Case Study: Fidelity Asset Management’s IT Blueprint

Throughout his years as an IT specialist, Keith Dennelly has heard the same question many times: When can we stop spending all this money on IT?

Dennelly, CIO of Fidelity Asset Management, says CEOs are often concerned that their organizations will turn into IT operations rather than financial services firms. They want returns on the investments in technology. The challenge from an IT perspective is figuring out how to get those returns when juggling multiple projects.

At Fidelity—and at State Street, his previous employer—Dennelly has worked to get the firm to look at IT on a longer-term basis so that it moves in lockstep with the various business units, rather than simply looking at IT on an annual basis or on a project-by-project basis.

During his keynote address at last week's Buy-Side Technology North American Summit, Dennelly described Fidelity’s organizational structure and its IT blueprint. When he joined in October 2009, he devised a plan to structure the firm’s IT in three phases. First, he conducted a detailed organizational assessment, which found that from 2003 through (est) 2011 the firm's production support costs would rise 7.2 percent.

Prior to Dennelly's arrival, Fidelity employed an advisor-based IT model in which each advisory group—such as fixed income, equity, asset allocation, and high-net worth—had a dedicated IT team. Each team built systems to support its group's specific business needs, which resulted in each group having its own infrastructure, platforms, architecture, design, utilities and databases.

This structure worked for Fidelity until the financial crisis hit in 2008 and the firm reexamined its IT spending. It found that a lot of money was getting lost in silos, and production support costs were increasing every year.

After coming up with specific metrics for those processes that were deemed most important, Fidelity created a "future-state vision" of what "really great" would look like, Dennelly says. The firm categorized all the existing systems, came up with a multi-year plan for those systems, and identified their gaps. This entailed collapsing and consolidating technologies and platforms—in some extreme cases, it meant whittling down 50 applications to five.

Fidelity Asset Management uses a role-based security administration system, delivered on a software-as-a-service (SaaS) basis, to ensure the correct people have access to the correct applications. To consolidate the disparate platforms, the firm intended to create reusable application programming interfaces (APIs) that each of the organization's initiatives could use to build out its capabilities, Dennelly says. To that end, creating an organization of common data—where, Dennelly says, “the data could be centrally scrubbed, cleaned and maintained so that there was one source of the truth”—was most important.

The best thing about this, Dennelly says, was being free to create this common data environment because every other key initiative in the firm was either creating the common data or consuming the common data.

The third phase was to produce product roadmaps for figuring out how to get to that "future-state vision,” which is perhaps the most important and overlooked aspect of an IT overhaul. Dennelly says the organization and structure that exist at the inception of the blueprints are not the same as those of the future. A true blueprint demands moving away from your current organizational state, Dennelly says.

"Where a lot of strategies struggle is in taking the next step and reorganizing your IT unit," he says.

At Fidelity, this proved to be a challenge because the firm was moving from a silo-based approach to a matrix-based organization. There was a perception that silos were going to lose power and control and they resisted having to rely on someone else for infrastructure and data.

But in order to become more efficient and cut costs, it was a necessary move. "We found that production issues would constantly suck key resources away from key initiatives, which would then get delayed because people were focusing on production issues," he says.

Fidelity has worked to cross-train its IT staff in order to become more horizontal. Dennelly says people have different personalities that make them more adept at certain functions: There are personality traits that make for better developers, analysts, visionaries, production or support. "You've got to put the right people in the right job," he says.

Dennelly oversees a workforce of about 1,500 employees, organized into about 80 to 90 delivery teams. This is one area where Fidelity is unique. Every delivery team is a vertical slice in the organization. Every key initiative gets a delivery team. Every delivery team has a head. The delivery team head could come from anywhere throughout Fidelity's matrix. When a project is done, the delivery team is disbanded and those employees get reassembled to another team for a new initiative.

"One of the frequent complaints I've heard in IT is that the teams just keep growing and growing—‘All we ever do is add people,’” Dennelly says. "This gave us a way to establish a culture of finishing things and having a definition for finishing projects."

Another unique aspect of this model is that employee bonuses are decided by three separate metrics: the employee's manager's rating, the head of the delivery team's rating, and the rating that Fidelity gives to each delivery team. This allows employees to move away from thinking that they only have to concern themselves with impressing their direct manager.

Fidelity currently has about 30 multi-year, multi-million-dollar projects under way simultaneously. Dennelly says that since he joined the Fidelity, it has retired about a quarter of its applications. Of the 13 data entities in the organization, nine are populated, and seven of those nine are being consumed by production applications. Fidelity is also on its third release of its user interface and has completed its role-based authentication.

(To read more on Keith Dennelly, his career, and his work at Fidelity and State Street, please click here to view his profile in Waters' December 2010 issue.)

The Bottom Line

• When it comes to technology budgets and spending, firms need to move away from only looking at return on investment and focus more on long-term projects that evolve with each business unit.

• An IT overhaul demands organizational structure changes. This is where most firms fail because they resist change.

• Dennelly oversees a workforce of 1,500 that is split up into 80 to 90 delivery teams that constantly change as initiatives get completed.

• Employee bonuses are in large part decided upon based on how effective the delivery team was in accomplishing its stated goals.