Eyes and Ears

By Sam Douglas

Catalyst: Fidelity's Don Haile on IT and Business Innovation



There was little public fanfare when Don Haile became Fidelity Investments' new CIO three years ago. At the time, the financial services industry was swooning over the bold moves at rival Charles Schwab in stirring the revolution in the discount brokerage business.

Haile paid no mind. Instead, he settled into the chair of a successful predecessor who had been a cheerleader for the new techno-wizardry that would carry Fidelity into the future. Haile, a 34-year IBM veteran, would give new prominence to the firm's skunk works, called the Fidelity Center for Applied Technologies, and begin the delicate balancing act of fostering innovation both there and in Fidelity's more prosaic back-office hallways. The result: a new eminence for Fidelity's technical prowess, and respect inside and outside the firm for Haile.

"Don has given FCAT the freedom to create something," says

Siki Giunta, president and CEO of Managed Objects, a supplier of Web site diagnostic software to Fidelity. "He's a showman. With Jeff Crawford [vice president of e-business], Don built a video wall in the operations center that shows off Fidelity's IT achievements, making everything much more visible to everyone in the company and everyone outside—from vendors to analysts and rivals. Don's changed the way IT is seen inside the company and in the industry."

Two Cultures

Two Cultures

There are really two cultures at Fidelity: The high-flying wireless and e-business crowd, and the more traditional group handling maintenance operations. Haile's mission is to have a foot in each camp. At heart, the 60-year-old is a nuts-and-bolts guy, but his 2,700-strong techie domain at Fidelity's Systems subsidiary plays a key role in pointing the firm toward the future. Fidelity Systems includes the FCAT, which is hustling to claim the promise of 2.5G wireless service and Wi-Fi networks.

"What's unique is that Don is responsible for new thinking as well as operations," says Sharon Botwinik, an e-business organization analyst at Forrester Research who worked at Fidelity until early this year. "It helps him cross-pollinate. And having both sets of skills gives him more credibility."

Now add to Haile's balancing act the pressure of a down economy. Fidelity's assets under management have fallen from a mid-2000 peak of about $1 trillion to $903 billion today. Its heavy bets, in Web and wireless investments, on active online traders brought mixed results: 87 percent of the firm's discount brokerage customers' trades are done online, but online trading is off by almost half, as it is throughout the industry. And three years after the company unveiled its widely ballyhooed wireless initiative, less than 10 percent of Fidelity's retail customers can access their accounts wirelessly.

Yet Fidelity is pushing ahead, boosting IT spending by nearly $200 million this year—real money, considering that it spent $2 billion of its $11.1 billion in revenue on IT last year. While some of that will go to wireless and other e-business initiatives, Haile is putting lots of money into a variety of back-office projects that promise to turn the cost screws on smaller rivals during the downturn. These include desktop efficiency efforts and a general movement to XML to streamline middle-tier systems architecture. "Now's the time to be making that investment," Haile says. "Frankly, we welcome this."

The differences in the two tech cultures at Fidelity are obvious. One is the culture of a giant corporation that manages money for 17 million people, whose obsessions are reliability and managing costs. The other Fidelity is on display at places like the FCAT, where about 90 of Haile's charges work on gadgets that aren't yet ready for prime time. The wireless unit's conference rooms are named for rock bands—wireless chief Joe Ferra receives visitors in the Talking Heads room. Says Charlie Brenner, senior vice president and head of the FCAT: "Don's role is to be the pivot point between the world of innovation and reliability and steadfastness. He sees the horizon, but he's looking down at his toes at the same time."

Eyes and Ears

Eyes and Ears

Haile may be an IBMer at heart, but he did convince Fidelity chairman and CEO Ned Johnson to build FCAT its own home in 1999. "I've got to be ready for the next wave, whatever it is," Haile says. "It's the look ahead that lets us say what the next big steps will be. Wireless could be it. Biometrics could be. It could be voice recognition." The $5 million FCAT spends annually is the kind of cash a big, privately held company like Fidelity can treat, if not quite like mad money, then as risk capital, he says.

Kevin Kelly, president of Fidelity Brokerage Co., which includes all of Fidelity's personal and institutional brokerage and mutual fund accounts and is the firm's largest subsidiary, says Haile's presence means he and other business-unit leaders can think about technology without worrying about it. "We don't worry about missing an opportunity, because he and his people are our eyes and ears on the whole industry. The future exists today—and it exists at FCAT."

With the collapse of the Web boom, the wireless guys, now not so in love with the idea of building a business on the backs of active traders, are domesticating their avant-garde technology. In the current generation of Fidelity Anywhere, you can use a cell phone, pager, handheld or even the OnStar telematics system in some cars to check your mutual fund and 401(k) accounts as readily as your shares in Cisco Systems.

Ask Haile about this year's agenda, however, and he'd rather talk about the "middle tier"—the server farm, where in the past the 300 or so computers linking automated teller machines, Fidelity.com and branch office kiosks to the company's mainframes could barely talk to each other. Haile's two-year initiative to convert these servers to XML, he says, will pay off in lower costs, faster service and greater innovation. Inside Fidelity, business unit executives love XML because the more precise tagging protocol lets them make changes to their Web-based services more easily and cheaply. The most obvious payoff to outsiders: Transactions will happen between 0.8 seconds and three seconds faster. The project has already cut out 100 servers.

Analysts think that, of all Haile's investments, XML will have the biggest impact on both speed, efficiency and time to market for new applications. They say it represents a more ambitious commitment to the technology than any other company has demonstrated.

"It's a courageous move," says Roy Schulte, a vice president and research fellow at Gartner Research. "To marshal the resources and face the inherent organizational inertia to implement XML in such an aggressive fashion does take the courage of your convictions. Every CIO on the planet has an XML strategy at this point, but most of them are doing it piecemeal and most are not expecting to gain as much as Fidelity is."

Another big operations target: cutting the total cost of ownership on each of the 35,000 PCs at Fidelity by $1,000 to $1,500, or up to 30 percent. The key: software that will fix problems without human intervention. "We prefer to buy, but we'll build it if we have to," Haile says.

Still, he accepts the responsibility of throwing bombs—and completing them too—through the work of the applied technology center. "Our role is to be the focal point for innovation within the firm as a whole," says Brenner. "We want to be the intelligent filter for new technologies, to say: 'This is not only a cool technology, but here are a half-dozen ways we can use it within Fidelity.'"

The center is also helping streamline Fidelity's mutual fund businesses. Among its projects: voice-recognition enabled voice mail that will let fund managers search their mailboxes by keywords. If Microsoft announces earnings, for example, a Fidelity manager will be able to pick up the phone and ask for messages from Microsoft CEO Steve Ballmer. "We're looking at how that could cut back on the two hours of voice mail a fund manager gets daily," Haile says.

The center will be crucial to the future of Fidelity's wireless group as well. The goal is not only to make wireless more intuitive but also a lot more ubiquitous, in the name of wearing down the resistance of slow adopters. FCAT is making an especially hard push into Wi-Fi wireless networking technology, which can deliver full-screen wireless at up to 11 megabytes per second—faster than home broadband. The goal: To let people access Fidelity Anywhere using any device, even a fully featured laptop, rather than relying exclusively on phones, pagers and PDAs.

Top of Mind

Top of Mind

But like the good Penn State man he is, Haile has a three-yards-and-a-cloud-of-dust strategy handy just in case the long bomb falls incomplete. Whether or not the FCAT boys can clobber rivals with fancy features, Haile is eager to put the pressure on competitors one fewer server and PC technician at a time. "We run an $11 billion business," he says. "The whizbangery, some of it will be very important, so we pay attention. But keeping our customers' money safe or letting people know this is the best place to keep their money is at the top of my mind."

SAM DOUGLAS is a New York-based technology writer who has written for The Washington Post, The Chicago Tribune and digitalsouth. Comments on this article can be sent to editors@cioinsight.com

On Haile

On Haile

Born: July 17, 1941

Resume: 34 years at IBM before joining Fidelity in 1998

Mentor: Ex-IBMer and former Exodus Communications CEO Ellen Hancock. "Not only amazingly technically deep, but she created a loyalty in her team that was unparalleled," he says.

What stands out in his office: His photo with Pope John Paul II and his "shrine" to Penn State University

Why he does what he does: He read a Time magazine profile of IBM during his senior year in high school. "In 1959, there was no technology," he says.

What you notice about him first: His take-no-prisoners wit

On colleagues whose dot-com dreams went kaput: "We are, on occasion, offering harbor. Our wayward children are coming home," he says.

This article was originally published on 09-01-2001