BETA
This is a BETA experience. You may opt-out by clicking here

More From Forbes

Edit Story

State Street Emphasizes Importance Of Data Analytics And Digital Innovation In New Role

Following
This article is more than 8 years old.

Chris Perretta has been an IT executive at State Street Bank since 2007, with most of his tenure spent as chief information officer.  A few months ago, he advanced beyond that role to become the Global Head of Enterprise Data and Technology at the company.  The role was created as an acknowledgement of the sanctity of data, and digital advances that State Street hopes to lead.  Perretta has led a significant transformation of the information technology function in order to help realize this vision. First, he standardized and simplified IT.  Next, he implemented what he refers to as “industrial agile.”  He also re-organized the IT team significantly, and created a greater emphasis on customer experience and innovation.  Perretta describes all of the above and more in this interview.

(To listen to an unabridged audio version of this interview, please visit this link. This is the 27th article in the “Beyond CIO” series. To read through past interview with executives from companies like Waste Management, Biogen, Allstate, Aetna, Marsh & McLennan, and BMO Financial Group, please visit this link.  To read future articles in the series, please click the “Follow” link above.)

Peter High: I thought we would begin with your responsibilities. Could you talk about the purview of that role?

Chris Perretta: I have a new job titled Global Head of Enterprise Data and Technology. It is an extension of the realization of the importance of the digital world and the creation of digital businesses and enterprises that State Street has recognized. I am excited by that, I think it is the next level of integration of the operational side of things and the technology side of things.

High: I would love to hear more about that - the sanctity of data - and the fact that it is actually called out in the title. I am sure that is meaningful. Can you talk a bit about your growing set of responsibilities?

Perretta: From the data side, it is an important part of what we do. When you look across industries as well, even manufacturing, and you look at what those companies are doing from a data perspective, is it driving revenue. The data component of what we do is so important in providing insights, analytics, and risk management to our enterprise and our customers. There is a need, frankly, to have an enterprise view of yourself as an enterprise, in a more sophisticated way than in the past. Our clients view of what they do with us, and augmenting their data with other data that they could care to look at, and providing that service is a need. The concept of so many more of our products, services, and obligations are data-intensive. There is a recognition that the business has to address the data question, not only in terms of pure technology, but also as a management and governance responsibility. It has to be integrated across what has traditionally been different functional and operational areas. I see my task as putting structure around that task, and to be able to provide visibility, analytics, and insights that has not been the purview, in its entirety, of traditional IT organizations. We are excited about that.

On the technology side, there is so much technology that could be emerging or disruptive that could change the landscape of what financial services do, despite their virtual nature. The designation of technology is a confirmation of the importance to the financial services business, as well as the traditional IT world that I grew up in.

High: As this role has been created, how has your staff been populated? Are there new roles or members of the team, as a result of this newly setup organization? Has it been re-badging and finding new spots for people in a new organizational structure?

Perretta: It is a work in progress. There is a Chief Data Officer, James Hardy, who has a lot of experience in the business and IT development. He is charged with making sure that, all of the way from definition and governance perspective through the mechanics of how IT uses data and publishes it, that we have a complete view of data. He is a direct report of mine. The CAO is a direct report of mine, with all the traditional activities of a CAO - plan, build, run, information security, etc. We tease out architecture separately from development and infrastructure at this point, because we want a holistic view or architecture. Architecture is such a key component of what we do. If we get the architecture right, we can drive faster cycle time, faster deliveries, and more robust environments. That is still within the traditional CAO role.

Another role that is emerging is emerging technology - how we fill the front end of the innovation pipeline with things that are either of tremendous assistance or potential disruptors to our business model or our customers' business models. That includes things like RoboAdvisor, block chain, and new distribution channels. Those are the types of things we are looking at. I think we will expand that further as we move forward, but that is part of the initial gig - figuring out what other organizational constructs we need to drive the digital agenda, which is a cornerstone of the overarching State Street strategy.

High: That calls to mind one of the strategic imperatives of the company, which is to be a digital enterprise. Could you talk a bit more about that, as well as what you think about the digital customer experience?

Perretta: As your question points out, there are different striations of that answer. One is that digital enterprise is different than just automation. It is basically saying that to be a digital enterprise, one has to describe the business digitally, which seems self-evident, but I always make the analogy of a manufacturing company who has a customer or product master, factory routing, a bill of materials, and quality control. Those are all things that describe the manufacturing process, and when defined correctly allows for customization of product at a high rate of speed, and provides a level of insight into businesses that a lot of financial firms did not have, because traditionally they focused on pure product in silos and the enterprise view was less important. The industry was built on fast response, sophisticated financial products, and less so from a supply-chain or manufacturing concept.

I think that the onset of the financial crisis and the distraction of a lot of the margins inherent in the business forces us to achieve operational excellence, as did the tough times in manufacturing several decades ago. I think there is a sea change that has to happen in financial services to build that digital enterprise. The other part of your question is spot-on. We took great pains during the financial crisis to understand that we needed to be operationally excellent. We also recognized the need to invest in core foundational technology components, like in our case private cloud. We also standardized our development environment, and techniques via industrial agile approaches and the automation of the IT processes themselves. We were able to connect this activity with real financial benefit.

That initial cloud work has begotten multiple cloud frameworks. We have a view that we want to run in private cloud simultaneously. From that, we have been able to move dynamically and run our applications in active-active modes, and eventually we want them to run in multiple clouds, with one possible being public - especially for development and test. That has been a progression going forward. That has allowed us to say that we now have the tools in place to get closer to our clients, to be able to allow them a global view of everything we are doing for them, and to better interact with them at any level in their organization to provide much better service.

Our goal here is that as the next generation becomes digital, to be able to change the way we build systems so that we have a customer-centric view of the world. We start and stop with our clients' view of quality, and we are able to adapt and configure our products much more rapidly than we have in the past. We can also tailor our products for different uses within our client organization. It is being able to tie the supply chain between two organizations more tightly together. There is benefit and value add to our clients, to us internally, and we are able to come to the market with more insightful products and deeper analytics. I think this is a journey, and the journey ends with our ability to anticipate clients’ needs and react rapidly.

High: You mentioned that you are implementing "Industrial Agile". Can you talk about the way you define that?

Perretta: When you are old enough, history repeats itself. Methods in software development tend to attract zealots. It is tailored to our environment, but with an emphasis on standardized architectures and a standardized data governance framework. We have a large class of applications that have the same sort of performance and reliability requirements. If we can standardize the way we build things, we can attract more junior talent and they can add value more quickly. We team them, in agile teams, with business subject matter experts, and we do not have to re-invent the architectural wheel every time. That means building standard constructs like security frameworks, automating all of our code delivery, production control processes, and the monitoring of the cloud - all the DevOps type stuff.

The Industrial Agile approach differs from the purest approach in the sense that it has a core component for architecture. The other thing is that it is also more directive as to the investment and return. We ask, especially in our business, for significant investments year after year. The business is willing to make those investments, and they need a little more clarity as to what the benefits are - financial, quality, regulatory, or otherwise - and what kind of timeframe to expect them within. We circle the agile approach with additional governance to ensure that the investments are paying off in the appropriate timeframe.

High: One of the several things I am fascinated by in your answer is the extent to which you track the value of the investments. I know that there are a lot of peers of yours that have had difficulty in proving return on investment in the portfolio they are pursuing, sometimes to their own detriment. As somebody who has been an IT leader for so long, can you talk about that migration towards developing more value calculations into what the portfolio is yielding for the organization?

Perretta: What helps is a crisis. When I look back at all the well-run projects, they share the same characteristics. One that is not necessarily a crisis, but our first transformation activity was public. The street is pretty tough, so they want to see the connection between what you do and the financials of the company, because when they are listening, they have their spreadsheets out and ask for the numbers that they can fill in. When you go public, you also get the attention of the board of directors. We now have a special dedicated technology committee at the board director level. Typically, the board got the cyber report of the audit committee, and now we give them a complete rundown of the technology strategy and the work that we are doing in terms of digitizing the business. That is helpful in focusing the mind.

We need to have a line of sight between the investments that we make and the financials of the company, in the case of those programs which are financially motivated, or regulatory-compliant, or other quality metrics. When we go public, for instance, that necessitates a bit of effort which has to be superimposed on our programs to make sure that we stay focused on those results, and that they are reflected and budgeted in as part of that project. There is a long litany of companies who do it that way, so we are going to dial those benefits into the budget or quality performance, and it is ours to achieve. I think to garner that much attention, the output has to be impactful, so by its nature, it is self-selecting in terms of management's attention. Things that do not get that much management attention, you begin to wonder whether you should be working on them, especially in environments of tight budgets. I kid when I say it takes a crisis, but it also takes visibility. Who is accountable for delivering? Typically the large important projects have clear accountability, clear output metrics, auditable results, and those types of things. They tend to break down organizational barriers more easily than your typical project, which may not have as large an impact.

High: Are there projects that you can share that have been particularly high ROI, or particularly innovative that you have pursued? It sounds like a great number of areas that you and the team are getting involved in that have true customer facing implications.

Perretta: The one that I like, because there was something in it for everybody, was when we looked at ways of getting data to clients in a more efficient way for us and them. The old method was to inundate them with huge files, whether they needed all of that data or not. We also knew that there was a need, internally, to be able to have flexible tools, as it related to being able to see across the enterprise, to augment the data we collect with other data sources, and to do that in a way that provides lineage - to be able to say "I have this report with this data... where did the data come from", and trace it back to a specific source. For us, in financial services, it is important because you are always filing regulatory reports and sending client reports. You want to be able to make sure that when the finance person and risk person signs, they are signing based on the same underlying data.

We saw a general capability that we wanted to build, and it allowed us to efficiently store the data we keep on behalf of ourselves and our clients. It provided a way for clients to describe the data that they wanted to augment that data with - metadata. It allowed them to manipulate the combination of the data that we kept for them and their data in a way that, in no way could overwrite the books and records for them, because we are doing work with those records. It also allowed for them to be able to create marks in a way that allowed them to do reporting, analysis, and call to that structure through a web service. That has been powerful in both servicing our clients' middle and back office needs in analytics and in regulatory reporting. There is a case where the team was able to abstract the problem, and build the capability in multiple scenarios. It is a fundamental component of what we call our digital governance framework. It is the mechanism by which we would do our data-intensive work or provide data resources to end users or automated processes that rely on that.

It runs on the big data appliances. We get better reliability, performance, and they are easier to maintain and patch. That, in conjunction with our cloud, which has performed quite well with all the things people recognize. It is a much more secure environment because there is no need for production access, so you have a uniform, highly adaptable compute process and capability. We have coupled that with a powerful and flexible data capability. I think that is what I am particularly proud of. Time and again we are taking advantage of that. It is the gift that keeps on giving.

High: As I reflect across our conversation, it seems like you went about simplifying technology, implemented Industrial Agile, and went to the cloud. It sounds like you have built a better foundation on which you can now pursue these more innovative ideas?

Perretta: You have to view it as being all about re-use and speed. How do you get speed? You re-use the computing assets, re-use people, or shrink the investment portfolio. There are a limited number of ways to get speed. I think that it is a mindset that every day you invest in IT is an investment dollar that should get a return, especially now when things are tight. It pains you to have to do one-off analysis on inflexible technologies. When I am done with it, it is only going to make my life more miserable. The maintenance is going to go up with one-off technical environments, and when you compare it to the economics of the cloud, you feel like an idiot.

Obviously, everyone takes shortcuts. There are urgent needs that you have to deal with, and that is the art form of management to say when I can invest, but when I have to respond to the market and live to fight another day. It is easy to go to the whiteboard and say that this is the perfect scenario, but we all have to eat. The easy part is the vision, and the hard part is getting there from large complicated heterogeneous install bases, and a lot of companies are starting from that point.

High: You have joked a couple times about the fact that you are long in the tooth. You have been an IT leader for a long time. It strikes me that when you became and IT leader, you were doing an awful lot more translating for people who did not understand technology as to its use and value. Now, at State Street, the board is asking for technology and is curious about its use. The equation has flipped on its head. What do you think are some of the things that changed that?

Perretta: We had a board that was engaged in the cyber questions, when I joined State Street, from the get-go. We happen to have board members who are well versed in the area. I think it started with high-level sophistication on that front, because typically when CIOs talk to the board, they are more often than not talking to the audit committee. It is still tough to be able to explain the entire spectrum of activity that you are doing. The board is understanding that they are being held to a standard of governing an important part of the risk formula of any enterprise. They want to know that a key risk driver is being managed well. One has to translate the complexities of what we do from a technology perspective into commercial terms, but also commercial terms in the framework of risk and management, because that is what a board does.

I think that continues on. I think it is probably easier as the natural technology aptitude of management increases, and I think at State Street, which is not a traditional commercial bank, we are a company that was re-born based on our ability to process transactions and have the right technology at the right time. I think that State Street has an appreciation for it, but I think it started in earnest with information security, but also moved rapidly onto technology strategy, in light of efficiency requirements, pure capabilities, and the understanding that technology can disrupt business. Nothing gets people's attention like fear. People are aware that it is not always your traditional competitors that will eat your lunch. They see that happening in other businesses, so they have endeavored to become much more savvy on the technology front.

High: You have mentioned security a few times. I want to address that a little more. With all the innovation that you are clearly pursuing, security is the other side of that coin. Many leaders have been stung by not having the right balance. How do you think about that balance between risk-taking and security?

Perretta: During our move to the cloud, part of our argument was that nothing bad happens when you go to the cloud. It is a more secure environment in the sense that there are fewer people who have privileged access. Those are the keys to the kingdom. Our view was that we have to engineer the level of security into the platform. To do that is to implement a role with a security program and capability in a cloud environment that has enough instrumentation so that it does not need production access to the extent that current environments do. When one looks at new architecture and new applications that one has to build in, just as important as any functional requirement is the risk to the platform. What is its necessary performance, and are we willing to pay for that? How do I engineer that performance into the platform or architecture? How do I engineer security into the application? In our world, the management of risk is job one.

In the go-go years, when everybody was chasing revenue, you did what you did to get the function and feature in, and the threat was not as great as it is today. Now, threats are bigger, and one has to engineer them in. It has got to be a mindset that says "We need to engineer solutions at a much higher level of resiliency and security". Those are the types of things that we need to build into the architecture. It is a moving target, because nobody does it perfectly, and it is always an assessment of risk. Good security programs and good risk programs are basically risk focused, as opposed to an audit focus. I think that one has to build it into the culture, the technology, and the processes that we use in IT.

High: We have talked about so many trends that are rising in importance in financial services and beyond. Are there any trends at the intersection of business and technology that particularly excite you that we have not mentioned yet?

Perretta: I am fascinated with block chain on several fronts. I view it in two ways. It is a style of computing, and that is the fascinating one. It is a method of compute that I think has lots of neat attributes, with security and transparency being one of them. I think that regardless of how one implements it versus communities of enterprises that work together to create standards that facilitate real-time execution of sophisticated transaction or automating an extensive value chain with a particular client one to one, I am fascinated by how we could make that work. At the heart of it, it provides an immutable transparent record with infinite history and that is a fascinating concept in financial services. There are an awful lot of people chasing this who say that this could make a difference. That remains to be seen, but as a style of computing, it fascinates me. I cannot pretend to be an expert on it, and whenever I read the original bitcoin articles my head starts to hurt, but I know people that are experts, and it is a fascinating area of technology. We will see how it develops and how it is used.

Follow me on Twitter