The Bottom Line Per ... Marvin Balliet

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At Merrill Lynch, it's a CFO who oversees tech spending.

Like many big Wall Street firms, Merrill Lynch spends billions of dollars on technology each year. To ensure its money is being well spent, Merrill employs an unusual management structure: It has a specially designated chief financial officer to oversee its 8,000-person information technology department. Baseline spoke with Merrill's technology CFO, Marvin Balliet, last month. Here are portions of that conversation.

Q. How has the downturn in the stock market affected Merrill's use of technology?

A. In the last 18 months, we've basically put a cap on how much we're going to spend. We did that partly by getting all the core business areas to take ownership of their total technology investment. They now understand what they consume from technology.

Q. How did you accomplish that?

A. I went through a major effort of changing the way I charged infrastructure back to where everything is unit-cost. We used to have these grandiose, high-level cost distributions; now, we've gone to individual, service-level charge-backs. So if you pick up the phone and make a long-distance call, you pay for that call. If you order Bloomberg [financial news service] on your desktop, you pay that Bloomberg fee. It doesn't get lost in a big lump.

Q. What's your biggest cost in technology?

A. Labor. There was a time in technology when capital was king and people were subservient to it. If you went back to 1999, capital—including mainframes and network equipment, that kind of thing—was probably 60% of our cost and labor, 40%. It's the inverse of that today. We've seen about a 20% swing.

We don't have huge plants that manufacture cars. We have technology that allows us to transact large volumes of highly profitable business as quickly as we can, as new products come out. Our job is to rebalance our technology portfolio to adjust to market conditions and profit opportunities. Sometimes that means redirecting software-development resources onto more promising projects; sometimes it means moving big projects to small-development mode. In other words, if you had 10 developers, go to three.

Q. How else has your approach to developing software changed?

A. In general, we're getting much better at what I'll call global development. For example, we've begun a very successful project that involves standardizing our global systems for order routing. A piece of that was developed in Tokyo. Another piece was developed in India. There was a piece developed in the U.S. We've managed that development on a cross-global basis.

Q. Why a CFO to oversee technology spending at a company?

A. An awful lot of what I do is vendor health-checks. I want to make sure we don't put in a software package and the company isn't there six months later.

This article was originally published on 2002-09-01
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