It was a year ago today when investment bank Lehman Brothers
filed for bankruptcy. The collapse of the 150-year-old bank with
over 26,000 employees sent a shockwave that rippled through the
economy.
The television pictures of brokers leaving Lehman's offices,
cardboard boxes in hand, made a lasting impression. But IT workers
were hit just as badly.
Lehman Brothers had invested a total of £600m in communications
and technology in the 12 months before the crash. And its collapse
left IT suppliers, such as Tata Consultancy Services, millions of
pounds out of pocket.
The US mortgage giants Fannie Mae and Freddie Mac were
nationalised a few days before Lehman's collapse, signalling the
start of the credit crunch. In the months that followed, Bank of
America acquired Merrill Lynch, and the US government bailed out
insurance giant AIG to the tune of £47bn.
The UK has not escaped. Lloyds TSB acquired troubled HBOS in a
government-brokered deal, and the Royal Bank of Scotland was all
but nationalised. By then Northern Rock, which ran into trouble the
previous year, seemed a distant memory.
Such was the carnage that followed Lehman Brothers' failure,
that a raft of new regulation for the financial services sector was
inevitable. As one commentator put it, Adam Smith's invisible hand
controlling the economy will soon put on the glove of
intervention.
But as we report this week,
IT has played a critical role in rescuing the remnant of
Lehman's UK operations. Isabell Jenkins and her team at
PricewaterhouseCoopers, have spent the last month disentangling the
IT systems at Lehaman's UK for its new owner, Nomura.
By the time she has finished, she will have cut down the number
of software applications used by the bank from 20,000 to around 50,
consolidated the IT into a single datacentre, and simplified
Lehman's vast electronic archive. The result should be a bank with
significantly lower costs than its predecessor.
And, when the inevitable regulatory backlash arrives, IT will
once again come to the fore. Banks will need to upgrade their
systems and invest in new technology to satisfy the Financial
Services Authority and the Securities Exchange Commission. That
will be welcome news for the IT professionals hit by the
downturn.
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