The impending repeal of the Glass-Steagall Act is likely to unleash a hunt on Wall Street for experienced information technology executives.
It will begin once commercial banks and insurance companies step up to the plate for the type of talent needed to build and manage the highly distributed, Unix-based client-server systems that have been the private domain of Wall Street firms.
Though Wall Street possesses a clear competitive edge in this field, it must consider how to maintain that strategic advantage in a post-Glass- Steagall era.
Consider this: Information systems and technology now function as the manufacturing and product development departments of financial services companies. Technology is a platform for competitive differentiation.
Commercial banks were the first to appreciate the benefits of technology, in the 1960s and 1970s, and began automating both as a way to improve service and to cut costs.
Here, the use of technology was confined largely to automating manual procedures and reducing paper flow. Insurers took similar steps; however, they did not keep pace with banks' continual technology investments.
Wall Street firms were the last to make significant investments in technology, but within a few years, these firms had leapfrogged banks and insurance companies in the use of systems.
The watershed event was in 1990 when investment firms widely grasped that their key to success was highly distributed, Unix-based client-server systems.
During this revolution, power over information moved from the mainframe system to the account executive's desk, igniting the investment of hundreds of millions of dollars.
The irony is that, because they were the last to employ technology for competitive advantage, Wall Street firms now have more flexibility than banks and insurers. The latter are encumbered by big, unwieldy legacy systems that grew more complex as they evolved over the years.
Banks and insurance companies must now confront two challenges:
*Making a considerable investment in technology in order to compete with investment firms.
*Attracting the executive talent to operate these systems to maximum advantage.
The good news is, they won't have to look far - most of that talent is working on Wall Street. Its firms are paying top dollar for technology executive talent - far more than banks and insurance companies.
But there's more to it than money. Technologists are attracted by challenging projects, and Wall Street has a long list.
With the repeal of Glass-Steagall, the 60-year-old law segregating banks from insurance companies and investment firms, the issues confronting these competitors will become clearly defined. In a new and highly competitive environment, banks and insurance companies must hire management talent to build, oversee, and drive new technology systems.
In order to attract top talent, banks and insurers must consider more than just money. How will these institutions maintain their business cultures if they are forced to rethink their reward systems? How will they bring about a change in viewpoint such that technology will be thought of as an integral part of the business' creative process rather than just a productivity tool?
The challenge for Wall Street firms is equally daunting: How can they retain their technology talent, given the pressing needs of banks and insurance companies?
The firms that find answers to these questions will surely be those that survive and prosper in the no-holds-barred competition that looms for the financial services industry once the Glass-Steagall Act is put to rest.
Mr. Marino is a principal of Sullivan & Co., New York, an executive search firm specializing in financial services.
