There’s something of a dichotomy in investment banks’ IT teams. On the one hand, banks want to hire rock stars who can lead their technology function and ensure they stand out from their competitors. On the other, senior technologists are increasing under pressure to strip out costs, and this isn’t good news for IT professionals.
At the senior end, there’s something of a poaching frenzy for top banking CIOs and CTOs. In the past few months, both Darryl West, the former group CIO at Lloyds Banking Group, and Iain Plunkett, CIO for UBS’s investment bank, have joined Barclays, while Goldman Sachs’ head of FICC technology, Scot Baldry, signed up to Credit Suisse, alongside Denis Roux. Elsewhere, Mark Ashton-Rigby, CIO for UBS’s investment bank, joined JPMorgan in New York.
Banks have armies of technologists; Goldman Sachs has 25% of its overall headcount (or around 2,000 people) working in technology, JP Morgan employs around 30,000 people globally in IT, and Credit Suisse says that it spends around 40% of its IT budget – or hundreds of millions of dollars – on its tech staff.
In theory, working in technology is the place to be – IT teams are growing, while headcount on the trading floor is being decimated as it becomes more electronified. However, cost-cutting, or “efficiency”, is putting more technologists in a precarious position, said Peter Redshaw, managing vice president in the banking and investment services research division of Gartner.
“Banks are looking to reduce fixed costs, and headcount makes up a large proportion of this within the IT teams,” he said. “They’re looking to the conventional routes of outsourcing, offshoring and nearshoring, as well as buying more software, Software as a Service (SaaS) and collaborating with application developers outside of the banking sector. All of this will impact technology headcount.”
Every CIO being drafted into a new position has the remit to reduce costs, said Paul Bennie, managing director of IT in finance headhunters Bennie : “It’s not just about building cutting edge platforms any more. Any CIO has to be focused on cost efficiencies and optimisation as well. This usually means increased use of vendor platforms for non-core functions, nearshoring and offshoring the workforce.”
Sharing the trading floor technology
The jobs being created within the technology teams in financial centres like London and New York are those building new eCommerce or e-trading platforms, where close proximity to the business area is required and which will provide “significant competitive advantage”, said MacLean.
Off the trading floor, banks have increasingly been mooting the option of sharing technology where there’s unlikely to be any competitive advantage, says Redshaw, such as the increasingly onerous technology investments spurred by new regulations. An example of this sharing mentality is Deutsche Bank’s Lodestone Foundation, which encourages banks to pool their software and then allow it to be customised – and supposedly improved – by the development community.
However, more recently investment banks have also become open to the idea of sharing technology related to the trading floor. Steve Grob, group strategy director at Fidessa, told the FT that banks were changing their mindset about opening up their technology in the front office.
Meanwhile, Goldman Sachs – which went to great lengths to prosecute its former programmer Sergey Aleynikov, who it accused of stealing its proprietary code – has been embracing open source technology. As we mentioned previously, it released GS Collections, a source code used in its internal applications, to open source repository site GitHub.
It’s a method of opening its code up to the development community for improvement, but also a way of unearthing new development talent who would have been unlikely to apply for a vacancy at the bank. These developers would likely be taken on for special projects, rather than as full-time employees, so it’s another method of curtailing headcount-related costs.