At the end of 2010, State Street Corp. announced it was embarking on a four-year transformation of its IT and operations. The project would create new centers of excellence, a private cloud to increase computing capacity, and new tools and processes for enterprise innovation. Management of the bank said the transformation would save $575 million to $625 million in IT and operating costs by the end of 2014. With the end of the year approaching, State Street is wrapping up the initial phase of the transformation, has achieved the planned savings, and is starting to see the business, IT, and operations benefits it expected.
Chris Perretta, executive VP and CIO at State Street, has led the bank's IT organization through the high-profile transformation over the past four years. With much of the overhaul in infrastructure and processes completed, Perretta and his team are looking forward to leveraging the fruits of that labor for further innovation.
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"Some of the work that we've done has really laid the groundwork for what we call the digital enterprise. We've done some of the plumbing work; we changed the way that we think about building systems; we changed our idea about what has to happen with how we handle data, and how we communicate our work to our sales and clients," he says. "Now we have these core capabilities, and it's about how are we going to use them to do something new. That's exciting when you get to that point."
Building a digital enterprise
Although State Street trumpeted the financial benefits of the transformation for its shareholders, the organization always viewed building that groundwork for a digital enterprise as an equally significant benefit of the transformation, Perretta says. And when it comes to transformational change, that groundwork is a means, not an end. What Perretta and his team have really built is a foundation for faster change in the future.
"I think that, if anything, we're trying to convince the organization that change has to be built into our DNA. It's not one of these one-and-done things. Every time we build one of these core capabilities, it is an opportunity to do even more stuff, and that means doing it even faster."
Executive VP and CIO
State Street Corp.
Professional history: Before joining State Street in 2007, Perretta was the CIO for General Electric Commercial Finance. Previously, he served as CIO for the North American Consumer Financial Services unit and CTO for GE Capital. Before joining General Electric, he was an associate partner at Andersen Consulting (now Accenture).
IT organization: 5,000 employees and contractors.
Education: Perretta has a Bachelor's degree in electrical engineering from Johns Hopkins University and a Master's degree from Syracuse University.
Off the job: Perretta is helping his wife restore a Civil War-era building and helping her start a new business.
The private cloud that State Street built during the transformation is one key piece of this foundation for faster change. "What we call a cloud -- but it's really a platform-as-a-service geared toward our business -- it's allowed us to leverage components more. And it's got a real focus on architecture, frameworks, and re-use. We're getting 40% to 50% re-use out of it. So in essence, we're building a lot more features and functions with a lot less code. We call it 'industrial Agile,' " Perretta says.
That platform-as-a-service, combined with a new data governance framework that State Street has implemented, has sped up the organization's ability to share data with clients.
"That was one of the first priorities that came back when we first started talking to clients" about the transformation, Perretta recalls. "There's the old model of sending thousands and thousands of files down to our clients -- and we still send them a lot of files -- but we said there has to be a way to give our [investment] clients data on demand that is pertinent, that is where they want it, when they want it."
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What State Street's clients really needed was the ability to access the data that State Street stored for them, combine it with data from other sources, and analyze it for their own forecasting purposes. State Street's private cloud provided a platform for clients to do all of that quicker and more cheaply, so Perretta and his team built tools on that platform to provide those data analysis capabilities.
"People can augment the data that we have on their behalf with data from other vendors and suppliers, and then manipulate it. We provide the data lineage, and we've built an abstraction layer for it, so we know that they can't do any harm to that data. We've found that to be incredibly powerful for our clients, and internally as well. And we find it more and more becoming part of our new Global Exchange business."
State Street's Global Exchange offers asset managers and owners the data and analytics capabilities that Perretta describes to help them gain better trading insights. Leveraging the cloud infrastructure that Perretta and his team have built, the exchange brings together data from multiple parts of the enterprise, including risk and multiple trading platforms, to give investment clients tools to analyze trade lifecycles and portfolios.
In addition to these technology and client benefits, State Street is well on its way to achieving the cost-savings benefits it targeted in 2010. The bank had pretax run-rate expense savings from the initiative of $86 million in 2011, $112 million in 2012, and $220 million in 2013.
Perretta touts the ability of State Street's organization to stay focused on the long-term strategy as one of the keys to the transformation initiative's success so far. One of the reasons the organization has been able to stay focused on that long-term vision is State Street's architecture team, which reports to Perretta.
"Usually the head architect [at a bank] is part of the development or operations team. Our architecture team is separate, and they look out at two- to three-year time frames and figure out what capabilities we'll need, prove that the concept works, and can I operationalize it, so it can be part of our business-as-usual operations."
State Street's cloud platform-as-a-service implementation, which was a year in the making, and the data manipulation tools it provides clients came out of the architecture group's work. "They created a proof of concept with an eye toward: Here are the capabilities that our entire organization is going to need, here are the technologies that we can deploy, and here's how to make them operational. So we try to build that kind of pipeline into the way that we operate. And I really do feel like the guys there have put together a process by which we are constantly evaluating new things and rolling them out."
The architecture group can help provide the vision and focus for State Street's ongoing transformation thanks to a leadership team -- led by head architect and executive VP Kevin Sullivan -- that can tie together the business and technology goals. "They are just as comfortable talking about technology strategy as they are talking about technology. They're scary people," Perretta jokes.
And the architecture team stays plugged into the rest of the technology organization through communities of interest that the team has built in different parts of the organization.
The architecture team has helped Perretta and State Street build an innovation pipeline, but the ongoing change that the bank is hoping to execute still is a difficult journey, Perretta says. His next challenge will be figuring out ways to leverage the new infrastructure and resources from the transformation to make that journey easier going forward. "It's not just State Street [that is trying to transform its technology]. Look at Microsoft -- everybody wants to go to Office 365... but the journey is so hard. Is there something I can do to make the journey faster? Is there something that I can do to ease the change on the business? I think that's a neat problem to try to solve," Perretta declares. "And it takes your very best and experienced people."
Jonathan Camhi has been an associate editor with Bank Systems & Technology since 2012. He previously worked as a freelance journalist in New York City covering politics, health and immigration, and has a master's degree from the City University of New York's Graduate School ... View Full Bio