FTF News presents the first in a two-part series about how J.P. Morgan overhauled the IT infrastructure behind its Worldwide Securities Services unit.

Clients of J.P. Morgan’s Worldwide Securities Services (WSS) may never know how they are benefiting from an overhaul of the IT infrastructure that supports the offerings they use. They may not be aware of the new hardware, new software or the enterprise-wide access to data. The signs that things have changed will come through faster service and mobile apps.For Richard Anfang, managing director, Chief Information Officer (CIO) for J.P. Morgan’s WSS group, and Sarah Gill, managing director, global platforms executive for WSS, those tangible results might be more than enough because for WSS, it’s all about the clients.

 

“One of our primary objectives is to create an exceptional experience for clients in terms of how they access the information that we house for them—whether we are their custodian, fund accountant, administrator and so on,” Gill says. “We’re also working on building out our mobile strategy and launching a series of mobile applications, which is getting a lot of interest from our risk management and executive user base.”

Anfang and Gill have been leading a major IT platform and process overhaul for the past few years. The multi-faceted strategy includes a move from proprietary Unix-based servers to Linux-based hardware, an embrace of Open Source technologies, state-of-the-art software development and re-engineering methodologies, and a silo-busting sharing of technologies across the firm’s business units.

From the start, IT advances such as Open Source and mobile technologies were part of the mix and an overall push to embrace innovation. “We’re able to leverage the open source ecosystem to apply more innovation to the products we’re delivering,” Anfang says.

In fact, J.P. Morgan has for the past several years sponsored CIO summits that bring together the technology heads of its clients. Past themes at these events have focused on cloud computing and mobile applications. This year there has been a big focus on enterprise data and information management. “A lot of our clients are asset managers or sovereign wealth funds and they are challenged to manage a vast amount of information and their data assets,” Anfang says.

The revamped outreach requires J.P. Morgan to map its technology to the ways clients now retrieve and use data, especially via mobile systems, the web and the portal-based delivery of services.

Going Mobile

“We’re improving the services and capabilities for our clients to allow them to focus on what it is they’re trying to do—which is to generate Alpha for their clients,” Anfang says. “The more we help them offload some of their data management responsibilities, the more it allows them to focus on their material business issues.”

Mobile technologies are one quick way to offload data management chores and offer a client-facing innovation as J.P. Morgan, Citibank and Bank of New York and other competing service providers are learning, says Lyn Marcrum, a senior analyst with market research firm Aite Group. Marcrum, who focuses on operational trends and technologies for the buy side, was formerly a consultant that landed assignments with various WSS units.

“I think, originally, we all thought that mobile would be primarily applicable to retail clients,” Marcrum says. “I never pictured a corporate actions manager walking around with an iPad checking on the status of a corporate action. But, you know, why not? I think its time is coming.”

In fact, Marcrum says that mobile initiatives are likely to branch out beyond the iPad especially given Microsoft’s tablet initiatives, which emphasize the business uses of mobile applications and systems. “That is going to be pretty powerful going forward.”

Anfang adds that WSS has learned that the real value-add of mobile applications is “less about mobility and more about the way users are interacting with information.  … We’re finding that there’s a lot of value to be unleashed by allowing users to navigate around the information that we are delivering to them.”

Clients may need more help because they are breaking with business conventions, says Marcrum. Hedge fund manager that were once holding short positions are now taking long positions while asset managers once assumed to be holding long positions are now holding short ones, she says. “How do you service those positions?”

Hedge funds that are used to doing a lot on the fly with their prime brokers insist that they can manage activities such as corporate actions faster if they interact manually the first time, Marcum says. “How do you do corporate actions like that? It’s not a good idea. It’s those kinds of current conditions that are forcing JP Morgan and others to put together a multi-faceted strategy.”

J.P. Morgan has the additional concern that WSS is a collection of multiple businesses—“some that complement each other and some that don’t sit nicely together,” Marcrum says. The to-do list can get rather long. “They wanted to work at making their corporate actions processing even more robust—it was already pretty darn strong,” she says. Those at WSS have had to ask: “How do we bring the prime brokerage unit into this? How do we do our business line where we have gotten asset managers to outsource their back offices to us? We may not be the actual custodian of those securities—we may be a pass-through. Where do our Chinese walls need to lie and how do we give them the same amount of service? … It’s a multi-faceted strategy on steroids.”

Anfang and Gill acknowledge that serving a wide range of customers—institutional investors, alternative asset managers, broker dealers and equity issuers—means serving many needs at once.

“For the bigger asset managers, many are looking for tighter integration between our platforms and the platforms they’re running, which can either be their proprietary platforms or third-party products,” Anfang says. “For the pensions and sovereign wealth funds, they’re looking for more complete solutions.” Gill adds that there is a huge need for those managing pension funds to have more exposure and counterparty risk analysis tools.

Lean and Agile

One of the things that J.P. Morgan has done well in managing big projects is making certain that domain experts “the really highly knowledgeable people” play key roles, Marcrum says. “I’m talking about stellar operations clerks and operations supervisors—the ones who know the nitty-gritty detail and are able to see the bigger picture of how the process is working out and what needs to change. Those people are like gold.”

To reinforce their project management efforts, Anfang and WSS have been embracing the Lean Six Sigma management philosophy for re-engineering—which stresses squeezing the waste from processes and improving process speeds by producing results that more closely match the customers’ definition of quality. The Lean principles have been applied to process reengineering and process modeling, Anfang says. “In a business such as ours, we have more than 8,000 staff in operations across the globe,” he says. “It’s a very powerful way for us to create more economies of scale in our operations area.”

In contrast to other, former clients, J.P. Morgan has struck the right balance, Marcrum says. Some of those other clients instituted re-engineering methodologies without an understanding of the business that was being revamped. In fact, some of those implementing the re-engineering were asking, “ ‘What is a Nostro account?’ ” she says.

In addition to the Lean re-engineering, Anfang and Gill say that for the past 18 months WSS has “aggressively” applied the “Agile” methods for software development that emphasize collaboration among business units.

“Two years ago, I’d say the vast majority of software development was done in a conventional, waterfall approach and that allowed us to tap into lower-priced development resources on a global basis,” Anfang says. The conventional approach of a lot of back and forth communication—business requirements, high-level, detailed design documents and so on—was wearing thin. “We’re finding that by adopting an Agile methodology for all our client-facing technology, we’re improving time to market by 30 percent. We’re also reducing costs by 30 percent and we’re finding that we’re delivering much better tailored solutions to help solve our clients’ problems.”

Gill adds that the Agile methodology has to be used broadly across all disciplines in order to work because it’s an end-to-end methodology. “We work very hard to make certain that we have a very integrated team structure focused on Agile development,” she says.

The swifter development time frames are a direct result of developers, business analysts and end users working in a more collaborative, iterative fashion via the Agile methodology, Anfang says. “We’re able to identify the business problem faster and more accurately in order to create a solution.”

The Agile methodology has also helped the WSS reach out to other business units at the firm, Anfang says. His team is developing software that is being used in production by the asset management and investment bank businesses, he says. “That trend is only going to continue moving forward.

“Our investment bank saw an opportunity with WSS’ Custody Foundation program to leverage the capabilities we are building rather than developing something similar on their own. And there are instances going in the other direction where the investment bank has strong capabilities in terms of enterprise-wide position keeping or settlement processing and we’re leveraging that technology as well,” Anfang says. “I think that none of our major competitors have such a broad business footprint; they don’t have the opportunity to create that kind of leverage.”

“One of the things that differentiates J.P. Morgan in the industry is the fact that we have such a broad array of businesses within the firm,” Anfang says. “We’ve launched a program called ‘Value for Scale’, which leverages capabilities across our entire firm … We are leveraging our vast intellectual property, core systems and operational expertise.”

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