JP Rangaswami, Dresdner Kleinwort Wasserstein’s (DrKW) global chief information officer, welcomes an exciting new opportunity with the reinvention of information technology. Interview by Dan Barnes.
The opportunity to innovate has returned for JP Rangaswami. For the past three years, technologists in financial services have been taking stock, or as Mr Rangaswami puts it: “We went into the caves.”
In his “tech vision”, knowledge-enabled bankers are sharing information and collaborating on projects in a virtual world independent of the device, with the ability to recall any of their communications regardless of their format. Information technology (IT) has become information communications technology (ICT) and is removing the boundaries of geography, of silos and of interoperability for its users. You can be contacted anywhere at anytime. “The battle is for ease of transference and navigation,” says Mr Rangaswami.
In the markets, standardisation and convergence of systems will allow elements of IT to be provided as a utility and be shared, while single, backbone players will provide clearing, accounting and messaging for payments on the SWIFT model. The globalisation of markets means exchanges and electronic communications networks (ECNs) are more integrated. Inside financial houses, the myriad of systems are converging and multi-asset back office systems are a reality. Through the practical application of knowledge management there is no re-invention of systems or models, and where there is commonality, they are shared. Expectations are high – if users want to communicate or find information, they want to be able to do it here and now.
Whether in the office or walking down the street, you are expected to be easily contactable. You no longer keep a phone book, but have numbers stored in a phone by contact name. A call is made with the push of a button, rather than typing in a whole number.
“It’s as fundamental a shift in how people communicate, as was seen at your retail bank in the mid-1980s, where you’d always been an account number,” says Mr Rangaswami. He goes on to explain: “There had to be a lot of investment before you started becoming a person. Everything is going to be based on a name, like an e-mail address independent of time or space, rather than a number.”
The shift in the drive of technology has moved from the corporate to the consumer and this requires some adaptation. “What they are looking at now is how you can provide global address lists that would work easily, how firewalls can be managed, how communications are recorded and retrieved, and how the institutional requirements can be met, because the solutions were initially for the consumer marketplace.” He cites the example of Skype, the peer-to-peer (P2P) technology system that routes telephone calls via your computer to other users.
Converging channels
However, tying a system to a particular device for communication will be an anachronism in the near future according to Mr Rangaswami: “The market has already come to a point in saying we’re not going to carry three devices. The latest Blackberry has already begun to look like a telephone. We’re seeing demand from our bankers to converge the various communications channels – voice, video conferencing, e-mail, the blog, the wiki [co-operative website] – and everything has to be searchable.” The desire to communicate, now, without any hitch, has simply become a necessity, and in the modern world, there is no tolerance for a lack of provision. “We live in a post-space invaders generation in terms of the users, the traders and the executives of today. One of the results of the downturn [after the market crash] was a drop in tolerance for almost any failure of technology. This is a good thing. There is no option for me to say ‘This is complicated, you won’t understand it’.”
The lack of a determined route or system can present problems for a business requiring any degree of corporate governance. “[Bankers] no longer care about the device they use, and they no longer care about the channel they use. They need a ‘Google’ experience for the ease with which they can go and find something. That put some real pressure on the IT community.”
Paradigm shifts
These technology developments are part of what Mr Rangaswami sees as the fourth in a set of paradigm shifts. He says that the first occurred when Doug Engelbart and Alan Kay allowed the consumer of structured information to manipulate it directly with their concepts of the mouse and the window. The second was the ability to manipulate the production of structured information via desktop productivity tools. The third shift was the move from HTTP or HTML to the world wide web, which allowed a move from direct manipulation of structured information to direct manipulation of relatively amorphous information. The fourth shift has allowed information consumers to manipulate the production of amorphous information.
An example of this is the blog. Blogging, the process of keeping an online diary, may not be an obvious tool for business, but modern technologies allow for blogs to be searched effectively, making them a useful knowledge management tool. Where structured data refers to data formatted in such a way that it is designed to be analysed (the contents of an excel spreadsheet, for example), unstructured data refers to data that is not formatted for easy analysis (the contents of a word document, for example). This class of data is nothing new, but according to Mr Rangaswami: “It’s the retrieval of the unstructured that held it up rather then the existence of the unstructured.”
Safety first
Whenever information or knowledge sharing is discussed, the first concern is security. “Information security and knowledge management are one and the same,” says Mr Rangaswami. “You impute value to an information asset and you determine how easy or difficult you are going to make it [to access]. The beauty of a digital world is that you leave trails. With the kind of computer forensics that are made available, we’re able to be relatively open about what was done by whom and when.”
Applied to the financial services industry, ICT can be a valuable asset, “The real value comes when collaborative work is really there to use. And all these technologies are fundamentally collaborative tools. Those tools are much more powerful, in terms of the third iteration,” says Mr Rangaswami.
The application of these technologies allows for enhanced discussion and easy identification of expertise, and it facilitates group projects. “There is still care to be taken, but we are looking at the use of the blog as a means for our people, who have a voice and passion on the subjects they care about, to reach the world at large using a blog as a platform and allowing people to congregate as a ‘smartmob’,” says Mr Rangaswami.
At DrKW, collaborative work methods are already being used. Mr Rangaswami explains: “Collaborating not in terms of sharing knowledge, but in working on the same thing at the same time while respecting each other’s space. By being able to create internal open-sourced instances of things like our quant libraries, we don’t have people reinventing the wheel at different locations. We had historical silos saying ‘This is research, this is trading and this is risk’ but actually quantitative models underpin a lot of them. We elected to move down a more collaborative route in August 2004.”
It is not enough to simplify life for the internal customer alone – external pressures are forcing other changes. “Say I have Commodore for foreign exchange, Fidessa for cash equities, Bloomberg for bonds. At a layer of abstraction, all of these are ‘vanilla flow’ products. Can I sustain three different architectures for these when the customer demand and the way our business is built says that we offer them through a unified window? How do I centralise what is common and federate what is not?”
The back office has the opportunity for simplification of the many systems currently in use. “There’s a convergence in terms of asset classes. More and more hybrid products are coming out. That convergence puts pressure on things like the quality of our reference data and our analytics. They could have existed as vertical silos before, but now I could create automatic arbitrage opportunities for a black-box trader if I get it wrong.”
And if you do get it wrong, be prepared that someone else will take advantage. “The counterparty statics have to be more consistent, the actual yield curves and the pricing curves have to be consistent and you can’t say that’s an equity-led offering, that’s a credit-led offering, that’s a forex-led offering and use different curves, because of historical ‘not invented here’ attitudes. Because as soon as you expose them to a digital community, people can arbitrage your historical politics overnight.”
This is not optional. The technologies available to make this happen are here and the impact these will have on a firm’s business is real. As Mr Rangaswami says: “You are leaving a lot of money on the table. That means that the concept of the computational grid and the [ability to] consistently centralise what is common, making sure we do things once and once only, are no longer theoretical or management consultant-speak. They are an imperative.”
Climate of change
What has caused this change? The impact of the capital markets crash three years ago had at least two significant impacts: it resulted in a loss of trust within the financial industry and it led to a freeze in technology departments across the financial services. “We, the technology industry, stood still for three years,” says Mr Rangaswami. “We went into the caves and took our food, our clothing and our firewood with us, and it is only now that we are coming out. But it’s a different world.”
And by the time people began emerging, a significant change had occurred. “Technology is no longer frozen, and in the intervening period, IT has become ICT. Historical telephony has died.” Mr Rangaswami is taking full advantage of the increase in use and development of communication tools: “I started looking at how I could use technology to underpin trust.”
This shift from IT to ICT has stemmed from the digitisation of telephony. As Mr Rangaswami says: “Telephony has become software. What was historically a very complex set of projects that had to be done to provide functionality within a telephone network, now is done at significantly faster speeds at the edge of the network.” The speed and efficiency with which these technologies can be deployed has allowed for a great deal of innovation. He continues: “The cost of entry to the business of providing these services has sharply reduced overnight. Therefore, you can experiment with things you never considered before.”
