The failure of Lehman Brothers a year ago highlighted the
scale of the financial meltdown and global recession.
PricewaterhouseCoopers (PwC) took over as the UK administrator
for Lehman Brothers. The firm is responsible for separating the
investment bank's UK operations from the global company, which has
been taken over by Japanese bank Nomura.
Separating the IT systems has proved to be an immense challenge.
If it is successful, Nomura will be able to run Lehman Brothers UK
as a standalone entity at a significantly lower cost than when it
was Lehmans Brothers' UK entity.
Cost-effective banking
Isabelle Jenkins leads the financial services technology team at
PwC. She has been responsible for unravelling Lehman Brothers' IT
for the past 12 months. Jenkins set about creating a banking
platform for the UK business that could operate as cost-effectively
as possible. The first step was to ensure the UK business had
access to all the Lehman applications.
"The UK entity required 2,000 applications and 7,000 servers,
all of which were shared by the global Lehman business. The
situation was even more complex because different parts of the
business shared application development," she says.
Her team was drawn from the technology consulting, forensic and
risk assurance practices at PwC. They worked alongside 70 Lehman
Brothers software developers.
With the global stock market in meltdown, many of the bank's
clients chose to terminate their trading relationship with Lehman
Brothers. But given the poor state of the world's stock markets,
some wanted to keep their investments with Lehman Brothers until
market conditions improved.
PwC needed to ensure the bank's creditors and clients were paid
the correct sums for their investments. PwC realised it needed a
software application to allow it to identify which Lehman products
the investment bank's clients had bought.
A clear view
"We had to customise the Lehman applications to create a tool to
give us a single view of the client, something the banking industry
has struggled with. This tool was fundamental, because previously
there was a lot of confusion on the trading positions," says
Jenkins.
PwC worked with outsourcer TCS to create a prototype application
in six weeks.
Data and applications on legacy Lehman IT systems will be
switched of by mid-2010. By then Jenkins needs to establish a UK
datacentre and network infrastructure, move applications to the UK
and provide archive storage to comply with financial regulations.
And she aims to reduce the 2,000 applications down to between 40
and 50.
PwC is using Nomura's network infrastructure, but by the end of
the year Lehman UK should have its own network and IT
infrastructure. "We will move from two datacentres to a single
datacentre, supplied by a third-party hosting company. We already
have a shortlist of technology suppliers," Jenkins says.
PwC is in talks with the FSA over the amount of data it must
keep from the old Lehman Brothers business. Storing excessive
archived information will materially impact the savings Jenkins
hopes to make by simplifying the IT infrastructure.
Throughout the programme, cost reduction has been a big focus.
IT consolidation will have played a significant part in the
turnaround.
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