CIO Of The Year JP Rangaswami

Deploying disruptive technology, keeping a wary eye on outsourcing and defending IT makes JP Rangaswami of DrKW our Top CIO of the Year.

The CIO of Dresdner Kleinwort Wasserstein isn’t afraid of disruptive solutions, doubts the benefits of outsourcing, and has seen technology go from ‘poster child to whipping boy’

JP Rangaswami is not one to shy away from strong metaphors. "Over the last three years, the IT industry seems to have gone from poster child to whipping boy," says the CIO of Dresdner Kleinwort Wasserstein (DrKW). "We’re under pressure on all fronts: budgets, delivery, reliability, and security."

Indeed, the 46-year-old CIO, who has more than 20 years of experience in the technology business, is known for his outspoken views on everything from the role of technology to offshore outsourcing to his support of what he calls disruptive technologies. After Rangaswami took over as CIO in 2001, DrKW had not only embraced Linux, but was building open source products that it was making available to the industry.

Like his peers, Rangaswami has seen his budget and staff slashed in the last three years. His IT budgets is down 40 percent and his staff has been trimmed 43 percent and now numbers at just more than 1,000 employees since he started as CIO. "It’s not about doing less with less, but about doing more with less, which is what technology should be about," he says.

How has DrKW’s CIO managed this feat? For starters, he and his firm are driving harder bargains as they are no longer held ransom by their IT vendors, and they are demanding plug-and-play products rather than ones that require expensive customization as they did in the late nineties. Rangaswami continues to champion open source technologies, and he estimates that approximately 43 percent of DrKW’s Unix user base is on Linux. DrKW also, for example, makes use of the JBoss open source application server environment rather than pay proprietary fees.

But has IT become a utility, as a controversial article argued last May in the Harvard Business Review? "Absolutely not," says Rangaswami. In order for technology to become a utility, he says, it has to reach a level of standardization, which it has failed to do. Furthermore, while certain aspects of IT have reached a point of commoditization and "could be a utility, the industry should be careful not to throw the baby out with the bath water," he says. Technology can still provide a distinct advantage, he says, but it’s an argument bolstered by the recent technology patent battles raging in both financial services and other industries. "Throwing that away is like being told that Amazon’s one-click model is not distinctive and did not give them any advantage," he says.

But what about outsourcing, which has become Wall Street’s cost-saving darling? Isn’t this one way banks can rid themselves of routine tasks? Rangaswami warns investment firms of the seduction of supposed cost savings. "What I lose with offshoring is far more than I gain," he says of DrKW’s own experience, which was "focused on the war for talent rather than wage arbitrage. With outsourcing I may reduce the core execution cost but I pay for it by increased coordination and training costs." DrKW found in some cases that the local offshoring staff had to be spoon fed and that the typical attrition rates of 40 to 50 percent meant they were often training staff to ultimately benefit others.

Rangaswami also urges firms who do embark on outsourcing contracts to "clean up their garbage first," rather than dumping it onto the vendor, who will most likely charge a considerable premium for the cleansing. "In the current climate, we cannot afford to feed the mouths of outsourcers. The focus has to be on getting rid of the layer of fat and then parceling it off neatly to someone who has the critical mass to provide economies of scale," he says.

Firms should not hire an outsourcer because you need someone to clean up the rubbish, he says.

Looking forward to the new year, Rangaswami has three ongoing priorities.

First, DrKW’s IT staff will focus on platform independence; trust and transparency; and security and reliability. Second, the firm will continue its move to a real-time trading environment, which is a "requirement" if banks are to cope with the increased demands of the business environment and looming regulatory issues. Rangaswami says that this will require a lot of needlepoint work to resolve reference data issues and increase STP rates.

Finally, Rangaswami notes, 2003 has largely been part of the story that kicked off with the peak of Nasdaq in March 2000. The months of reckoning for IT departments--he likens it to being at war--have stretched on, but now it’s time to look ahead. "It’s time to learn how to leverage the lessons of the last three years and move onward. The challenge is to continue to reduce baseline costs aggressively and make capital available for disruptive investments," says Rangaswami.