How the CIO Can Be a Better Partner for Your Business

I’ve come here to Short Hills, New Jersey to talk with the man that Business 2.0 magazine once called one of the 16 most influential technology people in the world. Let’s find out what Austin Adams thinks about the role of IT and these increasingly fraught, complex, and challenging times, and how the CIO can be a better partner for your business. Interview by Adam Burns, Editor-in-Chief

Adam Burns. I'd like to start where you ended one part of your career with your retirement from JP Morgan Chase in late 2006. You took over the reigns there after the merger with Bank One where you were previously CIO and famously killed the poster child for large scale outsourcing the 7-year, $5 billion IBM contract, quite a statement of intent. What was your motivation behind that move?
Austin Adams. There are several factors I think that go into an evaluation of an outsourcing arrangement, either one that's underway or prospectively. So maybe I'll share with you kind of the four criteria I think to decision outsourcing. Oversimplified, the first one is can the company, can the client hire and retain talent that's good or better than the outsourcing company itself? That's be the first one. The second one, what are the meaningful cost comparisons between the cost to the company to acquire hardware, software people compared to the costs charged by the outsourcing entity, and I'll admit to the second one, which is a little controversial, a very strong bias that says if you're a large firm then I would argue with most anyone the fact that the costs are in fact lower with the outsourcing entity when compared to the costs that you would pay for that hardware/software people yourself.

Let me walk you through a quick example because it's one of the ones that gets debated most. A lot of my dear friends had been senior people at the largest technology firms who have run sourcing or outsourcing or services. If you were to hear their equity analyst presentation on the street they certainly would tell you that their margins are 15-20% plus, maybe with the largest contracts 10-15%, but certainly double digit.

If you contrast that with what I believe, a major entity, corporate entity, would pay one of those same manufacturers, the margins in effect that the company has compare the cost to the company with the cost to the outsourcer itself then I would suggest they aren't that large. In other words pick IBM, which was for example one we had a contract for. I would believe that the internal cost to acquire hardware and software from IBM directly was certainly less than the outsourcing margins that were paid to IBM.

Now the question comes up very frequently, is outsourcing not a way to save money? It absolutely many times can be, but I would suggest to you the differential is in the effectiveness of management, the organizational construct, the philosophy by which technology is managed in the firm, but the basic inherent cost of technology, the cost to be acquired by the firm as compared to the cost charged by the outsourcing entity I don't believe are as great.

The third criteria simply is does executive management in the company want to manage technology? Very simply does the CEO, the COO, the executive committee, do they choose and want to both by their inclination and experience set want to actively manage technology? And there are good firms that have outsourced that have chosen not to and do not have an interest in actively managing technology. Back to the decision of JP Morgan, by boss the CEO Jamie Diamond there and both at Bank One had a very active interest and knowledge of technology and wanted to be a part of actively managing technology because we felt like it was potentially a competitive advantage in our industry and our business.

So that's the third criteria and frankly the one that's least discussed. Again the decision can easily be that the group chooses not for whatever reasons to manage actively technology and outsourcing can be the right decision, but that's the third criteria. The fourth criteria in my mind for making a major outsourcing decision, and again I differentiate that from off shoring of application development and those kinds of things. Outsourcing by the definition of the discussion we're having here and the contractual agreement that JP Morgan had with IBM is more in terms of running the major technology towers in the firm, network, desktop, data centers, etc.

The fourth criteria is simply the financing of the transaction and that's less relevant today than it was a decade or 15 years ago, but just by the nature of the accounting treatment of an outsourcer versus a company or prospective client, there are many expenses that can be deferred by the outsourcer over a 5-7 year period of time and they're able to offer initial lower costs to the firm in outsourcing transaction or proposal than the existing cost, and they are in effect – and I'm grossly oversimplifying but it's a financing transaction. Those are the four criteria my experience in 20 years or so has said that are relevant and legitimate in terms of making outsourcing decision. The quality of technology management in the firm I do not believe is a relevant decision to outsource, or relevant criteria to outsource. Although many times I've seen it used I don't believe that's relevant.

Moving to the JP Morgan transaction, we were 18 months or so into a 7-year contract. The contract was not working well for either firm including IBM, and some of that was JP Morgan's problem, not IBM's. We had failed to consolidate prior acquisitions of well known family names in the banking industry, manufacturers Hanover, Chemical, Chase, and most recently JP Morgan, and a lot of that had not been accounted for properly in the projections of the work that was to be done by IBM and the costs that were to be incurred by IBM. So IBM was not finding it to be a financially attractive transaction.

We weren't particularly pleased with the service levels and so it was more of a joint agreement that this wasn't working as opposed to any violent disagreement with IBM or anyone else or certainly not a philosophical view of outsourcing not working. Importantly the first criteria I mentioned, could we attract and retain the quality as good or better employees as the outsourcing entity itself, we were fortunate in that situation that 18 months ago virtually all those employees had been badged JP Morgan employees, and so therefore we were aware and indeed succeeded in the insourcing transaction that 96% of those people domestically and 98% internationally chose to re-join JP Morgan Chase. So if you visualize an environment where there was very little disruption as we insourced with essentially the same people doing the same things just being re-badged JP Morgan Chase, that was an important part of the criteria and indeed successful execution here.

I know you mentioned in point two that you're not against outsourcing per se. You did a lot of press at the time following IBM think, "I'm not against outsourcing", but it has to be a good fit. You talk about what isn't, but to your mind what is a good fit?
A good fit for outsourcing would be first of all scale and scope, and I can go back to the same criteria frankly. If the firm is not large enough or geographically located in a market where there's sufficient technology either to acquire or retain I would suggest outsourcing is very viable. More often than not outsourcing is appropriate I think when there isn't scope and scale, and the ability of the firm to be able to bring resources financial and human resources to be able to keep the firm abreast of technology in their industry and the ability to at least maintain a competitive parody if not an advantage, then I think that's very legitimate, and I can go back to the other criteria as well, the third one I'll keep talking about, is because very simply some executive management wants to manage technology; many do not.

You mentioned though that you and your CEO Jamie Diamond both felt that technology could be a competitive differentiator. Do you still stand by that?
Absolutely, and again I think it's a function of industries. I don't pretend to know anything about any in-depth industries other than financial services but I think if you were to take a step-by-step process that'd be too laborious to go through right now but if you look at everything from product delivery, service delivery, every piece almost of the financial services product at least in terms of a full commercial bank of which JP Morgan certainly is, then the technology delivery of product and service thereon is extraordinarily important to the firm and one our clients were very dependent upon, and the extent to which we could differentiate ourselves by bringing a better product, a lower cost product or improved service indeed does have the ability to retain and move clients.

And HSBC's proprietary Barracuda trading system for derivatives is a very good example of when to build and not to buy I think. How though does the CIO make the right choice in that situation?
It starts with engagement with business management in a very open, direct, candid, objective way, and the discussions not necessarily in order would ask the questions about does the feature functionality of the application we're developing, does it need to be materially different and/or better than anything in the marketplace today? Will the expectations of the volumes and the requirements in terms of the scope of the application that's being developed, is it a requirement of significantly bigger than is offered in the marketplace today by some vendor in terms of application software?

One of the most important but least frequently mentioned is the ability of the business to modify their business processes, and I get lots of examples in my career I've seen with banks, which I've worked in others, where the business has made very rigid kind of requirements of saying, "This is what I need in new software" and once a look was made in the marketplace then clearly there wasn't a match. It may have been only a 25% or 30% match of any existing application software in the marketplace, and so quickly the decision goes to, "Well gee, that only meets a third of our needs and so we must develop something in house."

Where a better approach I would argue would be to take a hard look and say are there business processes, sometimes business product realignments that could be or would be modified by the business itself to accommodate a more standard, off the shelf kind of piece of software that instead of requiring 70% modification might only require 25% or 30% modification and therefore could be purchased and modified internally in house. So business process realignment, the possibility thereof and the willingness of the business to look at their product and service differently is an important criteria.

Also it's extraordinarily important that someone lead a very objective look at the alternatives from kind of outside the technology world. If you think about it it's relatively human nature. If I'm the lead developer of the derivatives team and I'm asked, "Do you think we should go in the marketplace and buy some vendor's product or can you in your group do it internally?" my guess is about 95% of the time the response is gonna be, "I've got a great team. We're ready to go." It's everything from ego to job security, etc. and the recommendation coming from the technology team is that we build it internally, and I'd suggest by definition that's extraordinarily difficult to do with 100% objectivity if there isn't someone very senior both in the technology organization and likely someone in the business organization to help make that initial decision.

In summary, I think either decision is appropriate. I don't think it's a firm kind of decision. I think it's an individual large application by large application decision. Admittedly the larger the organization and the more complex the product line the more difficult it is to buy a product from a third party vendor and the more likely that you'd have to develop it internally.

And as CIO did you feel the job that the onus was on you to look outside of banking's four walls for technology initiatives and to bring those in?
It's my responsibility as is the business's. Did we do that often enough? No. The thought process tends to be, and perhaps it's true in other industries, that we're unique, our company is unique, our industry is unique, and in many cases that's true. In many cases it's not.

For example banking in firms I've been with we're too late, could've been much earlier to look at capability outside our industry in terms of building the right kinds of sales tools, aggregating client information for servicing, building what we would call central information files or CIS. Many of those kinds of activities, many of which were rolled into very effective data warehouses in non-financial services institutions were better done from my perspective than I saw us do in financial services. So certainly parts of our business we could and should have done a better job of objectively looking outside the industry.

You talk a lot there about the opportunities that you felt you missed. Is there anything you think you got spot on that you got absolutely correct?
I'd be presumptuous to say we did anything kind of spot on but a topic that could be a lengthy discussion is the utilization of data within our firm and how we use it, and I do think that any time any of us looked outside financial services we saw retailers, distributors, service entities that generally did a better job than we in terms of holistically looking at the client and the necessity internal to the organization to share information across lines of business or products to be able to provide a holistic view to the client both for selling purposes and servicing purposes.

So three things for the CIO are people, processes, and technology, all of which you've mentioned. How is the CIO's attention split across those three areas I suppose daily, and at times of technology rollout does it change?
Let me take the prerogative back up a little if I could to say there was one extraordinarily strong personal philosophical belief I've had for 25 years now. When I first came into what was for me my first large CIO role I did go through a several week period of time to say how can I as a leader or how can I as our technology group add greatest value to the firm for which we work? I developed an approach and a philosophy literally 25 years ago that I believed strongly 25 years ago, and needless to say any time you believe something strongly you look for reinforcement.

So today I believe it even more strongly and it's terribly simplistic but what it says is in the financial services industry competitive advantages gained when technology is developed and maintained in a cooperative, synergistic way throughout the organization. So it permeates literally everything I've tried to do in the role in terms of organizational construct and philosophy, which I guess we'll talk a little about, but to your point about people and process it for me was the underlying way of looking at everything.

For example let's just start with people. The people construct was that we had the technology organization that lined up with each of the businesses that was a shared accountability of the business head. In banking for example retail, credit card, investment bank, the CIOs for those lines of businesses, and their senior people within the technology organization reported jointly to me and to the line of business. Arguably a tough concept. The way I described it was a double solid line. Got a few thousand years of debate about is that possible or impossible.

It's a more difficult model than being able to say one individual is my boss and the other person is subordinate to him and I don't have to listen equally to each, but I believe to optimize technology it has to be that dynamic tension between what's needed specifically for the business and what's needed for the enterprise, and the way that translated to people and process to your question was the time allocation. The way I described it was the CIO for let's take credit card for example, allocated 80-85% of his time in a very mature environment, maybe as much as 90% of his time, directly to the line of business. He was housed with the line of business.

I wanted his people to feel like they worked for the credit card company, but having said that 5 hours every Wednesday and other times the CIO and people on his team would work with other technology leaders in the company to assure that we were looking at every possible point of leverage, whether that be shared databases, whether it be contractual agreements, whether that be internal processes, tools, education, whatever it may be, that fine tuning point between what could be leveraged, should be leveraged, and what is unique to the business. So if you start with that construct then I would suggest that people are differentiated a good bit in terms of their knowledge of the line of business, in some case technology process are as similar as possible throughout the technology organization. To your question about how that changes in times of stress or difficulty, I think if you have the right people and the right process and philosophy in place I think it changes very little.

You talk a lot there about business lines. A lot of financial services companies are incumbents. They've been going for an awful long time and have a big history. They're big companies and they're full of silos. Can technology be used to break those silos to communicate as you say synergistically across the organization?
Yes. Two points though. We'll differ a little at least with the phraseology you said about how you acquire other companies and they're added kind of to the portfolio. Probably one of the kindest things to say about the approach that we had in the companies that were part of the consolidation phase in the United States from '85-2000 was that I was accused of being a single systems bigot, and that's probably the nicest thing to say, but that's very much what I saw and we're all about and I'm an extraordinarily strong advocate. So while for example at First Union we made 95-100 acquisitions we only had one deposit system, one general ledger, one consumer credit system, etc. So you tried to build some systems that had the capability, the functionality, and the scalability, but you converted to that, and that's ultimately where we ended up at JP Morgan Chase with one demand deposit system, etc.

So that simplifies it a lot. What it doesn't do indeed to your point, it does not solve at all the problem of saying if I own the mortgage customer, the credit card customer, or the cash management customer then what degree of cooperation and dialogue is there among the business entities and the technology entities so that indeed these functional silos are not created? That's a challenge. Frankly it's solved best or created most by the very executive management in the company.

Are there incentives, business incentives that are put in place at the most executive levels in the company that would cause the business leaders and therefore the technology leaders supporting those businesses to share information, to be willing to share databases, to be willing to make compromises on new application development, to build data warehouses with information that other groups within the company could access for sales and servicing. It's all frankly a function of primarily executive management and the incentive that executive management has in place to the most senior people in the firm. Is it solely incented to grow their unit or is it an incentive to grow a greater subset of the clients in the company?

And so would you say is the role of the CIO then still very much in flux from technologists and strategists? What do they need to bring to the big table?
CIOs in the broader sense and the people in the organization have access to more information than clearly anybody in the company by definition. So were the CIO to wear his corporate hat or let's just say some sub set of the bank, the commercial part of the bank or the retail part of the bank, he has all the capability in the world to be able to look and say, what's the value add for a commercial customer to have the following treasury management services, also have a trust account, etc.? What does that do to the total profitability of the relationship? What's the retention rate of the people that have those services, and begin to educate and help the businesses understand the value to the firm of looking more broadly at the client across the firm or within a subset of the firm.

Let me use an example. I give this credit because it was not me. It happened to be three divisional CIO's that happen to report to me in the division and I wish I had a dozen of these stories. I have less than a dozen but five or six years ago a group of those CIO's came to me and said, "Austin, we need to help the business." Our groups, we have an application system for consumer lending, for credit card, for home equity, for mortgage. Generally a retail segment of the company we had at that time while they were singular relative to the product line they said, "Gee, much of the same decision tools, external data fees and credit scoring and all that kind of stuff is the same. Why can't we build, get our business customers to build one better loan decisioning and processing system for all these lines of business?"

And in this case in essence they did that and were able to sell the business. I think we're gonna get to this question later. How does the CIO and technologists optimize corporate value, increase their job security, their visibility, etc.? A lot of it fundamentally on the margin is being able to improve the business, and this was an example where at the initiative of the technologist the business was improved in terms of better product, build the price better, and be able to come to market quicker because development was done within one system rather than six, etc.

Absolutely. I think that JP Morgan Chase alongside perhaps Wells Fargo and Goldman Sacks seem to be very well positioned to ride out the current turbulence. Would you say that your policies have helped?
Well I wouldn't presume that to be singular to me. Let's just say I had great support from our CEO and my boss Jamie Diamond. Jamie believed in making major investments in technology and was more willing to do that than anybody I've been around frankly. So I would suggest the fact that we made over the last several years major infrastructure investments, frankly $2 billion plus in data centers, those kinds of things, but more importantly in difficult, challenging times the holistic way we looked at technology in the firm.

For example we had a master calendar of all the major technology projects in the firm. 135 projects that were deemed to be the most important across the entire firm by line of business and by the core corporate support group. We monitor them weekly but they were reported to the executive management of the firm. We looked at them on a monthly basis. The 30 that were most important were scrutinized more carefully in depth than that, and everybody on the operating committee, the dozen or so of us that allegedly ran JP Morgan, would know at least monthly if not semi-monthly which of those 30 projects were in difficulty, how could they be managed, what we need to do to address 'em, how you stayed on top of those kinds of things.

So in difficult times it's easy to under invest or take the I off important technology projects that either have - if they aren't done either allow deterioration in service, which is one of the things that happens many times in an environment like this, or we aren't able to come to market as quickly as was planned initially when things were better 18 months ago. Most importantly one of the things that we did and not unique to JP Morgan but certainly an exception among the very largest institutions was to holistically understand our clients across the firm, and we had a single decisioning unit, business unit with representations in the investment bank, credit card, retail, mortgage, etc. that looked at the major data warehouses and repository of information from which we gleaned information for marketing, sales, most importantly in this environment credit information. The very best firms, and I'm confident those three, would have an aggregate way to look at credit exposure, risk, credit risk, interest rate risk across the entire firm, and I would suggest that dramatically decreases at least the surprises and the ability to get ahead of things.

And clearly your CIO Jamie Diamond was very open to technology change and your expertise. How do CIOs who are not as lucky as you, how do they get the attention they deserve?
How do CIOs either succeed on an individual basis and/or contribute most of their firm, and I'd suggest those aren't generally mutually exclusive. It is being number one a business partner, and number two being seen as a business partner. So the question is asked with some degree of frequency, "Well gee, does the CIO not have enough exposure, enough face time with the CEO?" My argument would be that's less relevant than the extent to which he is perceived by his peers, the business leaders in the firm as a business partner, is perceived that way and acts that way.

In today's world there isn't a single business leader another direct report of the CEO who isn't with some degree of regularity having dialogue with the CEO about how well he's being supported during the technology. So frankly I've seen some CIO's fail because they were too singularly focused on the CEO, which sounds kind of crazy but it really is true because the best CEO's are going to make sure that the broader constituency is served, that the business is being supported, and so I'll keep preaching the point that says all of us as CIO's need to ask ourselves number one are we running the business agenda? Are we being a business partner? Are we being seen as a business partner? And I hope you'll ask the question a little later about incentives and how you cause people within the technology organization to act that way, but fundamentally that's the starting point.

The  next point then would be the skill set that's much more prevalent in CIO's than was the case a couple of decades ago, and that's some kind of business literacy and understanding. So again I've lost cases in the boardroom where I didn't get investments made. Luckily more times I have than I haven't, but I would suggest the burden is more on the CIO, the technology organization, than it is the CEO and executive management. It's our responsibility to help sell and help the company understand investment in data centers, databases, whatever it may be that on the surface isn't an immediate revenue generator for the firm and many times is chosen to be deferred in deference to some revenue generating application or something. It really is our responsibility to understand the business, to think as a business person, and communicate in business terms.

And the huge automation, visualization and metrics benefits that IT brings would appear to be tailor made for this really challenging period we're going through and yet all of the management dashboards, the advanced forecasting, the BI, none of it has helped save financial services. What is missing?
Oversimplified I'd say two things. Number one, the data is silo based by business or sub business or sub sub business and is not aggregated appropriately for lots of reasons, some of which we just talked about. The inability, unwillingness of the business people to understand the client as being owned by the firm as opposed to their business unit. It starts with the nature of the – the siloed nature and the lack of integration standardization of the proper fields within the application systems to be able to look across the organization as I said relative to risk exposure, crate exposure, interest rate, operational exposure, whatever it may be.

Secondly many times in financial services organizations we don't have a balance of the right people defining what the application development and modification needs to be. An easy example to look at today would be clearly is in some of the problems on the street now you have to ask yourself the question. In terms of the application systems that were developed and reporting coming off those systems what was the balance between the person who owned the revenue in that versus the people who had responsibility for risk and risk mitigation.

By definition I think most everyone would agree that there wasn't a balance in the way those systems were developed or monitored or there would've been a greater keenness of awareness and quicker to bring to market the exposure or bring to the table the exposure that the inordinate risk would've brought, but those aren't generally the developers of application systems. The definers of the requirements of application systems many times are greatly – the imbalance is much to the revenue side, less to the risk side. So as the pendulum swings you see in financial services today you're gonna see the risk jobs changing, the senior people changing over more often, and they will clearly be sitting at the table more in today's world until the cycle changes in terms of defining what's needed including technology needs to be assuring that we're looking at risk across a client or across lines of business.

Now I read recently that the average lifespan for a CIO is 21-24 months given the length it takes for any major IT deployment. Where is the relationship breaking down? Are CEOs simply not giving CIOs enough time?
I'm real harder on us than that. It isn't enough time. Again I'd ask he question how are CIOs incented? I'll give you some example, personal examples, not all of which have worked perfectly, but there are lots of things I think CIOs can do that I don't see us do very often to assure that we're lined up with the business, that we're running the business objectives. For example early on at Bank One our ATM availability 7 or 8 years ago was nominally 98.6%. As we measured that against other banks it seemed to be in the top quartile, maybe top decile. Another way to look at all the metrics we do in technology is from the business view.

So for at least 5 or 6 years I attempted to take every metric that would impact the client and talk in terms of client impact, not four 9's or five 9's. For example ATM availability of 98.6% at the company I'm talking about at the time, at Bank One, that meant that every month 50,000 customers couldn't get money out of their ATM. So the rude way I explained that to our team was look outside the building. Look at the faces of the 50,000 clients that could be standing in the parking lot and turn back to me and tell me how great 98.6% is. So one of the biggest – again it's fundamentally the same idea. The same idea is do we as CIOs, do we as technologists, did we think as technologists primarily in first or do we think of business and the client and the business objective?

Couple of other examples. In the same kind of timeframe I asked Jamie and he reluctantly agreed. I said, "I want 10% of my bonus opportunity for you not to have that opportunity. You can't control that. I want that based on the number of our improving by 50% the negative web impacts on our website." And the way it worked out, and you can do some modeling to get there very easily, the way it worked out that we had 250,000 negative impacts on our website every month. Now sure in terms of availability that was 99 plus something, but there were 250,000 times a month that our clients could either not get to our website or some subset of service within the website.

So what I asked and was given agreement that I and five of my direct reports, we only had an opportunity for 10% of our total bonus for the year. We weren't even eligible for that unless we cut that average in half to precisely 112,500 negative impacts a month. As you might expect that created particularly in October when we weren't making that number created a large amount of dialogue and cooperation among network, application development, web development, etc. But very importantly our business community felt like we were with them and we were running their objective. We weren't running a technology objective. We weren't talking about how our availability was 99.9% while they were getting letters from people who couldn't get to the web and were losing  accounts. They felt like we were running their agenda. We were running the business agenda, we were running the client agenda.

I'll stop; I'll give you my most extreme example, which had a positive effect but was a little too dramatic. One year I had for mine and four of my direct reports 10% of our bonus tied to the  net new accounts that our – our net new accounts for the year, the target for that in our retail organization. Because that was the most important thing in the retail organization for a period of 5 years. They had a net loss of new accounts, more attrition than new accounts for five years. That was their number one objective.

Naturally I got almost mixed within my organization because the point was well gee, we don't set prices, we don't hire tellers, etc. My point was if we're really running the business agenda that's what's most important to them and if our service is up here every day and we're getting good product out there, etc., availability response time is good, then that has a significant factor. So I'm preaching a little here but it is in my opinion the most important factor about the whole question you got about longevity of CIOs, CEO giving the CIO time, etc. All of those kinds of – the question is are we really focused on the business agenda? Lots of other examples. I'll give one and then we'll move on.

One of the things I've tried to do in the last two jobs I had was we had educational classes for the technologist to understand the business. It was primarily a web-based program called the business of Bank One and the business of JP Morgan, and we taught developers and network specialists, data center managers, how a bank made money, what are margins, what are revenue streams, what are opportunities, frankly relatively short, almost too short a course, but it took several days to complete over a period of times so they understand the business. I think if you back up a number of steps from that the ability of any support person but certainly a technologist to understand the business, to run the business agenda, to be seen as the business agenda, to be the business partner, that's the biggest, best opportunity I would argue for a contribution as well as self-preservation and job retention.

So you talk about your own bonus opportunity there. Are CIOs being motivated in the right way?
Generally not.

And what can be done about that?
Perhaps a better understanding at the COO or CEO level of it. Immodestly I would suggest I would like to see some CIOs, and I'm sure I wasn't the only one but who are bold enough to say, "Hey, I wanna make sure that I and my team are focused on the company succeeding, not me or my group being a best technologist or whatever it is. I want the business to succeed. So what can I negotiate with my business partners or the CEO or the COO to assure that my incentives and the incentives of my group are aligned with the business?" I can't imagine being thrown out of the CEO's office or your business partner's office if you walk out the door and say, "I wanna make sure that I'm more aligned with you than I am today in terms of our behavior and my personal incentive." I don't believe many people are gonna get thrown out of the office for that.

Trust and reputation are two of the most precious assets for any financial services company. How big a stumbling block is the technology operation?
Well when I think of trust and reputation clearly it is important. That's what we're all about. I believe that the opportunity is – there's more opportunity than we tend to think in terms of technology's ability to play that in a positive way, and you're absolutely right. In terms of a major crisis or an applications system being down for 36 hours and being all over the Wall Street Journal or whatever it may be, then those are risks. I choose to look at it more positively and say technology is a very important part of the whole service delivery, customer retention, customer attraction process, and the extent to which we have bulletproof services and we help our clients provide and bring more focus to those issues and that risk, that's a great opportunity.

What we did at JP Morgan was to combine the disaster recovery business continuity group with the IT risk group and so we had one group that was coordinating all activities across the firm working with the business. For example as mundane as this sounds the business if you ask the unaided question, "Gee, which systems do you have that can be down more than 12 hours in case of a disaster?" "Oh I don't have any. When do you need 'em up?" "I need everyone up in 30 minutes, some sub second for response time or recovery time." Technology is the best entity in the firm by far to give leadership to the prioritization and helping understanding of what's a tier 1 application, tier 2, tier 3 application, interacting with the business to help prioritize some of those, helping make sure that the business contingency plan is in place, coordinating all those activities.

So I think in your earliest point was part of it's an awareness of the importance of our systems being bulletproof and response time being satisfactory, etc. but in today's technology enabled world there's such an opportunity for the business leadership, for us to work with the business leadership to help make sure that they are with us doing the right kinds of things. If I'm very candid with you in post-retirement I'm on several boards and I've succeeded in frustrating the CEO of each of those companies by suggesting that the visibility of their IT resiliency and IT security function was not great enough in the firm.

They weren't compensating the entity well enough, etc. because while in financial services to your point trust and reputation are important, there are very few entities that it's not, and in today's technology world if those kinds of entities aren't safe in the broadest sense in terms of disclosure and client information and all the things we read about, exposure is extraordinarily great, but I'll wrap it with the way I kind of started it. I choose to look at it in a positive way in terms of technology enabling, improving the process, less about focusing on how we can create issues.

So I would like to address one element of the current financial climate with you if I may. The Bank of England recently released a statement that said, "Institutions should be able to raise funds without the stigma of being regarded as weak, and instead build their capital to demonstrate increased resilience to financial shocks. Now I know that that's a sentiment echoed here in the U.S. and across Europe. Isn't there an element here that we are in fact simply cleaning up after the spoiled child?
Yes there is an element of that certainly, absolutely, and if you've been in the industry as I and others have been for a few decades, cyclically we seem to make similar, not identical mistakes every 8-10 years. It's been pretty well chronicled the last year or so. Having said that, financial services are so critical to the world in lots of ways that I got no apologies for the ability and the willingness of the world to enable financial services to go to the debt and equity markets to get the kind of capital that's needed. I don't think anyone would argue that some firms haven't paid a very dear price to be able to do that. in other words the child may have been spoiled and the child may have misbehaved but I would argue they've been penalized pretty hard as well.

Embedded in your question I think is how do we avoid some of this in the future? Do we let just people keep coming back to the equity markets or occasionally as was the case here with Bear Sterns is there some kind of government intervention, whatever it may be? I think there are those kinds of opportunities. The biggest opportunity for me frankly beyond just our learning the lessons of history is the regulatory construct now in financial services is far from optimum, and I don't mean that in a personal way. Some of my best friends are people in the bank regulatory environment but as I think everyone would understand, it is a very convoluted environment today.

The way in which financial services companies even banks are regulated by several different entities, which are given guidelines and direction at different levels by different organizations and certainly there's a lack of coordination and consistency. That's an issue and I know it's being discussed. Whether Congress will do anything about it or other entities will encourage Congress to do anything about it I'm not sure but it's clearly one of the things that I think needs to be addressed in a straightforward, hard-nosed way to assure that we have a more consistent regulatory environment with more skills specialized people who are able to observe the marketplace and get ahead of some of these issues.

I use the example of customer based metrics, which I think is more important than the following point, but a practice that I didn't use until JP Morgan and wish I had was spending more time with the business to say what are the most important parts of our technology performance that are important to you in terms of prioritizing. In some cases it's availability, some of it is just getting to the market more quickly. In other words what we technology provide for you help prioritize for us, make sure we understand what's most important to you and how do you translate that to metrics, number one, and then number two, we want to report those metrics to you with some degree of regularity and have dialogue with you.

So the real power I found was the whole idea – well two things. Number one, that the metrics were business based and business prioritized, and secondly the dialogue by the third or four iteration got extraordinarily valuable because the first two are the typical lashing about "Why in the hell were the systems down last week?" kind of thing, but by the third look at the metrics the business would be saying what are the kinds of things I can do to make sure that our performance is better. Again it's the dialogue. Then it's the business partner. If you're adding value the performance is getting better and they're a partner with you as opposed to somebody shooting arrows.

And do you think that there is enough collaboration between CIOs?
In my opinion absolutely not from several perspectives. Not the most important but one of the most frustrating in financial services is that we collaboratively across various job functions within financial services but certainly CIO's have been for the most part very ineffective in creating industry-wide solutions for certain things. The most frequently discussed one right now would be mobile payments. How do we as technologists play with the vendors and others in making sure we've got the right kinds of standards, etc.? So there are lots of examples like that but there is absolutely in my opinion not enough collaboration and dialogue CIO-to-CIO or senior technology individuals below the CIO level in one firm with another.

In fact I would challenge anyone to say, "Tell me what are the deep, dark technology secrets in your firm other than specifics of their technology budget in terms of dollars, and the costs inherent in that budget." Secondly, what are the major application development projects or enhancements? I would agree those are – that's proprietary information, confidential information, and potentially competitively advantaged. Beyond that I would challenge anyone to tell me what discussions could not be had on a mutually advantageous basis among and between CIO's that would be of value, and that's everything from what's your experience with a vendor, what's your experience with this tool, what processes are most effective, etc.

I literally believe every other topic is open for discussion if the individuals come to the table with the right attitude around sharing, and that's important because we've all seen individuals who if there is a dialogue, allegedly a dialogue, it's really only a monologue because one person's ego has a need to talk 95% of the time and listen 5% or less so that's not a meaningful dialogue, and secondly if they're unwilling to admit that they can learn from others then it's not a meaningful dialogue. But by the simple definition of an open trusting dialogue absolutely every one of us as CIOs can be much more effective as individuals and as leaders were we to take a much more what I would call progressive/aggressive dialogue with other CIOs.

I suppose the logical question, the next question then, how best can that be facilitated?
I guess a commercial for what you're trying to do with meet the boss and some tools and processes around that. I think some of it beyond that is initiative. It's the willingness and I've done a few times in my career, could've done it much more, is to simply call somebody on the phone and say, "Next time you're in my city or I'm coming to New York", whatever it may be, "I know we're in a similar kind of business, I know we've got some similar issues. Can I buy you lunch, dinner, breakfast or whatever? I'd like to kinda learn what you're doing and I'd be glad to share with you what I can."

Particularly if you ask, "I'd like to learn from you and I know you're doing some things well." If that's done with some degree of sincerity it's a very rare exception when the person's ego isn't stroked enough or isn't flattered enough to say, "Yes I'll be glad to share with you all my wisdom and knowledge." Again an important part of it is, is there a two-way dialogue? If there is it's absolutely invaluable to maximize the performance of the CIO in the group.

So obviously JP Morgan Chase, one of the largest financial companies in the world, and there aren't a lot of organizations like that. What is the advantage for a CIO from one of these large organizations in reaching out and talking to other CIOs?
It's easy, particularly those of us that have had responsibility at a relatively large firm to think that we can't learn from others, and again I think that's flawed in lots of ways. So when I talk about CIOs learning and exchanging data with each other and engaging in dialogue, many times it's the facilitation of that dialogue well down in the organization in terms of specialists within the network organization or application development, whatever it may be, that some of the most meaningful kind of interaction and learning can take  place.

The personal example for me has been that every time I or someone in our group over the couple of decades began to get too arrogant about the way we did things we would make an acquisition, go in and look at the acquisition with the bias that gee, everything's gotta be done our way and we start engaging in dialogue and learning. There's an organization a 15th our size or 20th our size that has better processes, better decisioning tools, a better methodology, whatever it may be. So I would kind of argue with anybody. It's easy since I was at Wall Street but if you sit on Wall Street and you think that all the bright people in the world are in New York, obviously many are in London but someplace other than New York and London then you're absolutely sub optimizing and failing to see and learn from others.

I could keep elaborating on that but look at what's happened in non-financial services companies. Pick the Sears of the world or K-Marts. Go through the whole list of technology companies and the fact that many of the smaller companies did things better, thought about things in a different way, were more progressive, and so indeed it's a sorting out process of how you best discern that information but clearly there's best practices in lots of places outside the largest organization.

So if you could say one thing to a technology company what would that one thing be?
That their primary view of the world is running the agenda of the client. It's terribly simplistic. I'd just suggest to you that any successful relationship, and that's what both the supplier and the customer seek, certainly the supplier, is having a meaningful, sustainable relationship. Any relationship is based on primarily one of the entities running the agenda of the other entity. I would suggest that's true whether that's husband and wife, whether that's any relationship. What that specifically means in a technology company and financial services, examples would be I would ask a technology company how often they have come to the table in response to an RFI or RFP and said to the requestor, "Gee, we do some business with you now and/or we wanna do a lot more business with you but frankly that's not our sweet spot."

There are two or three other products or services I feel really good about and when those come up for proposal I'm gonna be very aggressive, but I gotta tell you, that's not our sweet spot. The number of times that technology firms have said that to me in 30 years I can count on one hand. If you take a deep breath and say how much credibility, everything else being equal, how much credibility does that build with me or anybody else? It gives me the impression hopefully with some degree of integrity that they're running my agenda. They aren't scared and they aren't worried about the fact that they're 8% below their quarterly sales goal but they're running my agenda trying to help me succeed.

So two points. The first one is that they would be with as much integrity as possible bidding and working on business that truly is their sweet spot. They can do as well or better than their competitors and acknowledging that up front. Secondly, and this is a difficult one too, is the whole idea of what are value added services that they can bring to the table without their being explicit costs involved? I clearly understand all of these are profit-making entities but how often does the supplier community come to a client or engage enough in a client to say, "Hey."

The example for me, Austin, was that many times I knew I had suppliers that were common to me and other financial services companies and so my request of them would be to say, "I don't want names. I don't want anything proprietary", but you have other financial services institutions that are using these tools, they're using your hardware this way or software this way, whatever. "What are some of the best practices you see?" Number one. Another one would be "I don't know John who's the CIO with this company and I know he's a big client of yours. Could you get an introduction to see if he'd be willing for us to have dialogue?"

There's information, there's contact, there's some number of things in addition to out of pocket kind of expenses for which the supplier may not be reimbursed that could be vaguely valuable to their client and admittedly they have soft value. But we always make decisions to some extent based on soft value relationship value add. So those are the two things. We're coming to the table with honesty and integrity around the sweet spot of what the company can do and can't do, and second what are the soft value added points of information or contact across the industry that that supplier could bring to the table.