Delivering IT Value During Challenging Times:
A Financial Services Perspective
Shelley Leibowitz, Morgan Stanley
Managing Director and Company CIO
October 30, 2002
Agenda

The Landscape

Today’s IT Value Proposition

The Strategic Response

Final Thoughts
The Landscape
Morgan Stanley as an Enterprise
Toronto
Montreal
Securities
 Investment Banking
 Sales and Trading
(Institutional and
Individual)



$15.9 BN in Revenue *
5.5 MM Accounts
600+ Branch Offices
Chicago
Denver
San
Francisco
Menlo Park
Los Angeles
Dallas
Austin
Stockholm
Amsterdam
Luxembourg
London
Paris
Frankfurt
Beijing
Zurich Moscow
Boston
Milan
New York
Shanghai
Washington
Geneva Tel Aviv
Atlanta
Madrid
Mumbai
 Institutional Investment Management
 Individual Investment Management
 Trust Services
 $2.4 BN in Revenue *
 100 K Accounts
 400 BN Assets Under Management
Seoul
Taipei
Hong Kong
Bangkok
Mexico City
Investment Management
Tokyo
São Paulo
Buenos
Aires
Johannesburg
Singapore
Sydney
Melbourne
Credit Services
Discover
Discover



Financial Services
Card
$3.6 BN in Revenue *
50 MM Accounts
4 MM Merchants
* Revenue FY2001
Company Structure
THE COMPANY
Administration & Planning
Securities
Institutional Securities
Finance
Law
Investment Management
Credit Services
Discover Financial Services
Individual Investor Group
Investment Banking
Investor Advisory Services
Traditional Investments
Institutional Sales & Trading
Private Wealth Management
Alternative Investments
Research
MSCI
Independent Investor
Services
Retirement Services
Advice
Other
The Morgan Stanley Story
Leadership position in
all business segments
Great franchise
Great positioning for longterm secular growth trends
Vision
Global presence
Sophisticated
technology
Innovation
Outstanding people
Business Climate
Hyper Growth
2000
Retrenchment
2001
Cautious Optimism
?
2002
2003
Themes:
Themes:
Themes:
Themes:
Time to market
E-commerce
Changing business
models
Efficiency
Cost management
Rethinking
Doing more with less
Productivity
Governance
Risk management
New opportunities
Regulation
Oversight
Financial Services Marketplace

Transactional Volumes

Margins

Product Complexity

Market Conditions

Industry Consolidation

Competition for Client
Relationships

New Entrants Into the
Broker/ Dealer Space
Today’s IT Value
Proposition
Living in a Post-9/11 World

Business Continuity Planning





Redefined to Business
Resumption
Separate people centers from
technology centers
Maintain geographic diversity
Broad business diversification
Security



Increased threats
Information security critical
Threats internal and at the
perimeter
 Partner security

Human Capital

Supplier Risk
Living in a Post-9/11 World
USA Patriot Act

Signed October 26, 2001 - passed in the
wake of Sept. 11

Grants additional powers to law enforcement
and intelligence agencies

Significant new requirements on US Financial
Services firms to detect money laundering,
fraud, and other suspicious activities

Main program components for Financial
Services



Anti-money Laundering Program
Customer Verification and Identification
Suspicious Activity Surveillance and Reporting
Enron and Beyond
Accounting's role in Enron crash erases years of trust
Adelphia joins list of corporate crashes
More Firms on Brink?
Trust
and
Confidence
Xerox forced to restate revenues
Accounting
and Disclosure
Scrutiny
Tyco
shares plunge
as CEO resigns
under a cloud
Conflicts of Interest
America's Corporate meltdown
Guardianship
More Governance
cheats are hiding in America, says Bush
Memo Indicates Global Crossing Chief Knew of Troubles
WorldCom Woes Put Spotlight on Qwest, Sprint
Is Arthur Andersen's Number Up?
One more big scandal comes as no shock
Risk Exposures
Counterparty
Risk
• Business Practices
& Controls
• Documentation
• Legal & Compliance
• Regulatory
• Disclosure
• Audit
Legal &
Regulatory
Risk
Risk
Management
Market Risk
Operational
Risk
• Operations
Processing
• Financial & Tax
• Technology
• Supplier Risk
• Business Interruption
• Manpower &
Intellectual Capital
Leveraging the IT Investment
Spending Trends

20% average growth
of IT spend (1995
through 2000)

Estimates forecast IT
spend for 2002 down
5-10% YOY

Multi-Year hangover of
capital outlays
~20%
Growth
1999
6%
Growth
25%
Growth
2000
0 - (10)%
Growth
2001
2002 (est)
Morgan Stanley Firmwide IT Spending
Source: Morgan Stanley, Office of the CTO
The Strategic
Response
The Strategic Response

Culture and Human Capital

Partner Leverage and Creative Sourcing

Structural Integrity

Managing the Project Portfolio

Guardianship Initiatives
Culture and Human Capital
Risk
Management
Communication
Ethics
and
Integrity
Excellence
Teamwork
Firm Vision
Focus on
the Client
Culture and Human Capital
Talent Management

Mentoring

Career Development

Skills Assessment

Professional Development
Plans

Peer Reviews

Flexible Work Arrangements
Partner Leverage and Creative Sourcing
The Leverage

Strategic Partnerships

Service Providers
The Risks

Domain Experts

Service Levels

Viability

Geo-Political
Partner Leverage and Creative Sourcing
Goals
 Cost Leverage
 Core Competencies
 Diversification
 Smoothing Demand
Options
 Business Process
 Technology
Co-sourcing and
Outsourcing
 Development  System
 Maintenance Monitoring
 Testing
 ASP
Responsibilities
 Audit
 Financial
 Connectivity  Drug Testing
& Employment
 Tools
 Security
Company Structure
Company IT
Alignment
Accountability
THE COMPANY
Administration & Planning
Finance
Law
* Office of the CTO
Securities
Institutional Securities
Investment Management
Individual Investor Group
Discover Financial Services
Investment Banking
Investor Advisory Services
Traditional Investments
Institutional Sales & Trading
Private Wealth Management
Alternative Investments
Research
Independent Investor
Services
Retirement Services
MSCI
Credit Services
Advice
Other
Agility
Institutional
Securities IT
Institutional
Investor Group IT
Investment
Management IT
Discover IT
Empowerment
Structural Integrity
Transparency

Cost Allocation

PMO

Governance
Managing the Project Portfolio
A Holistic Approach to
Rationalizing and Optimizing
Applications
Data
•
•
•
•
Accuracy
Consistency
Timeliness
Integration
Business
Imperatives
PMO
•
•
•
•
•
Controls
Workflow/Reengineering
STP
Self-service
Shared Service
System Integration
Product Platforms
Application Suites
Middleware & Interoperability
• Planning
• Reporting
• Governance
• Financial Management
• Metrics
Business Process
•
•
•
•
Infrastructure
•
•
•
•
•
Reliability
Stability
Capacity
Connectivity
Collaboration
Standards Based
Approach
Guardianship Initiatives

Importance of the Infrastructure

Patriot Act

Compliance and Controls

Transparent and Meaningful
Disclosure

Risk Management

Business Continuity Planning

Audit
Final Thoughts
Keys to Success
Align with your
business partners
There is no
technological
silver bullet
It’s all about
the people
The real keys to
success lie in
leadership and
culture
Protect
the
franchise
Q&A