Lehman CIO Keeps Ear to the Ground

Don't be surprised if you find Jonathan Beyman down on the trading floor at Lehman Brothers in New York. At least, when he's not in meetings.

"I spend a fair amount of time walking around," says Beyman, chief information officer at Lehman. "I wander down to the trading floor, generally, every day just to see what's going on down there."

The trading floor isn't typically where you find most CIOs at brokerage firms. But, then again, Beyman isn't your typical CIO. His background is in accounting and finance, not technology, and he got the nod for the top spot a couple of years ago, after running the operations side of the business. Now, he's responsible for 3,000 employees across operations and IT.

Aside from a stint as chief operating officer at an Internet company, where he spent four years "trying to make a billion dollars" before the company went bust, Beyman has been with Lehman for a total of 12 years, so he knows most of the traders.

He says the purpose of his trading-floor forays is to "talk to people I haven't seen." He asks about "general stuff. I don't actually go looking for anything specific."

What the trips do, the 47-year-old Lehman says, is provide him with a perspective that he can't get while holed up in an office. "You hear about what's going on with the business, what's going on with your group. You get a perspective on how your organization is doing."

When he's not on the trading floor or picking up the phone to call someone, he's likely in a meeting. On the day Wall Street & Technology caught up with him, Beyman had a slew of meetings planned, including four with people who report directly to him - a range of managers and vice presidents - a vendor meeting, a meeting with people in finance and a briefing with a headhunter.

It doesn't leave a lot of time to reflect on his biggest challenge, which is, "How do you drive productivity? This is the ongoing challenge within IT and, to a lesser extent, operations," he says.

These days the focus is on taking costs out of the organization "without diminishing service levels" and "doing things cheaper, better, faster. That's something I spend an awful lot of time on." (See Interview section to learn how American Century's CTO is handling such issues.)

He's not alone. A recent survey by CIO Magazine found that CIOs across all industries are grappling with budget cuts and a lack of resources at a time when more is expected of them.

The survey found that the focus is on finding ways to deliver the best value to the company and build best practices, compared to years past, when the focus was on staffing and implementing new technologies.

CIOs say they continue to deal with tight budgets and are trying to prioritize business-unit demands and align IT with the business goals.

It's no different for Beyman. From an operational standpoint, Lehman Brothers was hard hit by the Sept. 11 attacks. "We lost a data center and everything in it and ended up moving from downtown to mid Manhattan. That has resulted in lots and lots of new technology assets that need to be fully depreciated."

So while his budget looks likes it has grown from a spending and head count perspective, "It's lower than it's been the last couple of years."

In terms of reducing costs, it means everything from "pushing things offshore" to consolidating hardware like servers and storage devices. A lot of the applications which we are in the process of developing are aimed at productivity-type things," like reducing head counts both in the business and support areas.

Also, he says, as margins get depressed, the pressure is on to make sure the IT department is providing value to the organization. That means making sure "we're focused on the right things." It also means building more automated-trade processes and applications that execute trades on cue.

As well, there's the day-to-day organizational-type issues, like training programs and how the firm develops and advances people and IT governance.

He says that institutionalizing IT governance and making sure that the firm is "doing what we need to do, that projects are initiated for the right reason and the deliverable dates are hit," remain the biggest focus of his energy.

So how does he know when his department's efforts pay off and the IT staff brings value to the organization?

Measuring the success of IT initiatives is "tough" he says, and the firm is "in the process of trying to develop formal measurements."

At post mortems, Beyman can look at hard evidence, like whether the project was on time and on budget. The hard part to measure is, "Did it do what we said it would do? It's very difficult to measure because it's not a static world. The market changes, the environment changes, so it's difficult to say that this application that's supposed to enhance revenues did that."

However, he says, as you talk to people you get a sense of success. That's why he visits the trading floor and works the phone, canvassing his colleagues for their opinions about what's happening with the business and his department's contribution to it.

What he finds, he says, is that if a project didn't meet expectations it's "because both the users and the technology organization didn't think through what we were doing. You make your best guess where you add value and move the needle, but sometimes it's very difficult to tell, especially as it relates to revenue-enhancing applications." That's particularly so for trading technology, where the market environment can rapidly shift.

The one thing he's noticed about the job of CIO, he says, is how quickly it is changing. "It's almost less about the technology each year and it's more about the business each year."

That means his focus is less on "what sort of cool things are we doing" and more on the "execution of it," such as what does the firm need to do to compete and why is it pursuing a certain IT strategy. That's fine given his business background. The trick, he says, is "to get good people who know what we need to do. We have really smart people I trust who know a lot about (technology)."

Lehman Brothers has a number of key projects underway that keep Beyman busy. From an infrastructure standpoint, there's platform consolidation and a migration to Linux, which "is a high priority because it (provides) cheaper cycles." In the applications world, the high priorities are around automated trading and building systems that "can execute trades or provide lots of trading tools to the business."

Like everyone else in the industry, straight-through processing has his attention, especially in this era of cost cutting. "If you can eliminate touch points in any sort of process, you end up saving yourself lots and lots of money."

Of course, he has his wish list of projects that, "I think have some benefit to doing, but just never make it to the top of the list." They're things that involve support and control, like consolidating fixed-asset ledgers with purchasing systems. Otherwise, "We pretty much do everything we need to do. We're an ongoing business, wherever we feel like we really need to do this, we tend to go do it."

As for the future, he thinks that the migration from Sun to Linux is something to watch. Linux is catching on at a time when "everybody is feeling squeezed for dollars. You start migrating from $25,000 machines to $3,000 machines." That's been an interesting trend that has the potential to save firms big dollars, he says.

One trend that has fizzled is wireless. However, he says, cell phones and the Blackberry are devices that "everyone seems to have and nobody can seem to live without."

He say that Lehman Brothers has "fooled around with wireless LANs" and has a couple of conference rooms wired up, "but you haven't seen it take off in any explosive way." He's not sure it will. "It's hard to see where it's going to really change very much." Wireless laptops might kick-start it by eliminating the need to cable in for access, but, he says, it's the "kind of productivity thing that sort of feels elusive to me. It's going to be hard to prove benefits."

One thing that he thinks has passed for good is the heady spending days of the Y2K and dot-com era. "It's hard to imagine that you're going to have a period like 1999 and 2000 again. People were throwing money at everything because you didn't want to feel you were being left behind and were going to miss out on the next best thing. Those were fun periods to work through."