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Don't Reinvent the Wheel

Philippe Bibi, senior managing director and CTO at Boston-based Putnam Investments, plans to focus on adding business value in 2006 (instead of spending a lot of time focused solely on regulatory compliance) by developing technology that can automate derivatives transactions and replacing parts of Putnam's legacy systems with off-the-shelf solutions.

Q. Many in the industry feel that 2005 was the year of regulation and compliance. At this time next year when we look back at 2006, what will we remember?

A: I would like to think that in 2006 we are really going to focus more on dealing with business issues. ... There are a few that we feel are going to be of a particular focus for Putnam -- in particular, derivatives.

Q: Derivatives are becoming a focus for many buy-side firms. Are derivatives changing the way investments are managed, and what does that mean for technology leaders and IT strategy?

A: Derivatives have been in use on the sell side for many years. Mutual funds have nuances that the sell side does not have. So [recently], the usage of derivatives has increased at Putnam, in particular, on the fixed-income side.

What we want to be able to do is really deal with derivatives with the same ease and the same straight-through processing that we have when we deal with stocks. It is not as easy for us to trade derivatives today as it is for us to trade U.S. stocks or an emerging-market stock, and that is where we want to take [derivatives]. Our energies are really focused on being able to integrate the derivatives processing from the moment you manage the construction of your portfolio all the way to the balance sheet -- and make sure there are no manual interfaces and that everything is automated, because we don't want to have undue errors around the processing of these more complex transactions.

Q: What emerging technologies will have the potential to change the industry in 2006?

A: A move that has picked up a lot of momentum is a move to the [distributed] Unix-based, or Linux-based, architecture. And with 64-bit technology coming out at a very attractive price, I think a lot [of companies] that were on minis, or even mainframes, are going to be shifting toward a distributed world. The types of technologies that we are keen on ... are clustering because it is more sophisticated now; and grid computing and service-oriented architecture (SOA), which allow you to scale out an application without incurring massive licensing costs associated with the mainframes. ...

We do have a number of initiatives that allow us to reap the benefits of the 64-bit architecture. The software is not quite there yet, but when you are talking about memory availability and the operating systems that make use of [the 64-bit architecture], ... you get a lot of benefits with 64-bit that are not there with 32-bit. ... [In 2006, Putnam] will increase its momentum with 64-bit architecture. ... In '07-'08, there will be a transition for the large financial institutions to do exclusively 64-bit.

Q: What are Putnam's other top priorities for 2006?

A: We are focusing on where technology can add a competitive advantage to Putnam. There are some technologies that we use that 15 years ago were highly custom. As the mutual fund industry has evolved, a lot of off-the-shelf solutions have come out. What I want to ensure is that we don't reinvent the wheel. If we have a legacy application that we can replace with an off-the-shelf solution, I would rather do that so we can focus [our efforts] on areas where we can add the greatest business value, as opposed to trying to compete with a software company that has a solution and a much broader customer base than we do. <<<

Podcast: To hear this interview in its entirety, go to: https://twimgs.com/financetech/podcast/WST_vision2006_putnamv2.mp3
Philippe Bibi, Putnam Investments

Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio

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