Back to Basics: Reliability, Integrity and Customer Focus

The theme of this year's Securities Industry Association Technology Management Conference is Balancing Innovation With Compliance, something that many have said is very difficult to do, perhaps impossible. Marc Lackritz, president of the SIA, disagrees.

It all comes down to focusing on the "values of technology," he says. In the show's opening keynote, Lackritz explained that "The industry needs to focus on the values that are embedded in technology." These values are reliability, integrity and customer focus. "When you think about it, what really makes technology successful is when technology managers provide integrity of systems, reliability of technology and customer focus so that it's usable."

Considering all of the industry's hardships and scandals, it needs to leverage these values to move forward, he suggested. "Where we are right now, we need the same kinds of values [that are used in technology] for the whole industry-- reliability, integrity and customer focus. So in a funny way, technology is almost a paradigm for the whole industry."

Lackritz has confidence in the industry, and he recounted "all of the wonderful things" the industry has been able to do with technology. He listed online trading, a reduced settlement cycle, expanded capacity and operational efficiencies as some of those things, and noted that the benefits of technology have been huge -- and not without hurdles in the past.

Understandably, times are more difficult now. He acknowledged that the industry has just come out of what he called "a perfect storm" -- going from Y2k to decimalization to the dot-com bust to the 9/11 terrorist attacks to the recession -- and now to one scandal after another.

"We're in a bull market in new regulations, which has led to new costs. At the same time we've had market declines, industry revenue declines and industry confidence declines," Lackritz told the audience.

"This has resulted in what we have today -- a spotlight on compliance," he said. Reviewing the new regulations, he listed Gramm-Leach-Bliley, the USA PATRIOT Act, global settlement and research analyst regulations, Sarbanes-Oxley, Basel II and the mutual-fund regulations that the Securities and Exchange Commission is now considering.

With all of the new regulations at which the industry is throwing time and money, how can the industry keep its head above water and still innovate? Lackrtiz acknowledged that it's not easy. He suggested, however, that technology managers embrace their expanded roles. No longer are they just partnering with the trading and sales teams or operations staff. Today, the technology manager has to partner with the legal team, he said, and he or she "must be aware of so many other things that are happening in the industry."

"Every place you go, people are talking about all these new regulations, while budgets are being squeezed. Now the market is just starting to turn around, CTOs also have to deal with compliance, business-continuity planning, identity theft, e-mail ... there are a slew of things that they have to keep up with," Lackritz noted in the pre-keynote interview.

In his keynote address, Timothy Shack, CIO, The PNC Financial Services Group, and chairman, CEO and president of PFPC, expressed similar sentiments as to the growing difficulty of the technology manager's job. "I'm in a unique position, as I have both titles [CEO and CIO], which allows me to see two different sides of the equation. [Editor's note: Shack was named CIO of PNC in 2002 but had been CEO for several years.] Now I realize that asking for technology is a whole lot easier than delivering it," he said.

Shack noted that his firm bases its winning technology strategies on three things: driving business, managing expenses and mitigating risks. "You can't be successful unless you have an equal balance in all of these three areas," he said. "To create this balance, you need to create a winning and unabiding partnership with your tech organization and business partners."

And, according to Shack, one of the most important factors is having a technology organization that understands the business and a business organization that understands the power of technology.

Both Lackritz and Shack agreed that compliance will be a competitive differentiator. As Lackritz noted, just like quality was a differentiator in manufacturing, now it will be about the integrity of our systems.

Lackritz's advice to the industry in dealing with the multitude of compliance issues? "We're in the process of coming out of our own economic recession and some bad publicity about some events in the industry. So what we need to do is go back to the basics, doing our jobs well, focusing on the values that got us where we are -- emphasizing reliability, integrity and customer focus. And if we do that, and we get back to fundamental values, we'll be in great shape. The demographics are good, everything is pointing into a positive direction and the opportunities are in front of us," he said.