Morgan Stanley 2006 CTO Summit

Last night, I attended Morgan Stanley’s Sixth CTO Summit. As I described in a prior post, Morgan Stanley’s CTO conference is a very well run and managed event that brings the firm’s top 40 technologists to the valley to meet and interact with venture capitalists and start-ups.

Since the first summit six years ago, Morgan Stanley spent $12.5bn on IT. Importantly for attendees at the CTO Summit, that spend includes millions with 30 start-ups, or 11% of the total companies that were sourced by Morgan Stanley at the summit. Morgan Stanley is expert at deploying technology from both ends of the bar bell – large vendors and the best and brightest innovators. Morgan Stanley first met, at the CTO Summit, and later bought technology from VMWare, Transitive, iRise, Avamar, and others.

I enjoy attending the summit and am often struck by Morgan Stanley’s ability to concurrently scale the technology environment with very little increase in total spending. For example, since 2001:
• Trade volumes are up 7.5x
• Bandwidth is up 20x
• Business data is up 4.75x
• Servers/computers are up 3.5x
• Business connections are up 8x
• The IT group now manages 68,000 desktops, 16,000 servers, 4.5 PB of storage, 10,000 mobile devices…

And yet, the CAGR of IT spend is ~2%. Remarkable. The IT department is allowing Morgan Stanley’s core business to grow and scale without a related increase in IT costs that would reduce the marginal profitability of such growth. In some sense, IT is a fundamental source of operating leverage. A core element of this accomplishment is the use of innovative new technologies.

Key, well-known, sources of savings are:
• the move from SMP to blade servers,
• RISC to x86,
• Unix to Linux,
• virtualization,
• automation,
• 1 GigE to 10 GigE,
• and an increase in the ratio of severs/switch port.

Part of the summit involves Morgan Stanley delineating sources of ongoing cost and a request for technologies to blow out bottlenecks.

Transitive and iRise were recognized as two companies that help meet that mission. Transitive, which allows any software application binary to run on any processor and operating system, helps Morgan Stanley move applications off of expensive legacy hardware. iRise, which is a visual requirements gathering and prototyping solution, helps reduce the cost of failing to deliver applications that meet customer expectations.

With respect to SaaS, Morgan Stanley (Jeff Birnbaum) made several interesting comments. They segment SaaS into three models: web based delivery of applications, Citrix-like terminal emulation with server-side processing, and Softricity-enabled and client-side processing and delivery of rich client applications that require no client installs.

Morgan Stanley views web-based SaaS as, pejoratively, the 3270 equivalent, which demands large back-end server farms and limited user experience. They see a continuing demand for rich client applications, beyond what AJAX delivers, and see Microsoft’s acquisition of Softricity as the most significant new technology of the last 12 months. Softricity streams applications for client-side processing without requiring the .exe to be installed and managed on the desktop. Softricity allows Morgan Stanley to avoid the need to deploy and manage .exes on 60k desktops, while providing traditional rich client application user-experience. It will be interesting to follow what MSFT does with the technology – perhaps Softricity will provide MSFT an articulate, user centric response to the rise of web-based SaaS.