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10:39 AM

Interview with Tim Buckley, managing director of Information Technology at Vanguard

Vanquard's Tim Buckley invests in his firm's Web presence.

WS&T: How much of your firm's revenue is devoted to IT? What did you spend your technology budget on this year?

As a mutual-fund firm, that measures technology as a percentage of operating expenses, Buckley says the allotment is typically around 40 percent, with a focus on everything from "software development to actually running the applications."

WS&T: What have been some large categories of spending?

Vanguard has made much recent investment in its Website. "People could find out how they were doing, and get advice online, making it easy to take action. It's all online for the total portfolio," Buckley explains, adding that there used to be a necessary phone connection. The Website investment was made with straight-through processing in mind. Buckley says, "100 percent of our transactions are entered straight through, and we're looking at same screen that client is looking at."

The benefits for Vanguard have been realized, with the firm having the ability to retire 14 applications and their databases in addition to IT-cost savings.

WS&T: What is your project-prioritization process?

Vanguard has four major business lines, Buckley begins. "Each business line starts off working with IT teams to determine what are the strategic opportunities. What are the goals (for the business lines) and what are gaps? What are opportunities that you're trying to take advantage of? Who do you want to serve? Then each ends up with a business case. You roll them all together into an IT portfolio, mapped out in two dimensions."

Buckley says that this map materializes as a nine-box. On the Y axis is operating impact. On the X axis is client impact. A project is scored against its client impact or operating impact and it can be low, medium or high. A project that is low operating, but high client impact, would be a new product or service, he explains. The opposite may be all about making operations more efficient. If both are high, that's a change of business, while if both are low, that project is a necessary evil. "Then you lay (the nine box) out and figure out how diversified is it. Is all on client or all on operations? What about risk? How many of the projects are high versus how many are low? The firm looks at the IT portfolio as a whole, and we have to be able to balance it well." VANGUARD CHART HERE

WS&T: So then do you tend to take one project out of every box evenly?

"We tilt it, we don't have a hard-fast 50/50. We like about 65 to 70 percent to be high client."

WS&T: What is your perspective on outsourcing versus staying in house? What projects would you be likely to outsource?

"Work done by an full-time employee that doesn't carry around a Vanguard badge has historically been around 30 percent. We've had sizable contractor budgets here to help compliment and supplement what we were doing here, but in past few years, we've really moved a lot of that work to crew members here at Vanguard."

Buckley adds that he expects contractors and outsourcers to grow because they offer flexibility in terms of budget. "But as far as core development, we haven't gone there yet. We don't have any big plans right now."

Buckley says that outsourcing does not necessarily fit into Vanguard's four components that define IT value for the firm, which are:

  1. -Collaborating on great solutions
  2. -Delivering quality software
  3. -Providing the utmost security
  4. -Providing the lowest possible cost of ownership without giving up the top three.
On collaboration of IT leaders: "We are organized by business line. We expect (those business-line developers) to know the business as well as business executives do. You can't get that with a contract consultant."

Vanguard uses a Six Sigma program to ensure quality. "We spend a lot of time as a management team on what is best way to build software, eliminate re-work, and be competitive on cycle time and cost."

Extensive security is a priority for the firm, which uses a dashboard with 29 different dials to know where the stands at all times. Buckley says that a critical part of security is being able to control who has access to what data, which is easier to control internally versus externally when dealing with contractors or outsourcers.

Total cost of ownership is the last item Buckley examines for IT value. "You must also look at labor cost for a data center and how well the environment is running. What are you doing around storage? "Throw all of those together and you get IT value. If you look at just one, you may make the wrong choice."

WS&T: What applications are more suited for buying from a third party? What is more suited for building?

Clients deal with Vanguard virtually, and every interface is through technology. For this reason, Buckley says, all technology is vital, however, "anything that is client facing, we believe that we can do the best job at actually building it. If it is a service point, we want it customized, whether it is Website or customer-relationship management." Packaged financial systems such as a general ledger or expense-management system would be ideal candidates for buying solutions, though.

WS&T: What are some of the largest expenses involved in taking on a new project?

While Vanguard used to look only at development, Buckley says that the firm now examines maintenance costs as well. "We haven't been great at taking into account all of the maintenance costs associated with projects."

WS&T: What are some emerging technologies that might get some play time in your firm in the next year?

"Web services, as it becomes more secure. What's the role of Linux? It's hard to say. It's a maturing technology that is still coming of age."

Wireless: "You don't hear much on it." Buckley adds that collaborative tools in the workplace don't have much use at Vanguard, since about 80 percent of Vanguard's workers "all sit together. Wireless and collaborative tools are not going to change how we do business." Voice over Internet protocol: "This is the real deal, its just a matter of maturing."

However, Buckley warns that firms must use care when turning to emerging technologies. "You need to look at curb of adoption (of the firm) and the client base because you can get ahead of yourself. We watch for innovation but that is really important to us."

WS&T: What major IT projects are on the table for next year?

Vanguard's big emphasis for 2004 will be to run IT more efficiently. In addition, the firm continues to pursue total cost of ownership, as Buckley explains, "There are huge wins to be had there, when we look at our mainframe, Unix, (Microsoft) NT environment. What applications can be run on what type of a box? With Linux really gaining ground on Solaris, and competition with Microsoft, it's a win win for all the companies out there."

Vanguard will also continue to examine storage. "There's a big effort here to save on storage costs. There are millions of dollars in unallocated, unused storage. We want to make further progress to figure out what types of storage and what types of data (we need to consider)."

Finally, the firm is looking to move towards a common application on the desktop.

WS&T: What are your biggest challenges are for 2004?

IT challenges include total cost of ownership, offshore-development opportunities, and increased collaboration. Concentration on professional development is another key for 2004, with Buckley noting that Vanguard must have the "best crew in the business. IT was great when they were only taking care of themselves. Now we must make sure that all are getting necessary training to stay current."

Project-portfolio management is vital in "making sure you're picking the right projects with the investment dollars that you have."

Finally, Buckley says Vanguard must fight for better software quality. "There's reminders of it every time you have to download a patch from a vendor. It's all too frequent."

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