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Innovation in the Face of 380,000 Layoffs

We have all seen the headlines of big layoff announcements in the finance industry.  It seems the headlines are never ending.  Tens of thousands of workers have been cut in 2011, and news articles are now appearing on what to expect in 2012.

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The above chart shows the layoffs for just a few firms.  The total cuts across the industry are astounding.  Banking analyst Dick Bove of Rochdale Securities puts the 2011 total layoffs at 230,000, and over 150,000 in 2012.

As everyone in the industry scrambles to adapt, let's not forget the personal lives affected by these cuts.  A relative of mine was laid off last week from a regional bank here in the U.S.  18 years on the job, working directly with SMB clients in the field on their corporate banking needs.  6 weeks of severance and that is it.  It was completely unexpected, and he is devastated.  It is affecting his family, his marriage, and his well being.  Multiply that by 380,000 and the effects are overwhelming.
The effect on the economy is also real. The goods not purchased, the taxed not paid, the unemployment benefits to be paid out.  Did Occupy Wall Street and government regulators get what they wanted?  And with capitalization ratio requirements on the rise, we can only expect more restructuring, continued divestiture of portions of these big firms, more layoffs, and more lives turned upside down.

In the face of this change, those remaining are asked to innovate as never before.  In just a few years, the industry has seen the introduction of "professional innovators."  The job titles tell the tale.  "Innovation Manager," "VP Technology Innovation," and the emerging "Chief Innovation Officer," are all becoming more common in financial services.  Using the advanced search feature on LinkedIn, I found over 100 people with the word "innovation" included in their job title in the top 5 or so banks:

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On the other side of the innovation equation are the vendors, such as Akamai.  Akamai has experienced terrific growth in financial services with annual growth rates at over 40%.  How can vendors justify major investments in financial services solutions with the industry undergoing such massive reductions?  How are firms going to achieve innovation in the face of these massive job cuts?  And how are technology vendors going to continue help provide those innovations?

The answer lies in moving the needle of IT spend from running the business (RTB) to growing the business (GTB), shown as follows:

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Firms need to push out more IT work to vendors and outsource providers to free up ever more scarce internal IT personnel.  Let me provide two examples, one small, and one large.

An existing Akamai customer has been writing their own mobile redirect rules at the load balancer in their data center.  When a customer enters "www.thisbank.com" from their browser on their Smartphone, the request is redirected to the mobile web site of the bank, "m.thisbank.com".  It's a simple procedure that makes all the difference in the world to the mobile user's experience.  It is also very cumbersome for the IT folks to maintain the ever expanding rule set on the load balancer.  There have been cases of "emergency" additions required by the firm.

When the firm heard about Akamai Mobile Detect and redirect product, they were thrilled.  A vendor managed service that would provide complete and up to date coverage as new devices come into the market.  And, since the redirect occurs at the Akamai edge server, the redirect to the mobile phone occurs much more quickly.  The firm frees up internal resources for network management, QA, Program Management, and more, improves the user experience, and moves the needle from RTB to GTB.  As well as no more late nights required by the IT staff to test out the change prior to the market open.  (I've been on those late night calls, and they can wear you down.)

A second, much larger example is data center build out.  A large Akamai financial services customer had considered building out numerous regional small data centers to improve the response time, and offload the bandwidth from their 3 major US data centers.  Instead, they decided to take the big step with Akamai, and have Akamai deliver their www site.  The result: huge gains in performance, huge offload of bandwidth, no additional staffing or data center management, and future plans to now reduce the number of major data centers from 3 to 2. 

Now that is moving the needle.

Rich Bolstridge is Chief Strategist, Financial Services for Akamai

1 Comment

Layoffs are needed to be competitive in the market. Layoffs is the answer to wall street my friend to maintain street expectations irrespective innovation,family and society. it signals margins will improve. also cost reduces. thanks for this article.