Northern Trust Fights the Fax

The challenges of dealing with a shrinking budget and an increasing workload are nothing new to Tim Theriault, president of worldwide operations and technology, and chief technology officer with Chicago-based Northern Trust, a financial services institution that provides banking services, custody, trust and investments. Northern Trust is no small fish, boasting assets under administration totaling $1.59 trillion and managed assets of $365.3 billion.

In response to the ongoing competitive and resource pressures, Theriault has been forced to come up with new ways of dealing with old problems by analyzing his IT inventory to make sure technology is being applied in the most intelligent way possible. He recently discussed how he has put Northern Trust at the forefront of institutions that are looking to streamline and automate by taking the phone and fax out of the corporate-actions equation.

BS&T: What are the major challenges of running both a custodial and asset-management organization?

Tim Theriault: Many of the challenges are the same: making sure we are providing timely and accurate information at the lowest cost and continually investing in technology that differentiates us.

BS&T: Do you take a different approach to managing technology in different parts of your business?

Theriault: No. We have taken a universal approach by using common technology platforms and have integrated them. We have also standardized the core technologies, such as in the way we developed Passport for our clients. (Passport is the company's Web-based reporting and transaction suite of tools.) We developed the architecture first and then laid the applications on top of that to provide robust tools for our clients.

BS&T: Can you provide more information about Passport?

Theriault: Passport is how customers get into our network. It is a single-sign-on network that gathers data, sometimes that data is inside Northern Trust and sometimes it is outside or a combination of various systems. The system was originally developed in 1993 and has since been rewritten more than once. The incremental investment for each rewrite has been minimal. It is created using some Web services technology but it is all Web-based.

Passport has been around for years. It takes data from Northern Trust and other sources, specifically Reuters, and is a portal to outside market data, news, our information and external information. It is a knowledge-based system. Traditionally, custodians just did online reporting, but we have taken that to a new level for risk management and...for people to talk to their custodian.

BS&T: Some in the industry have trouble providing Web applications access to mainframe information. Do you have that problem?

Theriault: No, we do not. Passport used to access information from DEC, which is a platform that we use from Digital Equipment Corp., which was since acquired by Compaq. That was one of the technology firms in the late '80s that provided (what are now) old legacy applications. Passport was able to access information from this old legacy-reporting system, while providing new reporting to our clients. Passport will get the data from wherever it is but, in fact, all our platforms have been upgraded. Whatever it is-server-based, mainframe, Unix or Linux or NT-Passport gets the data.

BS&T: A number of CTOs swear that open source is going to be the greatest thing this industry has ever seen. Do you agree?

Theriault: I completely agree with that. Open source is going to have a number of impacts. For one, it will help the Intel platform have a high degree of price performance over a proprietary Unix platform. But I think the best thing is that it will really keep control over price and enhance software capabilities. Without that competition, there would be more expenses.

BS&T: Don't you need strong vendor support behind an open-source technology before a firm can take a chance on it?

Theriault: I think that you wait for multi-vendor support to legitimize the new technology but I don't think you really need a vendor for support. The fact that there is broad-based support for open source from companies like Sun, BEA, HP and Dell is a sign that it will become more and more viable. I'm not saying that you don't need support, but...if only one vendor had supported it, that would be one thing-but, they all are, and so that has legitimized it.

BS&T: Northern Trust is seen to be at the forefront of custodians getting clients to accept automation in the corporate-actions arena. How have you done this?

Theriault: We have made phenomenal progress with corporate actions, in that now we have 70 percent STP. We were not going to have STP unless our clients automated. Most of our fund managers were looking to reduce costs and risk too. We have given customers additional time to make their decision, as opposed to sending a fax, so we have added value to them if they go more electronic, and we are also adding value to plan sponsors.

I would say our customers (plan sponsors) are asking us to push managers. One segment of our customers is asking us to force the other to automate. But we are not forcing anyone over. Instead, we are working together and bringing value to them.

BS&T: Are you getting much resistance to your automation efforts?

Theriault: I would say only a few are resisting automation. Clients can work directly with us or send SWIFT messages. There is only resistance with the timing of going online. Right now, we offer online means of processing corporate actions or we can accept SWIFT messages. To send SWIFT messages, however, they have to do some development work on their end. Some are saying they want to wait until they go live on SWIFT. We are telling them to use our online tool until they are SWIFT-ready. Corporate-actions delivery and response is available through Passport.

BS&T: When will you ask that all customers use some form of electronic communication for corporate actions?

Theriault: We are pushing for the end of the year. As I said, plan sponsors are asking us to push investment managers on this.

BS&T: What is the next technology that will have a dramatic effect on the financial services industry?

Theriault: It's not about the newest technology. It's about...how well we manage the technology we have; for example, how we use open source and how we leverage the offshore model. The real innovation will be coming in the application of technology, as opposed to pure technology.

BS&T: How has your budgeting process worked over the past year?

Theriault: We have reduced our budget (by 20 percent) while the...work we have done has not been reduced. We continue to lower costs by leveraging open-source technology and offshore outsourcing.

BS&T: What keeps you up at night?

Theriault: The challenge is making sure you are applying technology and investment for your own uses as opposed to the vendors' desire to sell more. I doubt many would disagree with that. I think we have to maintain focus on what we can control and not what we can't.

Editor's Note: This article originally appeared in Wall Street & Technology, a sister publication of Bank Systems & Technology and part of the InformationWeek Media Network.