, and less control. Yes, it seems to be true, that technology groups are realizing that controlling everything, in every aspect of technology that touches an enterprise is both impossible to do, and doesn't actually provide any benefits to the organization.
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