Conservative thinking holding back finance sector CIOs

Gaurav Sharma

Caution and conservative thinking is holding back financial services CIOs at legacy institutions, according Hugh Cumberland, financial services IT consultant at networking firm Colt.

Cumberland says CIOs of emerging City trading and financial sector firms tend to be more in innovative and less risk averse.

"Both at Colt and having spent decades in investment banking, I find that CIOs of established players within financial services tend to be very conservative about moving forward with new technology," he told CIO UK.

"If it is technology that is going to assist them with their sales, they tend to explore and exploit it quite rapidly. But when it comes to the back-end of IT infrastructure, caution prevails," he adds.

Cumberland reckons the prolonged downturn of the current financial crisis is in many ways a blessing in disguise for CIOs within the sector.

"The ensuing capital and operating expenses squeeze forced some to act and go down the route of outsourced virtualised services using the cloud, much quicker than they would have. While that's good news for companies such as Colt, I can tell you from personal experience that these CIOs were a tad late. Their counterparts at some of the emerging trading outfits were well ahead of them in achieving broader IT efficiencies of scale."

In tune with market sentiments, Cumberland agrees that process efficiencies achieved by the industry are going to continue further.

"No CIO is going back to their CEO saying the crisis is now over - let's go back to clunky IT estates."

Yet he reckons the "copper wire" mentality of data dissemination still prevails at legacy institutions. "The high frequency trading guys often go for ultralow latency and fast throughput on 1GB or 10GB pipes.

"CIOs at emerging financial firms won't mind where the server is, as long as speed, efficiency and quality of service are maintained, a legacy institution often insists the server be located close by," he says.

Cumberland assigns two key reasons for legacy institutions being behind the curve.

"First, CIOs at large established firms feel if they have 1,000s of IT people working for them, it's a prestige issue relative to size of the institution in question. By contrast, CIOs at younger firms often say they'd rather have no one working for them; but rather buy services on contract which give their businesses the flexibility and agility they need at a price point that makes sense."

Cumberland cites the example of Source UK, an exchange traded products (ETP) firm founded in 2009 which lists Goldman Sachs, JP Morgan and PIMCO among its many partners.

"Source UK themselves say that they don't have an IT department. Their infrastructure and services network is provided to them under contract which allows them to grow at their own pace (or potentially shrink if they have to). They've seen fantastic growth and are the fifth biggest ETP house in the world, with a CIO unshackled by legacy IT infrastructure.

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