FBR CIO Tim Wood Cuts Costs, Tech to Grow Profits

Arlington, Va.-based investment bank FBR found itself in freefall during and after the mortgage crisis. CIO Tim Wood’s job description changed dramatically, from builder to cost-cutter. By putting his business skills to the test, he made dramatic but necessary reductions to IT that helped return the firm to profitability. By Jake Thomases

Plenty of people take their work home with them. Tim Wood takes his to the grocery store. Kathy, his wife, teases that he won’t let her buy a bag of chips or a bunch of bananas unless she negotiates the price down first.

It’s a joke, of course, since a CIO’s salary is enough to cover full-priced fruit even for Wood’s family of 10. But clearly cost-savings have seeped into his bloodstream enough that he’s taken the haggle home where his wife can see it. Cutting is his calling now. FBR needed to shrink to survive, and Wood, with his MBA from the Massachusetts Institute of Technology (MIT), turned out to be a man who could squeeze a budget until its eyes bulged.

“My job is no longer whether I can build the best system possible,” Wood says. “It’s can I deliver the most value with the least possible resources and the least possible cost?”

Does Wood feel constrained by that mandate? A big North Carolina grin lights up his face. “I feel challenged!” he says.

Wood, 47, was hired to do one job in 2006, when FBR was flush and the dollar figures attached to a technology project weren’t that important. The mortgage crisis hit it harder than most. From 2008 to 2012, the Washington, DC-area firm threatened to go from a mid-sized investment bank to a small-sized investment bank to a closed investment bank. Its workforce shrank from 765 in 2007 to 247 five years later—a 68 percent drop.

“I don’t like to tell people what to do—I like them to figure out what to do. I like to give them a challenge and see what they do with it. Part of what I’m looking for in my managers is people who can get out with the business and figure out what work needs to be done.”

Every department head had to change their approach. Reducing the IT budget, so often seen as a cost center, was a priority. Of course, Wood was expected to do it without causing drastic reductions in client service. The job he’d been hired to do was gone—a dangerous proposition for FBR if his skillset had been tailored to it. Luckily, with his business degree, the CIO proved adept at slicing the fat until his department became the lean machine it is today.

Through the sale of some assets, including a mutual fund business to Hennessy Funds in 2012, and the tough streamlining made by management, FBR emerged from its spiral a more compact but more targeted company. It reported after-tax earnings of $92.9 million last year, up from $29.7 million in 2012 and way up from a loss of $49.6 million in 2011. Headcount is up to nearly 300. Wood says the firm has found its level and isn’t looking to regain its pre-crisis size.

IT Super Team
Throughout his career, Wood has tried to envision what an IT super team might look like. Those musings stopped about three years ago. He thinks it’s because he inadvertently found one. Once over 80 technologists, his staff is down to 15, plus three contractors. His trials for new hires are intense, say his employees, because he wants people who have earned his trust so he doesn’t have to look over their shoulders later. Thanks to FBR’s cutbacks, anybody who hadn’t graded an A+ on the Wood scrutiny test was let go, leaving only the best of the best.

“Once you deliver for him and he sees your capability, he rewards you with trust and responsibility,” says Vikas Chopra, his head of enterprise solutions. “But there have been a lot of people who he’s felt were not up to snuff and does not trust how they do things or what they deliver.”

Those who made it through the cuts have stayed; no technologist has been there for less than four years.

The notion of doing more with less doesn’t bother Wood. Based on his time at UBS and CIBC, he suspects that projects tend to use whatever resources are allocated to them, whether it’s a lot or a little. So even though his staff has been cut by 80 percent and his budget by 65 percent, he’s been able to keep the servers humming through a combination of talented people, massive outsourcing, and shrewd negotiating. Most internal development these days is done around the margins.

A Brain Wired for Business
Optimizing business decisions comes more naturally to Wood than building technology, in a way. A physics, economics, and French triple major at Duke University, his first job was as a management consultant on coal transportation logistics.

He dabbled in database and mapping programs on the weekends, and even built a customer relationship management system for his realtor sister, but didn’t have a deep knowledge of programming. In 1992, he enrolled at MIT’s Sloane business school. While there, he interned at Microsoft, helping design the interface for a version of its Encarta electronic encyclopedia. Microsoft offered him a job as a product manager, while Swiss Bank, a predecessor to UBS, offered a position in technology marketing in London. He was torn, until Bill Gates announced publicly that the internet didn’t have a future. Wood, who had written his thesis on the internet, went to Swiss Bank.

When the brand management group he’d been hired onto dissolved, he was assigned to a development team without being given a specific role on that team. No one had any idea what to do with him there because he wasn’t a trained developer.

Realizing that his career was heading down a dead end, he tried to beg an invite to the company’s technology off-site meetings to immerse himself in technology. When he was rejected, he offered to take the official notes, a job no one wanted. As their scribe, he learned architecture and distributed development, later inviting vendors in for demos where he learned about solutions on offer.

His big break came when Swiss Bank decided to embrace the NextStep operating system for internally developed applications, running on terminals they installed at custody client sites, instead of Microsoft Windows, which the rest of the world was moving toward. Recognizing what a mistake this was, Wood bought a computer with Delphi, a rapid application development tool for Windows, at a 1995 trade show in order to prove that high-quality applications could be written for Windows. Within a few days he’d made significant progress. On the Friday before Easter, he carried his work computer into his home study and emerged three days later with a working prototype for a reporting application.

The self-assigned project, intended to influence decision-makers, proved his worth and earned him respect. One of the traders he showed it to asked him to lead the IT side of a new bond options desk he was putting together. That same trader later put him in charge of his first sizable team, a 10-person squad that built the bank’s historical bond database.

In the late 1990s, having moved to New York as the regional manager for the foreign-exchange (FX) and interest-rates business, he was given open-ended instructions to put together some kind of client-facing fixed-income information program using the emerging internet. Over the next two years, his group of 60 built more than twenty different sites and systems, among which was DebtWeb, which in 1999 was honored as the first site to issue a bond online.

The Move to FBR
Things at UBS went south in 2003 when the higher-ups in the equities division, where Wood had been transferred, decided he was still a fixed-income guy and let him go. Canadian bank CIBC disagreed and asked him to head up its equities research and client portal technology group.

He later became head of distribution and research technology for equities and fixed income. In 2006, on the recommendation of a vendor representative who had seen him in action, FBR brought him in to talk strategy and soon offered the CIO position. FBR was appealing because it gave him a chance to fix all the flaws he’d seen but couldn’t do anything about in the big-bank machines.

“At large banks, a lot of the time the development managers or product managers have to meet a lot of requirements from internal architecture organizations,” he says. “There are lots of hoops they have to jump through. They spend a lot of time dealing with architectural standards and infrastructure standards. Are you on Sybase, are you on Oracle, are you on SQL Server, what authentication method do you use, what development language are you allowed to use?”

The development tools committee at Swiss Bank, which he ran for a time, was in charge of telling the bank’s global developers what tools they could use. It struck him as bureaucracy. All he really cared about was delivery timeframes, and wished he could empower product managers to use whatever they liked best, whether it was Sybase or punch cards.

“I don’t like to tell people what to do—I like them to figure out what to do,” he says. “I like to give them a challenge and see what they do with it. Part of what I’m looking for in my managers is people who can get out with the business and figure out what work needs to be done. I want to provide them with an area and a scope and measure them by client satisfaction.”

Chopra confirms that his boss is far more delivery-oriented than process-oriented. If you’ve met his high standards before, if he trusts you, he’ll let you complete the assignment using whatever methods you prefer, Chopra says.

Managing Vendors
When Wood started at FBR, the Fidessa trading platform was one of the only systems not run in-house. Today, almost everything is supplied by vendors. FBR is currently in the process of sending its email surveillance system outside its walls. Most in-house development is around business analytics and smaller support systems.

Wood does not inherently lean one way or the other in the build-versus-buy debate. He is driven by pragmatism, not ideology. Most of the bank’s systems have been outsourced because it was the best way to create a streamlined technology stack. Those that are still supported by his team aren’t there because they’re his babies—they’re there because his team can support them better and cheaper than anyone else.

FBR’s Oracle financial system servers were once housed in a third-party datacenter while operations staff for that system was internal. He determined that the reverse would be cheaper, so he pulled in the servers and outsourced the support staff. “I don’t think there’s a system he wouldn’t vend for the right price,” says Chopra.

More often than not, he gets that right price. Although he delineated a set of vendor management practices early in his tenure, including putting one person in charge of the relationship with each of FBR’s 30 primary vendors, his colleagues still turn to him when the time comes to negotiate contracts. Kecheng Liu, FBR’s head of trading and risk technology, recalls Wood’s three tenets for effective negotiation: Come in with an alternative, make sure the vendor understands your position, and don’t deny them an opportunity to turn a profit. “He’s a master at that,” says Liu, recalling how Wood convinced a compliance vendor to cut his asking price in half.

Other cuts have come as a result of renegotiating contracts or through reduced need. He has chopped FBR’s Microsoft contract in half and significantly drawn down market data expenses. However, infrastructure costs have shrunk the most. Where once there were 500 servers, now there are 150. An FBR datacenter and colocation facility in Manassas, Va. originally held 17 racks. By year’s end he wants to shrink it to six.

“There was a huge growth in data storage requirements predicted that really hasn’t panned out,” he says. “We’ve had growth but the technology capabilities have advanced faster than the storage requirements. I tell my guys, let’s plan on having one server in one closet five years from now, running everything we need to run internally.”

A CIO Who Codes
In the early years of his tenure, when FBR IT staff members were creating systems themselves, he built some of the platforms it uses today. Six months into the job he led the development of Metrix, a client analytics system that continues to grab the attention of visitors. Later, paper expense reports were replaced with an expense-management system that electronically imports things like credit card statements so that client relationship information can be plumbed in for insight. He oversaw the construction of a convertible bond system that was built in nine months using only one subject matter expert and three developers.

Wood is a rare sell-side CIO who contributes coding when needed. In fact, he sometimes codes in his head during his daytime runs through Teddy Roosevelt Island, the wooded island in the middle of the Potomac River. He loves skiing too—his sister lives in Aspen, Colo.—and reading science fiction. The rest of his home life is mostly occupied by his eight children: four older daughters and four younger sons.

When we met, FBR’s Arlington office—which houses about two-thirds of all personnel, with the remainder in New York—looked like a house with eight kids in it. Junk was everywhere. Every surface but the ping pong table was stacked high with old phones, computers, wires, and other office equipment. The company, which occupies several floors of its skyscraper, is moving to more consolidated quarters at another building down the street. It’s a chance for Wood to make even more efficiency alterations.

Al-Noor Ramji, the former head of IT at Swiss Bank, once affectionately called Wood a virus, because he was a man who could be turned loose on an organization and spread fundamental change. FBR, during a period of existential struggle, unleashed Wood to enact major reform in its IT department. Thanks in part to his work, it appears the patient is going to make it through in good health.

Fundamental Data

  • Name: Tim Wood
  • Age: 47
  • Title: CIO
  • Staff: 15, plus 3 contractors
  • Education: BA in physics, economics, and French from Duke University; MBA from the Massachusetts Institute of Technology
  • Hobbies: Skiing, running, reading science fiction

IT at FBR

  • Biggest technology challenge: Making business intelligence actionable. We have an incredible amount of data and intelligence available to us, but honing that data down to just the right set, based on the circumstances of the business decision being made requires both deep business understanding and the latest analytical technologies.
  • Notable technology accomplishments: Simplification and consolidation of our infrastructure. We have made it a priority over the past couple years to simplify at the same time as we have consolidated our server, storage, and network infrastructure. The effort has yielded excellent returns in cost, manageability, and flexibility.  
  • Technologies currently under evaluation: Touch-enabled video walls, mobile device management (MDM) platforms, iSCSI, and accounting systems.
  • IT wish list: It’s a tie between inexpensive cloud archival that satisfies our regulatory retention requirements and low-power servers. The archival would open up the possibility of moving more of our datacenter infrastructure to the cloud. But, low-power servers would eliminate the need for the specialized environmentals of a datacenter.

 

 

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