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"IT transformation," cloud = loss of 850 IT jobs at State Street

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So this is IT transformation. "State Street (Corp.) will cut 850 jobs," says the headline on the Boston Globe story. Blame the cloud.

Indeed, State Street Corp., the huge financial services company with $22.6 trillion under manamgement, is firing 520 IT employees while another 320 will be transferred to two IT vendors, presumably as part of an outsourcing deal. State Street currently has 4,000 IT employees so the cuts amounts to 20% of that department. The fallout from the outsourcing deal and where State Street goes from here is explained in the press release

"State Street’s internal IT resources will be more focused on research and development, including further use of innovations such as private-cloud computing that will create more sophisticated, client-facing solutions and services."

And here's the obligatory canned quote:

“Our business operations and IT transformation program reflects our commitment to maintaining an advantage that supports our continued growth in an increasingly competitive global environment,” said James S. Phalen, executive vice president and head of Global Operations, Technology and Product Development. “While making changes that impact a number of our employees is never easy, we believe that this move is a necessary step that will allow us to better deploy our resources in line with our core competencies, efficiently leverage the capabilities of our partners, and enable us to offer more sophisticated products and services to our clients.”

State Street presents a striking example of how the cloud will impact IT. Savings are estimated to be $575-$625 million between now and the end of 2014. For the record, State Street's revenues were up 8% and profits 18% in the second quarter. The layoffs and financial results were reported at the same time.

What's your reaction?

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Discussion
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Allan Miller
Allan Miller 0 Points | Mon, 04/29/2013 - 17:44

I haven't dug into the details on this deal but if I was a betting man I'd bet the IT department was filled with a legacy "keep the lights on" mind set and was resisting the changes needed to move forward.

 

talent
Bernie M 0 Points | Tue, 10/18/2011 - 21:23

Is the cloud really what we're talking about here, it really sounds like another outsourcing situation.  Sounds like there will be some jobs working on the cloud.

Talent Capture - time to find a job.

jdodge
John Dodge 1362 Points | Wed, 10/19/2011 - 13:16

Bernie, that is a never ending debate, but one that is more about nomenclature than substance. The cloud is much more than outsourcing. Just follow the posts here and you will quickly understand why.    

jdodge
John Dodge 1362 Points | Wed, 08/17/2011 - 15:28

IT workers fight back after layoff, charge discimination against employer and outsourcer.....

http://www.computerworld.com/s/article/9219197/Outsourced_and_fired_IT_workers_fight_back

jdodge
John Dodge 1362 Points | Wed, 07/27/2011 - 21:43

Tim,

Welcome to the Enterprise CIO Foryum. Those are good points and fodder for a story should a reporter wish to dig into it. I doubt State Street would say much, but you don't know until you try. But State Street is hardly in a state of decline....many large corporations have never been healthier in the top and bottom line (indeed, many American corporations are growing outside the U.S.). There's a disconnect between the overal health of coporate America and the economy, which equates to B2C and B2B spending.

Also, more than once, someone here has said cost cutting is not in the top three reasons to move to the cloud. But down deep, we know it is. 

 

 

twessels
Tim Wessels 1 Point | Wed, 07/27/2011 - 21:29

It is hard to say that cloud computing per se is the reason for the layoffs.  Over 40% of the employees are being transferred to the outsourcing company, so those jobs are not really gone.  And although the bank doesn't make it clear how far along they are with building their private cloud, it could be that the skill sets of those people losing their jobs don't match up with their needs for people skilled in building and maintaining a private cloud infrastrructure.   Another thing to consider is that CIOs don't want to be caught unprepared for the next leg down in the economy like they were back in 2008.  The economy is in a long term decline and economic growth will be coming to an end.  Preparing for the eventuality of reduced IT departments in the era of cloud computing could be an organizational survival strategy.  

pcalento
Paul Calento 256 Points | Wed, 07/27/2011 - 00:24

The real story (and opportunity) here is around how the role of IT is changing (i.e. those jobs that are staying). I'd argue that a renewed focus on business outcomes (even for IT), as IT takes on a new urgency. As Jim Gardner notes below, "IT professionals as a group are resilient and smart".

--Paul Calento

(note: I work on projects sponsored by EnterpriseCIOForum.com and HP)

jdodge
John Dodge 1362 Points | Wed, 07/27/2011 - 13:49

I don't think enterprises could focus any more on business outcomes any more than they are....and that's why they are not hiring.

And what are business outcomes? Glass half empty: efficiency, cost cutting, obssessed about headcount...glass half full: growing the business, retraining employees, expansion/growth....     

Julie Williams
Julie Williams 0 Points | Tue, 07/26/2011 - 19:08

Providing IT as a Service ( Cloud ) = Efficiency

jimgardner
Jim Gardner 14 Points | Tue, 07/26/2011 - 18:00

Of course, just because it is an obligatory quote doesn’t mean it’s not true. Corporate America has been using these types of euphemistic phrases so long that when a situation arises that really does reflect what has been said all along, we all roll our eyes.  (God help me if I ever really do leave my job “to spend more time with my family” or to “pursue other interests”!) Still, I’m not going to shy away from a story that a company adept enough to leverage the Cloud is also adept enough to turn a nice profit. IT has always been about change and productivity. It is a challenging job market and I feel for those impacted, but IT professionals as a group are resilient and smart, and aren’t exactly in the same fix as an autoworker. I recently posted an encouraging blog entry on the same subject here.  

jdodge
John Dodge 1362 Points | Tue, 07/26/2011 - 18:17

At PC Week, some reporters had canned quotes tied to PC function keys. Just hit F8 for "The spokesperson would neither confirm nor deny the report." Or F9 for "He left the company for health reasons." The Xywrite word processor was very good for assigning such functionality. 

And yes, sometimes they can be true, but that does not mean they aren't obligatory or canned. -:)   

pearl
Pearl Zhu 89 Points | Thu, 07/21/2011 - 18:42

Hi, John, thanks for sharing the the thought-provoking story, I think every organization may want to have the efficiency via Cloud's potential, on the other hand, talent solution should also be well managed and explored for the long term growth.

1. Transfering staff to the parters could be a leverage approach, both strategic and human at some way.

2. Any possibility to re-train some staff to focus on the IT growth area?

3. Hopefully the cloud eco-sytem could help creat more IT jobs overall, because of the new potential service and solutions, that should be the key difference between Cloud and offshoring. 

thanks

Goddardd
Doug Goddard 122 Points | Thu, 07/21/2011 - 13:28

I would expect to see many stories such as this, as virtualization leads to a massive consolidation of data centers.

jdodge
John Dodge 1362 Points | Thu, 07/21/2011 - 20:52

I think some come in under the radar. This is first one I've seen that was so specific to IT jobs, the cloud and "IT transformation."

Goddardd
Doug Goddard 122 Points | Thu, 07/21/2011 - 21:02

The US federal government announced the closure of 800 data centers today. This is a natural byproduct of virtualization because if one can run 5 or 6 virtual machines, on a single hardware platform, for example, one doesn't need as much hardware, or the people who support hardware. However, it could be boom times for those who know how to develop applications for this new platform, or how to port legacy applications to the cloud.

moore.dwight@gmail.com
Dwight Moore 1 Point | Thu, 08/04/2011 - 16:33

I think one has to be careful of that conclusion. CPU power and memory requirements don't change just because we can consolidate. Part of this is the recognition of over buying capacity and poor use of existing resources.Better management and coordination goes a long way. I had a large client once that saved $11 million in one year, and avoided buiding another data center (already at capacity) by inventorying their data center. The $11 million where purchased, owned servers that were not utilized or were under utilized but adding cost by taking up rack space, power, and cooling. The kicker? The client was already running virtualization software. 

Also,  because one can consolidate many into one physical server, doesn't mean there are fewer actual servers to manage (now virtual vs. physical). You get savings benefits in cost related to physical HW, power, cooling, and space, but not necessarily in personnel.  If the consolidation is internal, then you may or may not save. If it is outsourced, you should get some economy of scale savings for managing the servers, but may sacrifice control over SLAs.  The real benefit in IT personnel savings comes with the management tools for managing these environments combined with the virtual machines and the  use of commodity hardware. Cloud holds this promise, but the tools are still evolving. 

jdodge
John Dodge 1362 Points | Thu, 07/21/2011 - 21:48

Yikes! And I thought 850 IT jobs was a lot, but 800 data centers times the number who work there is tens of thousands of IT jobs. Yes, virt and cloud is behind the ability to do this. Then again, the US government was an IT mess unto itself. 

http://www.nytimes.com/2011/07/20/technology/us-to-close-800-computer-data-centers.html