Chiropractors say alignment is the key to life. Whether you believe in getting your neck cracked or not, chiropractors are "spot on" when looking at the securities-industry technology infrastructure.
Our industry needs to align our technology infrastructure with business priorities to ensure that the infrastructure can support not only the business of today but the business of five years from now.
Over the past three years, we have cut, we have contracted, and we have outsourced. But now that there is hope of a recovery, are we really positioned to take advantage of opportunity as it comes?
Or have we cut so much that there is no infrastructure flexibility left to enable us to take advantage of opportunities?
One of the first things that needs to be changed is our lovefest with return on investment. Tightly coupling technology with financial management during a downturn has its cost advantages, but have we ROIed ourselves into a box?
ROI is a very useful tool. However, it does have significant limitations. Not everything can be translated into return, not all returns can be calculated, and not all benefits can even be understood. The Financial Information eXchange (FIX) is one of those projects. Did Fidelity and Salomon (now CitiGroup Capital Markets) expect to revolutionize the future of trading when they agreed to create a protocol to communicate trading information?
While I wasn't there, I would think that they were mostly looking to increase traders' efficiency-not to revolutionize trading and change the value proposition of dealers, exchanges and financial intermediaries.
If either Fidelity or Salomon had ever prognosticated the savings and business opportunities that FIX would create, the executives would have either been laughed out of the building or taken to the loony bin.
Getting one's technology priorities aligned in this age is incredibly important, so important that it should not be left to either the CFO or even the CIO.
Technology must be directly aligned with both where the firm is as well as where the business is going. Technology leadership, just as with business leadership, must come from the corner office.
The firm must look at industry trends and its drivers, but add to that mix the firm's core competencies, competitive differentiation and business vision. This must be aligned with what is practical and possible within the budget of both time and capital.
So what is the answer? I would love to say that the answer is to outsource everything, or take everything offshore or even bring everything back, but that isn't the case.
The answer to this riddle, like many things in life, is not an answer at all, but a process. It is a process of alignment and priority, and it will not be easy. It will be different for each firm, for each management team, for each division and for each technology infrastructure.
Firms need to look deep into their core and dispassionately ask some serious questions around profitability, product maturity, business value and opportunity. They also need to think about how they will deliver cost-efficiency to the commodity products, flexibility to the opportunistic products and a mechanism to prioritize and manage development and maintenance without an army of high-priced developers.
And, unfortunately, just like the chiropractic, the process is never ending. While the alignment process may occur more frequently when you are out of whack, it is necessary, even when you are healthy, to stop small aches from becoming acute problems.
Larry Tabb is founder and CEO of Westborough, Mass.-based The Tabb Group, a financial-markets strategic-advisory firm.Larry Tabb is the founder and CEO of TABB Group, the financial markets' research and strategic advisory firm focused exclusively on capital markets. Founded in 2003 and based on the interview-based research methodology of "first-person knowledge" he developed, TABB Group ... View Full Bio