Having written several glowing articles about State Street's internal cloud computing projects, we were dismayed to hear that the bank decided to shed 850 IT jobs, partly due to the success of the very cloud/IT efficiency projects we've honored. The bank is eliminating 530 IT jobs and outsourcing 320 positions to IBM and Wipro. We grilled CIO Chris Perretta this morning on the layoffs; he gamely defended the plan.
BTN: State Street is eliminating 850 IT jobs the same day it reported a second-quarter earnings increase of nearly 18 percent. Can you explain this?
Perretta: First of all, earnings are the rear-view mirror and we're looking to the future. All along, we've wanted to shift the workload from maintenance and operations into development. At the end of the day, we want a larger percentage of our dollars and State Street personnel working on things that differentiate us with our customers. The infrastructure has to be perfect, it has to run all the time, but that doesn't necessarily differentiate us with our customers. We've made a huge investment of money, time and personnel to design a new private cloud that will go officially into production in a couple of weeks. That was designed by State Street personnel and the technology infrastructure that supports it was designed by our personnel.
Part of the rationale for doing this is to achieve operational excellence. If there are partners out there who have the right skill set and investment level, we want to take advantage of that. It's no different than the arguments we make to our customers where we say, why don't you give us your middle and back office, we'll run it for you, because this is our core competency and you can leverage all the investments we're making. We have to eat our dog food on this one. At the end of the day, we're investing a lot of money into the IT organization, and this is a mechanism where efficiencies are getting plowed into the R&D arm of what we're doing.
BTN: That all makes sense. But why does that have to result in a net loss of 530 jobs?
Perretta: Your point is well taken about the personnel dislocation aspect of its. That's of tantamount importance when you make these kinds of decisions. There are two things going on. One is, through efficiency and automation, some of those jobs are going away, they're being automated. Two, some jobs still exist, they're just not going to being done by State Street personnel. If I have a database administrator or someone who patches servers, that job may go away through automation or I may decide to purchase that service from a provider. That individual may not have the right skill sets to apply on the development side. There's dislocation and it's unfortunate.
BTN: What are some of the job titles of the people being laid off?
Perretta: The kind of services we'll be purchasing relate to the running of the infrastructure. So the people who maintain and monitor mainframes and midranges and desktops, etc., those types of jobs will be outsourced.
BTN: So are Wipro and IBM mainly providing IT support for you?
Perretta: Absolutely.
BTN: Some press accounts have said you're moving jobs into the cloud. Do you look at it that way?
Perretta: We don't want to let the facts get in the way of a good headline. It's early days for the cloud. Do we believe the cloud is more efficient to operate than traditional technologies? Yes, we do. It also has other attractive operating characteristics. But we're also applying lean methods and tools to the traditional technology environment and linking up with world class players, in this case Wipro and IBM. This does not reflect a movement to the cloud, but as we move more and more into the cloud, there will be additional benefits to be had.
BTN: How do you get IT people to work on cloud projects if they know they're job-killing?
Perretta: We work in environments where computing power doubles every 18 months. You could ask the same question about mainframe workers, midrange workers and desktop workers. Technology is constantly changing and we make progress in technology via abstraction. We get more powerful machines that allow machines to automate the mechanism by which we manipulate our computing assets. That is relentless. To think that the workforce won't change in the nature of what we do in technology is crazy.
Newspapers don't do a lot of hot type any more. There's not a lot of typesetters around in the world. Our world changes and how we deliver our services will change. That's just the reality.
I believe that the technology content of financial services will continue to grow. As State Street becomes more successful, we will continue to grow the number of people who work here.
