Interesting times

By Huw Thomas, Editor

Becoming Credit Suisse CIO in May 2008, Karl Landert’s first few months in the job have coincided with an unnaturally turbulent period for the industry. FST editor Huw Thomas spoke to him about managing IT in an age of uncertainty.

“We are not a service provider; we are an IT organisation of a financial services institution and we need to understand our business. We walk the talk and what we say is what we deliver”
-Karl Landert, CIO of Credit Suisse

Asked to define his role as head of Credit Suisse’s IT function, Landert likens it to being mayor who has to manage the different aspects of day-to-day life in a busy city. “There are dozens of buildings and an infrastructure which is sometimes old,” he says. “You need to replace it to cope with growth and the influx of people coming in from rural areas. Your role is not purely a technology role anymore.” If Landert is a mayor, then the city he became responsible for little over half a year ago is one located in the middle of a war zone, facing unpredictable attacks from all sides. Good news is in short supply in the financial services industry, with the ongoing credit crisis leading the Swiss giant to report a third quarter loss of more than 800 million euros. Given the situation, a siege mentality would be understandable.

But if Landert is fazed by this baptism of fire, he does a good job of hiding it. “It’s been a challenge because a lot of things have changed in the first few months,” he confirms. “But it’s also been highly rewarding. If you don’t enjoy working with your own people, your IT organisation, but also with your peers on the business side, don’t do this job. It’s a people’s job and with all the challenges that we are facing and all the bad news, the one most rewarding thing you have is working with a good team, having a good spirit, and making some of the tough decisions you need to make. But as long as the team is working well, people enjoy working with each other, I think that gives you a lot of motivation.”

In the choppy waters currently being navigated by those in IT in the financial industry, a major challenge is building any kind of long-term strategic plan. When the managers are anxiously awaiting the next bombshell that threatens to blast them out of their corner office, it can be hard to both get their attention and convince them to part with jealously guarded funds. Though Landert is far too discreet to voice such a forthright assessment, he nonetheless recognises such pressures. “Given the seismic events we are seeing right now, we see these profound changes coming along,” he confirms. “Nobody can afford to have a long-range strategy which is very detailed. I think one of the common themes which I see throughout all the things we do in our long-term strategy is about becoming a very agile IT division of financial services or of the bank. The agility has to be within the whole IT organisation in structural technology-type of activities, in the way you set up your operating model in order to react to and be able to survive some of the volatility we have and some of the changes which will come along.” It seems that even the biggest organisations are going to have put major plans on the back burner in favour of being prepared for an increasingly uncertain environment.

For Credit Suisse at least, this shift in focus is already underway. Though, as with any move that requires a drastic direction change, it cannot be done overnight. “You need to look at the way that you do financials and how you account for IT costs and the investments you do,” Landert continues. “You’ve got to tackle some structural aspects of the organisation. You’ve got to look at the operating model that includes some of the sourcing strategies you have. You’ve got to look at your architecture and your infrastructure, at technology processes and standards, and last but not least, at your workforce. It’s the key point that you align all these activities because they all highly depend on each other and you cannot change one without affecting another.”

A common response to uncertainty and constrained budgets is a greater reliance on outsourcing. By not actually owning technology and processes themselves, organisations can find it that much easier to walk away if circumstances change suddenly. Landert confirms that this is very much a part of Credit Suisse’s plans, but that the issue is not as black and white as it might sometimes appear. “You’ve got to have a clear strategy, and the clear strategy now regarding outsourcing is what parts of the overall value chain you outsource what you keep in-house,” he says. “More and more you want to keep in house design knowledge and architectural knowledge, beyond the pure contract management that you always keep in-house, in the retained organisation. And you want to have the ability to do what is called today multi-sourcing. By keeping that in-house you can utilise different partners and use competition between different partners. But it’s also easier to switch vendors.” Of course, any decision regarding outsourcing has to take geographic and vendor risks into account. The key issue for Landert is that design and management authority remains inside the company.

But contrary to the prevailing winds blowing through the industry, Credit Suisse are even looking at bringing some previously outsourced elements back into the organisation. Landert tells us that the possibility of bringing certain helpdesk functions back in house are currently being explored. “I think it’s the realisation that most companies, although they are global by nature, have a very big challenge in providing you with a consistent global service,” he explains. “Sometimes you have local champions, who are better prepared to do that. Secondly, what is driving it is where we have customer satisfaction issues, which are leading us to this conclusion. For example, in Europe we re-insourced some of the helpdesk and the desktop end-user computing services, which we had outsourced previously in some of the European offices. We’re looking at it on a broad scale right now.” It’s an important consideration. While it can be tempting to go for the lowest cost option in difficult times, doing so at the risk of alienating customers can lead to yet bigger headaches.

Credit Suisse operates an integrated bank model with IT acting as a shared services unit to all the sections of the organisation, from asset management, to private banking, to investment banking. Serving all these specific needs at a time when financial markets are in such a state of flux must surely present some problems? “Right now one of the challenges we have is certainly sizing IT and the way we provide our services to some of the peak volumes we have seen,” Landert responds. “We have been reacting very fast to deal with some of the volumes which were created by this market volatility and by the events we have seen. Right now the challenge is how can we sustain the business, how can we make sure that when we have these events where you triple and quadruple your volumes, that all the systems are really delivering on their SLAs. Reaction to these events has kept us pretty busy.”

So what of the future? It’s virtually impossible to open a newspaper without seeing stories about falling budgets and brutal cost cutting. Speak to most people working in financial IT and they will tell stories about being asked to do more with less. While Landert is cautious about sounding too many alarm bells, he nonetheless acknowledges that the current situation requires some very careful use of resources. “Going forward I think there are going to be some of the tough decisions that we need to make about where we continue to invest and where we reduce investments,” he says. “That’s not an IT call you make alone; that’s the one you do with your business.” Making these kinds of calls really puts a spotlight on the quality of IT’s governance and its interaction with the business. It’s an area where Landert believes his team has demonstrated considerable success. “I think that over the last couple of months, we have made significant progress in providing the full transparency of the levers we have,” he continues. “This is a business IT alignment which is absolutely crucial in difficult times. You have to be agile, to have the full transparency, and to understand the leverage you have on what you can do and you cannot do with your IT infrastructure in supporting the business. That’s going to be very important in the coming months in deciding where we put your investments and where we don’t invest.”

In any case, Landert is sanguine about the bank’s ability to weather any effects a prolonged downturn may bring to technology expenditure, largely due to the work that has been done in the recent past. “We had the luxury to be in the situation where we could gain a lot of synergies through combining all the different IT units whilst at the same time continuing to invest,” he says. “So we are looking at three or four years of having done healthy investments and increases in the IT development.” Landert clearly believes that this groundwork will be enough to see him through, but also seems generally upbeat that budget cuts won’t have too big an impact on his work. Though he acknowledges that the current uncertainty will have an effect, he remains confident that IT will retain the capability to be effective, simply because IT is so fundamental in coping with some of the challenges that the industry is facing.

To ensure that the company’s IT doesn’t stagnate, Landert promotes the concept of managed evolution. It essentially boils down to a constant evaluation of the bank’s IT assets which enables change to be made without potentially crippling investments. “To survive and to keep your cost levels acceptable you need to have a constant process of eliminating your heritage and your end-of-life application systems,” he says. The approach allows the technology portfolio to be contained, both in size and complexity, reducing redundancy and enabling a much greater level of component reuse. Key to its success are solid architecture and strong standards. “That is one thing we do and we have been very successful in it in the last 10 years, in different parts of the IT organisation, Landert continues. “Constantly re-engineering and reinvesting in our systems enables us to eliminate some of the old ones and reduce complexity. That allows you to become more flexible and agile and to also meet business needs in a faster way.”

It is maintaining this overarching philosophy which is key to Landert’s role. Returning to the idea of what the modern CIO actually is and what responsibilities the IT function has, he offers a stark assessment. “We are not a service provider; we are an IT organisation of a financial services institution and we need to understand our business,” he says. “We need to be respected and accepted by our counterparts and our colleagues in the business, and we need to speak with them in the same language. We walk the talk and what we say is what we deliver. These are some of the key principles.”

As stated earlier, Landert sees being a CIO as like being a mayor. Making sure there aren’t potholes in the roads and that the buses run on times. To do this requires the ability to get a good overview of the business, to avoid getting bogged down in details. “At this level I don’t want to make a call about which kind of technology we want to use or what application we want to build,” he says. “You need to have a view on how you spend and how you prioritize spend along the business areas you are supporting. You need to have a view about what kind of skills you need today, what you will need in the future and how it will develop.”

Perhaps most importantly, it is about setting the right tone. In times as trying as those we now face, it is essential that management leads from the front and brings together all the disparate elements of this global organisation. “These interdependencies are what you need to manage besides the people side and interfacing with the business and working with your people to keep them engaged,” Landert concludes. “Engagement of the organisation is a key factor in being successful.”

Virtual reality

The driving force for any virtualization strategy comes down to three aspects. First, you want to utilise your machinery better, you want to utilise your servers to a higher degree than having only 5% utilization on them.

Second, you want to reduce power consumption. We have a lot of power issues and it’s becoming a driving cost factor. In many areas of the world it’s a constrained resource. So you want to reduce your power and with that you also reduce the power consumption, you reduce the data centre space you need. You don’t need to go and construct new data centres and buildings.

Last but not least, it allows you also to simplify the overall management and systems management processes. It has an effect on sustainability, but there are also very good economic reasons to pursue virtualization.

It’s not just IT

Landert explains the importance of Credit Suisse’s people
To attract and retain best talent we have what we call strategic workforce management programs in every region, which are coordinated globally. We have career development paths and the whole framework to develop people. It is pretty unique and it’s something we use globally where to show the career paths which we have in the company. We have a very good and successful mobility program for people to move between the different divisions within the IT organisation.

And when I speak about mobility program we are speaking about an organisation of roughly 12,000 people, including contractors and some of our partners. We’ve got more than 1000 projects running simultaneously, more than 1000 applications. There are lots and different cultures of every multinational environment. This gives you the ability to attract a lot of talent who will actually enjoy working in such organisations. I think there’s another change that is also happening right now; you need to hire for potential. You need to hire people that also enjoy moving along the organisations as you start to be more process-oriented, especially in certain application development areas. You also need to specialise people in a certain type of roles, like grouping together test people and having a quality assurance test competence centre, which you may locate in whatever geography. That’s also a change in the way that people have been working in the past.

1856 – Credit Suisse’s predecessor Schweizerische Kreditanstalt (SKA) is founded
1905 – Opens first branch outside Zurich
1910 – Opens representative office in Paris
1940 – SKA Opens New York Agency
1989 – SKA’s sister company CS Holding becomes parent company of the group
1997 – CS Holding becomes Credit Suisse Group
2005 – Credit Suisse implements its One Bank strategy by merging its Credit Suisse legal entities in Switzerland with Credit Suisse First Boston