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A Conversation with American Century’s Bob Sauvageau

Leading a large buy-side firm through today's economy takes business and tech savvy. American Century's CTO says doing more with less is now just part of the job.

Bob Sauvageau has been chief technology officer at American Century, a global asset-management firm employing over 2,600, for the past six-and-a-half years. His tenure has been an exciting one, spanning both the high-flying economy of the late '90s and today's prolonged slump. To manage the tough times, he says, the firm must engage in cost cutting while maintaining high service levels.

Recently, I (WS&T Managing Editor Anthony Guerra) sat down with Bob to find out about his latest initiatives along with exactly how he has managed to scale back while keeping American Century's technology on track.

Wall Street & Technology: What is your most recent technology initiative at American Century?

Bob Sauvageau: We are investing quite heavily in new applications and capabilities for the investment-management function. We have taken a look at all the supporting applications over the last several months and decided we are going to replace two of our proprietary-built systems with some vendor packages.

We're focused on two areas: one is really data management and reporting capabilities, primarily focused on our securities master and performance reporting. That is both for internal use and for publication out to our customers, in particular our institutional client base. The other area is compliance where we have had proprietary capabilities but we are acquiring and installing a vendor package. We're going to bring a lot more of our compliance capabilities into a real-time, pre-trade environment. Those are two areas where we'll see major improvements, as well as other enhancements to the portfolio manager's desktop.

We are going with Eagle's Pace product for the whole data warehouse, data management and reporting capability. On the compliance side, we are still negotiating with two vendors.

WS&T: Could you name the two finalists?

Sauvageau: Not yet.

WS&T: What else are you working on?

Sauvageau: We are doing a complete desktop refresh, so we are rolling out Windows 2000 and Office XP across the enterprise. That's a big deal because you're touching every desktop and laptop in the firm. And then the other big initiative that I'm sponsoring is that now that we've come through a two-year period of contraction, we have embarked on a four-year roadmap for technology for the firm. We're reviewing everything: our infrastructure, our applications and the skills and roles in the organization.

WS&T: That sounds like a major project.

Sauvageau: That's a big one. That touches everyone. There are a lot of questions we'll be looking to answer there. Not just the applications that we have and asking are they viable and scalable over the next four years, but what role will open source play in our environment; things like Linux and so on. The skills question is going to be very important. As our portfolio of technology continues to migrate more and more to vendor-provided applications, we believe the skills mix is going to need to change within our organization over this period of time.

WS&T: How so?

Sauvageau: Well, I think there's less proprietary development, so I think we're going to have to be shifting parts of our workforce to be much more business-analyst focused. Vendor-management skills are going to be very important, for example.

WS&T: Almost a different type of employee other than a hardcore IT programmer.

Sauvageau: Right. It's not a 100 percent shift but, on a percentage basis, we believe more of our employees are going to have to shift into that area.

WS&T: Let's talk about ROI around these two projects.

Sauvageau: Keep compliance aside because for compliance there is an ROI. On the Eagle Pace piece, it was not driven by the desire to reduce cost. It was driven by the desire to dramatically improve data quality, data assessability and reporting capabilities.

On the compliance side, that was, in fact, driven using an ROI business-case model because, there, we are doing a fair amount of up-front compliance checking. However, it's all proprietary. It's across multiple platforms, so we're going to be able to consolidate all of that and have an even higher percentage of our compliance rules pre-trade which, in the end, reduces risk, saves time and saves effort.

WS&T: In terms of the most recent budgeting cycle, was funding for discretionary projects cut?

Sauvageau: It was not and let me just tell you about some of the efforts we've had. We started a serious cost-management initiative within IT beginning in 2001. So we have had a two-year program and the end result is our 2003 budget is 30 percent less than what our 2001 budget was. Year over year 2003 versus 2002, we reduced the budget by 15 percent. What I think is impressive for me, for our organization, is that we've increased the amount of discretionary spending for new application development by 5 percent year over year. So we have taken cost out primarily in infrastructure and other demand-driven areas, while lowering unit cost to deliver the same services.

WS&T: What are some of the other ways you cut costs and increased discretionary spending at the same time?

Sauvageau: We had a hardware giveback program. We appealed to everyone in the company to turn in any hardware that was little used which yielded just shy of a million dollars return. Like many firms, we went through a serious server-consolidation effort and, by the end of 2002, over about an 18 month period, we reduced the number of servers we have by about 40 percent.

WS&T: That's quite a reduction in servers. How did you then maintain support for all your applications?

Sauvageau: By moving to larger, more powerful servers where we can service many more applications on a given server. In the end, your hardware costs are reduced, your software costs are reduced and your personnel costs come down because there are fewer servers to support. Counterintuitive, perhaps, we actually insourced our Web hosting. In prior years, we have outsourced the physical hosting of our Web servers and we took a look last year at what it would take if we were to bring that in-house and we yielded a 50 percent cost savings by bringing all of the servers in-house. Now we are hosting them ourselves in our own data centers. We have also been very aggressive in renegotiation vendor contracts.

WS&T: Can you talk more about how you renegotiate vendor contracts?

Sauvageau: We take the low-hanging fruit first, which are those contracts that are coming up for renewal. We look to put some things out to bid, so we engage in much more competition than we have in the past when, really, what we were driven by was time to market as opposed to cost. Now, we really try and strike a working relationship where we're going to have a long-term relationship.

WS&T: What is the most important emerging technology a CTO should be aware of? What about Web services?

Sauvageau: I'm not convinced that Web services is the answer. I'm taking a wait-and-see attitude. I truly believe that, in general, open source is here to stay. We have seen major firms who have made a commitment to open source and vendors, like Oracle, it's probably not an exaggeration to say, are betting their future on open source.

It won't surprise me if we are running Linux applications in our shop by the end of 2004, and I think we are not far from being willing to run mission-critical applications in that environment. I think what will be interesting to watch is the battle for the desktop in that environment and how does Microsoft respond to what is clearly a serious threat to their dominance of the desktop right now.

WS&T: In terms of the economy, how have you continued to motivate your staff?

Sauvageau: When I'm asked what is my number one concern, it's not cost, it's not standardization, it is how do I keep our IT employees motivated and engaged in an environment where there is little to no growth.

We started some different things. On the compensation side, we mark the market twice a year in IT, so we absolutely remain certain that we remain competitive because we will certainly lose out in the long run if we are not. Even in a down market, we fully fund our training budget so each employee has the opportunity to attend training each year and upgrade their skills, whether it's a formal training class or attending a conference. The other thing that we did was experimented at management level with a job-rotation program. We tried it out in December and that has worked extremely well, so probably 25 percent of our management team took on new positions where they took on responsibility for a new team and were able to learn some new skills, work with a different group of people and learn about a different part of our business. The response has been very, very favorable.

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