The bank will create agile teams where “product owners in business and infrastructure divisions will lead teams of technologists, using agile principles, to continuously work on products and ensure progress meets their expectations”.
It will also increase the proportion of software engineers in the workforce and better support and motivate them, as well as “reduce the burdens that slow them down.”
The strategy has four parts, according to the presentation. The investment bank wants to:
Offer a digital client experience
Build scalable infrastructure
Make room for innovation
To do so, Goldman Sachs is using 45% of its $4 billion engineering budget in 2019 on investment. The other 55% will be used to run the bank.
In the financial services sector, banks are making huge investments in technology. JPMorgan allocated $10.8 billion last year and has earmarked $11.4 billion for technology in 2019. Bank of America spent $10 billion on tech in 2018.
Unlike America, where banks have a return on equity of 12%, Europe does not have strongly positive government-bond yields, or a pool of investment-banking profits like that on Wall Street, or a vast, integrated home market. All this is true, but European banks have been lamentably slow at cutting their costs, something which is well within their control. As a rough rule of thumb, efficient banks report cost-to-income ratios below 50%. Yet almost three-quarters of European lenders have ratios above 60%. Redundant property, inefficient technology and bloated executive perks are the order of the day.
And when the next downturn comes and banks need to raise capital, which investor would be foolish enough to give even more money to firms that do not regard allocating resources profitably as one of their responsibilities?
There’s much room and ability to improve the bottom line by fixing the back-office sprawl:
Costs are falling at an annual rate of about 4%, according to analysts at ubs. This is not enough. As consumers switch to banking on their phones there are big opportunities to cut legacy itspending and back-office and branch expenses. Lloyds, in Britain, has cut its cost-income ratio to 49% and expects to get to close to 40% by 2020. The digital German arm of ing, a Dutch bank, boasts a return on equity of over 20% in a country that is supposedly a bankers’ graveyard. If other banks do not do this they will soon find that they have lost market share to new digital finance and payments competitors—both fintech firms and the Silicon Valley giants such as Amazon—that can operate with a fraction of their costs and which treat customers better.
Source: Fixing Europe’s zombie banks
The bank has selected AWS as its preferred cloud provider with the intention of porting its production workloads, including its customer facing platforms and strategic core banking applications to the cloud.
From what I can tell talking with banks, they’re over that 2010 thing of “public cloud isn’t secure enough.” Now it’s a scramble to move their shit up there.