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Innovative Institutions

These six Wall Street firms tapped into technology and let their inner innovation sing.


Third-party vendors are a favorite of Woods, though. "Thematically, building is the choice of last resort as far as I'm concerned," he emphasizes. "The only reason I'd build would be if there were no industrial-strength solution."

For example, Mellon made the decision to take on a multi-year project building a system to address its corporate-actions challenges (See full story, page 42). "We were looking for a system to do (corporate actions) and we couldn't find one," Woods explains. "If there were one on the market, I would have bought it in a minute."

Northern Trust also recently addressed corporate actions with a homegrown solution, despite the firm's penchant for a "fair amount" of buying third-party solutions. Tim Theriault, president of Worldwide Operations and Technology at Northern Trust says, "The industry hasn't quite come together on how to do (corporate actions), so we moved ahead and did it ourselves."

The result, Theriault says, is an automated corporate-actions system which uses e-mail notification and response for the global custodian's investment-manager customers. In the first six months since implementation, he says there has been a 70 percent take-up rate by customers, which has reduced risk and improved straight-through-processing rates.

Theriault also stresses that Northern Trust distinguishes its projects neither by building or buying. "Where we differentiate is how we integrate those products to make sure we are producing timely and accurate information," he says. "That's where we compete, not on which software products we use."

State Street Corporation, on the other hand, weighs in heavily on building applications, says Joseph Antonellis, executive vice president and chief information officer at the global custodian. "Everything we do has to be large, and needs to scale very quickly," he explains. "This typically eliminates many buy options."

Antonellis indicates that, like Northern Trust, State Street also places much importance on integration. With the firm's recent acquisition of parts of Deutsche Bank's Global Securities Services business, Antonellis has opted to integrate the new operations into State Street's existing architecture.

However, Antonellis concedes that certain applications are more suited for buying, such as a recent compliance engine for State Street Global Advisor's asset-management business.

On the whole, Antonellis, like many other heads of IT, has a rule: "If the software carries with it a distinguishing characteristic that sets us apart, we build it on our own. If it's software that would fill a gap, and time to market doesn't give us a distinct advantage, then we would think about buying."

How to be a Technology Innovator
  • Define a project-prioritization process.
  • Create and support a talented technology team.
  • Outsource selectively and when necessary.
  • Take advantage of emerging technologies.
  • Know the firm's business.
  • Use programs such as Capability Maturity Model to quantify developmental success.
  • Fight for a budget and use it wisely!


Sticking to his blueprints for innovation, Mellon's Woods has been able to translate ideas into reality. One of his major projects during 2003 was an accounts-receivable conversion (ARC) with Mellon Global Cash Management. The project used imaging and character recognition to convert paper-based check payments into electronic debits, available through a lockbox network.

In addition, Woods notes that centralizing 25,000 desktops onto one operating system has increased the amount of desktops that one maintenance person can support. Instead of 100 desktops, each person can now maintain 250 desktops, thus reducing costs and increasing efficiency. "They can all be managed from central locations, so you no longer have to dispatch people on the sneaker patrol to go to your desktop to do things," he adds.

Mellon also participates in Capability Maturity Model, a program developed by Carnegie Mellon University's Software Engineering Institute that provides a framework for measuring software-development efforts. By the end of 2003, Woods says that all application-development units within the firm will be at Level 3 (out of 5). This establishes them as "defined," or being able to be documented, standardized and integrated into a standard-software process for the organization.

J.P. Morgan Chase is involved in CMM as well, says Schmidlin, and will begin rolling out Level 3 at the beginning of 2004. He notes that CMM has, so far, yielded reductions of 30 percent in post-release defects of software, nearly 20 percent in development costs, and almost 25 percent in cycle times.

E*Trade's Levine has been focusing on standardizing IT architecture by moving operating systems to Intel and Linux. He notes that Linux is an advantage, not only because it commoditizes computing, but also because it promotes competition among operating-platform vendors, ensuring reasonable pricing.


All six firms admit to using Linux on some level, with extended plans to come in 2004. However, an inkling of doubt remains with some. "We haven't moved as quickly as others on Linux because we need to worry about its scale and it hasn't been proven yet," confesses Antonellis, adding that technologists are currently examining the possibilities.

Web services and voice-over-Internet protocol are other technologies being discussed. However, with the exception of a few pilot programs, wireless does not top anyone's list of things to do. With questions remaining about security and necessity, Northern Trust's Theriault says, "the appetite is still small" and State Street's Antonellis says wireless is a "nice to have" that can't yet be justified by a business case.

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