Measuring return on investment from technology projects is an uncertain science.

How, then, to determine return on noninvestment?

It's clear that Morgan Stanley didn't do any favors for its retail brokerage unit—the old Dean Witter—by failing to modernize the computer systems that support the business.

CEO John Mack talks about the need to catch up on retail technology, and former brokers trash-talk about the antiquated stuff they left behind.

But how much do outdated applications and poor websites actually contribute to the weak numbers at the brokerage? At some point, technology is a cultural issue within a firm, not just a toolkit and a budget item. The lack of new computers may make people feel that the big bosses just don't think of them as being that important.

Good brokers aren't leaving Morgan Stanley because they can't print out client reports easily, they're leaving because they can make more money and feel more secure at other companies. Surely the technology situation contributes to those feelings.

And of course, inadequate tools make it harder to do the job and please the customer. The brokerage business comes down to relationships and information, and if the equipment at hand makes it harder to get and share information, it puts a strain on the relationships, especially when the broker across the street has the latest and greatest equipment – and the customer sees the difference.

There is no simple formula that says an investment of a given amount in retail systems four years ago would yield a certain result today. But it's clear that not investing in brokerage technology contributed to Morgan Stanley's woes.

That's why John Mack, having decided that he wants to stay in the brokerage business, is making technology one of his visible priorities in turning the unit around.

Story Guide:
Morgan Stanley: Trading Sideways

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