Straight from the Reader’s Mouth

Often, journalists are involved in a arduous struggle to figure out the best way to fulfill their mandate of covering a certain industry, or a certain segment of an industry. We at WS&T are by no means exempt from that ongoing process.

There are a number of ways that we go about assigning, researching, and writing the stories that make it into this magazine's pages and on our Web site. From speaking with sources - on and off the record - to attending industry conferences and events, we do our best to ensure that our coverage mirrors the challenges you are facing in the workplace.

When it came time for our July issue, we decided to get that information straight from the horse's mouth and provide it to you unedited. As you will see in this special section, budgetary concerns underly all the decisions that executives are making in the field. Problems that, a few years ago, could be solved by throwing bags of money at them are now demanding more creative solutions.

As one readers told me recently, the key is no longer understanding which technology to invest in, but how to most effectively employ the IT resources littering one's shop.

While it is clear that budgets have been coming down and will probably continue to do so, it is equally clear that there will be no decrease in the workload which IT managers must process.

We hope hearing from our reader advisory board, which is made up high-ranking executives at major financial institutions, will help you decide on some ways to handle the challenges you face in your shops. -AJG

Richard Rzasa, Chief Information Officer, TD Waterhouse

1 - The market environment has been challenging. Prior to the downturn, which started in 2000, we began to evaluate all initiatives on an ROI basis. As a result, we did defer some infrastructure initiatives, but in the interim, we have seen new products and services on the market that will allow us to address these challenges in a more cost-effective manner.

2 - One of my biggest challenges is to continue the necessary system and infrastructure upgrades in conjunction with the new business initiatives. Competition for budget dollars is fierce, but we employ an approach where all major initiatives are vetted by the Executive Committee to ensure that there is close alignment between the business and IT. This process has worked well for us, as we have been able to invest dollars in the critical infrastructure projects while delivering new products and services to our customers and associates.

3 - For me, it is the realization that there needs to be the alignment between business and IT. Too often in the past, IT dollars were wasted due to lack of business support, or for bleeding-edge technologies. Now, the two groups are aligned and making joint decisions on where to invest capital. And, surprisingly to technologists who have feared this interaction, pure infrastructure initiatives are being funded. We are in the last stages of completing a desktop upgrade for all of our associates. The business value was easily demonstrated by the improved performance of the desktops, along with the headroom to allow new, customer-centric applications to be deployed.

4 - Introducing new technologies - imaging and workflow, content management, enterprise-management systems to name a few - in a challenging environment for technology spending. Along the way, we have also taken out costs due to careful performance and capacity management.

5 - History repeats itself on Wall Street. I've seen the euphoria followed by the downturns before. Hopefully, this lesson will stick a little longer this time.

Ira Lehrman, Director of E-Bond Technology, Deutsche Bank

1 - It has primarily driven us to streamline and concentrate on the revenue aspects of our business versus operational enhancements; to focus on the direct impact on revenues. Typically, anytime we spend money, our objective is to save money or enhance our service, but often what you will get is indirect savings. Now, investments must be directly tied to an immediate return. Rather than look at the investment for the longer term, we need to question what is the immediate value that this feature or component or deliverable will have. Investing has changed from the "nice to have's" to the "need to have's."

2 - My greatest challenge is closely tied in with my greatest accomplishment so I think I'll give a combined answer to those two questions.

3 - The things I'm looking out for are Web Services and what that evolves to be, as well as seeing where the Linux environment will be going.

Web services offers the possibility of better integrated services among different market makers. We do a lot of business with the sell side and we work jointly with our competitors on many deals where we integrate applications. I think the potential benefit would basically be B2B (business to business).

In terms of Linux, it could give us the ability to run on Intel-based machines versus Microsoft NT servers which would have an immediate impact. However, I would have to ensure that I could scale on that. Typically, today on Intel you run a Microsoft operating system. Linux allows you to run on Intel and that is where we have seen the biggest cost savings and stability, to run them on the Intel-based platform while continuing to get almost 100 percent guaranteed up-time without any major issue on the operating system.

4 - That would be tied to my client-relationship-management project and being able to institutionalize best practices in the corporate-coverage environment across various groups. We need to know everything about our clients, to know the core products they use from our firm, to know where they are heavily weighted in terms of their investments, such as FX or derivatives.

This is all geared towards what is called silo busting or cross selling. We have a number of groups offering a number of financial products: such as FX, derivatives, short-term commercial paper, long-term commercial paper, etc. All these groups are going to the same clients and pitching them each product. We have taken all the groups and put them together under one environment, under the capital-markets corporate coverage.

We are using internal client-relationship-management software and some internalized credit risk and tying them to external systems like credit-rating agencies and embargoed research for pitch-book management.

Our objective is to have a customer-centric view of the client and to give a common presentation so we avoid the situation where the short-term desk makes a bid to a client at the same time the bond desk makes a bid. This way we align and have one face and one understanding of the client. We are working with tools to bring that together. Each person here needs to know our firm's total relationship with a client, such as what is our lending relationship with the client or our credit-risk view of the firm, as well as the credit-rating agency's view. All firms want to decrease their exposure to risk, so I need to know these things before I pitch to a client.

5 - I was definitely a part of the Internet bubble and learned that P&L is the bottom line. The core business must produce a revenue stream and, in our business, it must be a business that is accepted by both the buy and the sell sides. It must be something that adds value regardless of the hype. Even if you are Web-based, you have to approach things as though you are not an Internet business but simply use the Internet as a delivery mechanism. A great idea will go nowhere if the business model can't survive and if the company can't make money.

Mark Madoff, Head of Listed Trading, Bernard L. Madoff Investment Securities

1 -The nature of my job has changed due to the demeanor of the other market participants. Everyone is miserable. That makes everything tougher.

2 - The biggest challenge is the decline in dealer profits. The business has changed because of lower retail volumes and shrinking spreads.

3 - The most important technology change that we face is the ability to connect markets, ECNS, ATSs, and dealers.

4 - My most important accomplishment is successfully addressing the issue stated above.

5 - To deal with higher volumes, we expanded our systems capacity rather than personnel. This made dealing with the declining volumes much easier.

Robert Palatnick, Managing Director/Technology, Depository Trust and Clearing Corporation (DTCC)

1 - It is hard to focus narrowly on the downturn, because for the past year and a half, the aftermath of 9/11/2001 has played an equal, if not larger role in the nature of my job. The imperative has always been for the financial utilities to be able to do clearance and settlement as cost effectively as possible. The downturn has only strengthened that imperative, while also adding the considerable business continuity costs to the mix. Unfortunately, enhancing business continuity and reducing the costs of clearance and settlement is driven, to a large degree, by continuing buy-side and sell-side investments in straight-through processing, which is a tough sell in the current financial market, mainly because the return is difficult to immediately quantify.

2 - Our biggest challenge would have to be ensuring that the financial infrastructure, in which my organization plays a significant role, is literally bombproof.

3 - Computing as a utility, which is proceeding along both a functional and a technical path. On the functional side, the huge outsourcing deals of the past few years, where some major financial firms have outsourced their entire infrastructure to the likes of IBM, EDS or HP, are going to sink or swim. Their stories and any resultant cost savings will have a major influence on other organizations. The technical road to support the utility-computing model is being paved by grid computing and Web services, with both of those technologies benefiting from the competition and cooperation between Microsoft and the various open-source alternatives.

4 - Moving fixed income real-time trade matching to the point where the majority of trades in one segment of that marketplace (government securities) are reported to, and matched by, the clearing corporation within 15 minutes of trade execution. The success of that process has obvious implications for business continuity, but it has also resulted in projects to standardize the clearance and settlement flow for street-side trades in all fixed-income products. Additionally, we have begun to work with the buy side on a way to expand that standard to their benefit as well.

5 - The most obvious one is that "business cycles"" are exactly that. One with more implications for technology is that a sound business plan - supported by appropriate technology, which projects a return on investment - matters. And getting short-term payback on a long-term investment is often helpful in sustaining investor (read as your business sponsor) interest. This applies to local projects, network projects, Web projects, global projects, it doesn't matter - the same rules hold.

Richard Rosenblatt, President and CEO, Richard A. Rosenblatt & Co. (NYSE floor broker)

1 - It hasn't been a terribly dramatic change. The largest shift is that a higher percentage of business is coming from professionals. That is the mix in the industry that we are starting to see. The public has only started coming back in more recently, but it really hasn't changed my job all that much.

2 - I think that staying ahead of the tech curve has been the biggest challenge for us. That will maintain its position as the greatest challenge moving forward. So, since our job is to provide the most efficient execution at the best cost, technology continues to be the answer. Since we get paid to make a difference, technology is going to be what differentiates one service from another.

3 - Communications is where the greatest advance has been and will be. I am proud of the new trading systems we have built to be as modular as possible so that if someone comes out with a better GUI, we can incorporate that into our system. We can communicate with more and more systems that our clients might have in place. We based our systems on the idea that any new execution venues that don't exist today will have to use a form of FIX, and we are developing our systems basically to regenerate themselves by taking any piece that can improve our service and plugging it into our system.

4 - I think our new order-delivery and DOT-access system is the greatest accomplishment we have made over the last year which has helped make us much more compatible to custom-trading development than we were. We were first out with that system and, rather than replace it, we started using several different systems until we were using up to four different DOT systems at one point to stay current. We realized that was an approach that was not working because we really didn't have the level of control over the environment that we needed.

5 - I think you have heard a lot about the fact that history repeats itself. Every boom has been overdone to the point where, finally, reality sets in, but that's where history repeating itself stops. As the market gets more healthy, I think it's a trap to expect it to looks like the markets of the '90s or '80s. It is going to be as unique and divergent as those markets were in their time. It will be something new and we will need new technology to deal with it.