Investing in the future

Chris Perretta, CIO of State Street Corporation, tells FST that technology expenditure is key to success and that a company’s culture is just as important as its infrastructure.

“When you’re 20, 25 percent of the budget you have to defend what you do. I think that’s very healthy and it’s a test that I apply to every project that we undertake.” Chris Perretta, CIO State Street Corporation

Upon joining the company as CIO in September 2007 Chris Perretta stated that one of the main draws of State Street was that it “viewed information technology as a catalyst for business success.” As he approaches the end of his first year as CIO, does that impression still hold true? “I think my first impressions were reinforced actually,” he says. “This is a business that really gets what IT can do for it and its customers. I think that’s kind of refreshing.”  He describes an organization that eschews the quick fix in favor of a long-term view of IT expenditure: “It’s a very constructive and insightful view. The company looks at it as an investment,” he continues.

Customer centricity is a phrase that is bandied about so regularly that it sometimes seems to be a little more than an industry buzzword. Speaking with Perretta, you get the idea that it goes a little deeper at State Street. “Even within the bowels of the IT organization.  You get people who really have a customer view of the world,” he explains. “With an organization this big it’s heartening to know that they’re worrying about what your customer is worrying about. That’s an important driver for the whole corporation.”

Key to this concept is the fact that State Street’s IT people interact closely close with the corporation’s customers, generating excellent direct feedback. This in turn is reflected in the investments the company makes. A good example is the corporation’s online portal MyStateStreet.com. “It varies by customer, but there’s a full range of functions and features,” Perretta says. “It basically gives them visibility and transparency into their portfolios and provides them with the certain analytic capabilities. It’s about access to timely data so that they can make the decisions that they need to make.”

Despite the uncertain times, State Street posted a record-breaking $2.6 billion profit for the first quarter of 2008, up a full 52 percent on the same period last year. When we ask what part technology has played in this success, Perretta offers a self-deprecating laugh and says “If you want me to take credit for it – yeah. Sure. Why not?” Joking apart, Perretta states that much of the organization’s ability to buck the downward trend results from its being in tune with the industry. “We operate on a lot of different levers and we can pull the levers in the marketplace that make sense’” he continues. “ So much of what we do is part and parcel to the running of our customers’ business. It’s the culmination of a set of operations and products which are truly adding value to our customers in these turbulent times. I think that’s testimony to the investments that have been made in the past.”

State Street is a genuinely global operator, with offices in 23 countries ranging from Australia to the United Arab Emirates. We ask Perretta about the challenge of keeping so many far flung business units moving in the right direction. Perhaps surprisingly for someone so steeped in technology, his primary response has nothing to do with wires and circuits. “First and foremost there is a State Street culture,” he says. “Around the world that’s the glue that holds things together and one can’t underestimate the investment one needs to make as a leader in trying to further and cultivate that culture.” But this focus on the human element can prove difficult. “I think it’s the easiest part of your day to kind of put off,” he admits. “But there are great people on the ground that manage the day-to-day operations and at a leadership level that’s one of the key drivers. You need to focus on global talent and the development of that talent.”

It’s clear that this concentration on talent and culture cannot be confined to the here and now. It’s a hoary old adage that a failure to prepare is preparation to fail, but that doesn’t make it any less true. “You really have to fight to be forward thinking,” Perretta confirms. “I want to be two years ahead of the business. We need to know what skill sets we will need and where will we need them, not just today but two years from now. I think that’s the real challenge. You’ve really got to carve out some serious thought processes.”  Obviously, technology and processes are vital but the value of the business’s flesh and blood component cannot be underestimated. “That culture and the quality of the people, is what’s really going to drive the performance of the organization,” he says.

Another element of State Street’s global strategy lies in its approach to software and systems. “So much of the development work we do actually serves the globe, we don’t have tailored solutions for individual countries,” Perretta explains. “We build it once for the entire globe and so we are forced to be intimate with our operations around the world because you’ll have people in different geographies building stuff for people that is going to be used across the company.” Once again, the importance of the State Street culture becomes apparent.

But culture notwithstanding, rolling out a single IT model enterprise-wide must be a difficult process? “It’s always a journey,” Perretta says. “I think there’s always work that we have to do to continue to drive and improve the model. You have to have a mindset that you’re never done with this stuff. The secret is to determine which are the vital few, metrics you’re really going to watch to determine that you’re making progress.”  Currently, the areas under scrutiny at the corporation are speed and time to market. “It really addresses customer need because they care about these issues,” he continues. “Also by creating a single language that everyone uses to talk about how to go faster, it galvanizes the organization. Everyone’s speaking the same language. Everyone’s dealing with the same issues. The issues are teed up the same kind of way. In a global environment there are lots of different challenges in doing that, but that’s what we’re pursuing.”

Another major focus is on the corporation’s technology architecture. While this area has traditionally been viewed as something of a science project, Perretta is adamant that it brings major real-world rewards. “We are really turbo-charging a lot of our work in architecture now across the whole enterprise because we think that there are tangible commercial benefits in driving innovative architectures across all the State Street organizations,” he says. “We really do believe that we can deliver things quantitatively faster with new technologies and really increase the quality of the delivery for customers. We are really making a lot of effort in developing our personnel there and really building bridges around the world to of have a single dialogue about technology and architecture around the industry. It’s key to our efforts going forward.”

State Street spends an impressive 20 to 25 percent of its annual operating budget on technology. Like any self-respecting CIO, Perretta would welcome an even higher portion, but recognizes the pressure on him to communicate the value of this investment to the rest of the business. “When you’re 20, 25 percent of the budget you have to defend what you do,” he says. “I think that’s very healthy and it’s a test that I apply to every project that we undertake.” He explains that there has to be a clear understanding of the business outcome of any spending and a defined plan of how the desired results will be achieved. “I’m a zealot about technology,” continues Perretta. “I want to prove that that 25 percent should be even higher. So I have to demonstrate as a CIO that we are great stewards of those investment dollars and that they’re generating fantastic returns.”

Finally, we turn to where State Street’s technologists will be focusing their attentions over the coming months and years. “We are really excited about the results we get in technologies like service-oriented architectures and the ability to have our systems interact with new capabilities that we build,” says Perretta.. “When you’re an established firm like State Street you have a very large installed base of technology which doesn’t refresh every year. The ability to take the really industry leading capabilities we already have and plug them in with new ones I think is very, very powerful.  And to do that reliably at speed is crucial.” He goes on to tell us that his teams are truly enthused to be addressing these issues as they hold the potential to provide quantum leaps in performance. “The IT world has been very good at clawing back productivity by sharing machines, virtualizing ideas and integrating more and more complex systems,” Perretta continues. “With new technologies like SOA, in which State Street is a leader in some of the underpinnings, we have a real advantage and we’re going to push it to the hilt going forward.”

Right and proper
Perretta on State Street’s cultural commitment to quality

Being new to State Street it’s kind of fun to share your observations with the people that have been with the bank for a long time. You really get the sense that our customers put their trust in us and IT professionals here take it very, very seriously. 

So I think that there’s a concept of there are certain ways that you have to do things that you’re not going to compromise on. It’s great to talk about a culture of an organization where everyone down the line can say, “Yeah, this is the right way you have to do things and we’re going stand up for that,” That is very, very important to me as a leader because I can trust my colleagues to raise the issues that they need to raise in a timely fashion and to really understand that this kind of rock solid reliability and performance is what customers expect of us.

In turn we have to embed that in the way our people think. That’s a big, big deal because trust and dependability are precious commodities. If they get away from you they’re tough to get it back, so we talk about it a lot.  We talk about control, security and integrity. Those are things that we need to cherish in our culture and I think that the tone is all set from the top. That tone is loud and clear at State Street. It’s a really important idea but it doesn’t come overnight and you got to keep on working at it.

Seeking clarity
Perretta discusses the impact on transparency wrought by the credit crisis

I’m new to the industry so you’re seeing it through frankly a novice’s eyes.  But having said that I do believe that technology can give you the window into the operation of your business in an instantaneous way. I really do think that data and data visibility within the enterprise is an issue that more and more companies are wrestling with from the technology side. 

In the past I might have had disparate operations and disparate businesses and now there’s a real technology challenge saying, “I need to get visibility across what were traditionally distinct business lines.”  I think that’s a challenge every industry is facing but financial services in particular. Especially with the regulation you have here. 

So you’ll have something like the new financial services regulatory Basel initiatives which are forcing you to do that. They represent a tremendous technical challenge but also I think can differentiate us with our customers by providing that level of transparency into what we’re doing on their behalf.

That’s the way we view it.  We view it as the more access and insight we can give to people, the more attractive our offerings will be. So that’s the way we’re going to proceed. It’s a neat technical challenge. It enthuses a lot of my team and we’re aggressively pursuing that.