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Inside Deutsche Bank's "dysfunctional" IT division

So, COO Kim Hammonds is leaving Deutsche Bank. Less than a month after describing Deutsche as, "vastly complex," the, "most dysfunctional place she's ever worked," and in the middle of a, "difficult transformation," Hammonds has left, “by mutual agreement with the supervisory board.”  She was, “a breath of fresh air,” according to the chairman. In some ways, however, Hammonds does not seem to have been fresh enough.

Hammonds' key task at Deutsche Bank was to streamline the bank's unwieldy array of operating systems. When now ex-CEO John Cryan presented his "Strategy 2020" plan in October 2015, he expressed his intention of eliminating 6,000 Deutsche Bank contractors and cutting the bank's operating systems from 45 to four. Two and a half years later, Deutsche still has 32 different operating systems, and the contractors we spoke to complained that the bank has become "toxic" to work for.

How did Deutsche end up with so many systems to begin with? A senior technologist who worked for DB for over seven years, explains. "People at Deutsche loved setting up little groups to create their own mini-platforms for developments," he says. "For example, you'd have one platform that had been set up by the exotics guys and then someone else would come along and say they liked that, but wanted their own functionality. They'd go off and make "enhancements" and then you'd have two different platforms that weren't talking to each other, each one with its mini-fiefdom."

He says his time at Deutsche was spent trying to prune the platforms back: "It was like whack-a-mole. You'd get rid of one and another one would pop-up somewhere else."

Despite the best efforts of some of its senior technologists, when Cryan took over in June 2015, Deutsche's IT infrastructure was therefore out of control. Cryan famously described it as,"lousy," and a "Horlicks" (total mess to non-Britons). Alongside the bank's 40+ operating systems, there were 100 different booking systems for trades in London alone, and no common client identifiers. Cryan elaborated upon the problem in his March 2018 interview with Zeit. In 2015, the systems at Deutsche Bank were, "...really, really bad. Very bad, beyond end of life," he said. "There was hardware that was no longer supported, software that could no longer be supported because it could only run on that hardware." A Deutsche insider elaborates: "There was no integration and reporting was a nightmare. Trades between teams in the investment bank were booked in multiple systems and it was very difficult to represent the risk we were exposed to, even in a single transaction."

This, then, was the situation inherited by Cryan and handed to Hammonds and her team to resolve. Nearly three years later, there have been some successes. Thirteen out of 45 operating systems have disappeared, a new risk analytics and pricing system has been put in place, inter-system reconciliations have been cut from 1,000 to 600 (with a target of 300 by 2020), and last year Deusche Bank had its most stable year ever for critical applications after working hard to stabilize its IT environment. There's also "Fabric," Deutsche's new cloud computing platform, which allows enables Deutsche Bank programmers to access the bank's computing power in weeks rather than months, and allows select third parties access to Deutsche's storage and data to create applications which will benefit the bank and its clients.

Even so, insiders in Deutsche's IT division point to ongoing problems. They say the bank still operates separate platforms for equities trading, rates trading and FX trading (with the former two known as "flow risk" and "Summit" respectively.)  "These three systems are the behemoths," says one insider. "It's almost impossible to conceive of how they could come together given how complex the products have become." The thirteen systems that have been eliminated were seemingly the easy ones: those that remain are more complicated and more fiercely protected by their champions.

In this sense, rationalizing IT systems is a matter of internal politics (this may have been what Hammonds was referring to in her "dysfunctional" comment). Cryan himself acknowledged this in his Zeit interview, when he explained his intention to, "change every single computer system," at Deutsche. - Only by changing all the systems would the program be depoliticized, said Cryan: "If you say you will change some of them, the people who like their system will say "not mine.""

Now that Cryan's gone, however, it's becoming apparent that his authority over some senior managers at Deutsche Bank was weak. He and Hammonds' ability to challenge Deutsche's most powerful tribal leaders appears to have been correspondingly limited. "It's going to be a far more uphill task to cut systems in future," says one senior insider. "The people who control these systems don't want them cut. It's all about politics."

Some suggest the situation is being made worse by Deutsche's alienation of the contractor market. Systems rationalization is best done by outsiders without a vested interest in the status quo. And yet, having targeted contractors for job cuts, DB technologists say the bank isn't a popular destination for systems integration specialists. "We just don't have a good reputation in the contractor market," reflects one.

Nor does Hammonds appear to have made her role any easier. Having signed a 10 year deal with HP to manage Deutsche's servers, data centres and storage in 2010, some insiders argue that she rested on her laurels and didn't do enough to motivate her team. Ultimately, however, they say she was given neither the time nor the money necessary to succeed: "It was an almost impossible job given the cost and revenue challenges," says one.

Although Hammonds and Cryan have now gone, some of their key lieutenants remain. For the moment, Deutsche's global IT operation is run by Pascal Boillat - a Cryan and Hammond hire who joined from Fannie Mae in 2016. IT in the investment bank is run by Scott Marcar, who joined from RBS in 2014.  New talent has been added: Thomas Nielsen, the former chief digital officer for Tesco’s supermarkets, joined the bank as a "digital transformation specialist" last year. In a possible reflection of the intensity of the role, however, Jason Sutherland-Rowe - the man in charge of Deutsche's "global IT transformation programme" is currently out on sabbatical.

For the moment, Deutsche's technologists are holding their breath. New CEO Christian Sewing has indicated that the strategy will continue as before, suggesting the program to rationalize the mess of operating systems will persist. Some point hopefully to Autobahn - the electronic trading system that started out as a fixed income platform in 1996 but which has since been rolled out across FX, equities and ETFs, as evidence that Deutsche's different trading teams can come together on a single platform. Others point to the success of Aladdin, the risk management and trading system offered by Blackrock, in reducing complexity at Deutsche Bank Asset and Wealth Management, as evidence that change can take place.

"Hammonds was innovative, but she couldn't do what she set out to do," says one DB insider. "So we're just sitting here, waiting to see what happens next."

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AUTHORSarah Butcher Global Editor
  • nj
    23 April 2018

    "They'd go off and make 'enhancements' and then you'd have two different platforms that weren't talking to each other, each one with its mini-fiefdom." - Sure, but why did they then port it to a new (to Deutsche) operating system?

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