The Morning Download comes from the editors of CIO Journal and cues up the most important news in business technology every weekday morning. Send us your tips, compliments and complaints. You can get The Morning Download emailed to you each weekday morning by clicking here.
Good morning. U.S. banks will spend more than $40 billion on IT this year, by some estimates. But according to Gartner Inc. analyst David Furlonger, too much of that IT spending goes toward maintaining outdated IT platforms. “This problem is magnified at the larger firms because they built those structures based on profit margins that were far better than what they are today,” Mr. Furlonger told CIO Journal. “Now they have to feed and water those platforms and processes.” That complexity was exacerbated through consolidation that occurred in the sector over the previous decade. According to the Journal, the six largest U.S. banks have more than 22,000 subsidiaries combined. Bank technology leaders are still working through those issues, but say they’ve been able to get their houses in order, enabling them to spend more on analytics and other strategic technologies, while keeping overall IT spending flat. Guy Chiarello, CIO of J.P. Morgan Chase & Co., told CIO Journal earlier this year that “net [technology] spend is flat from 2007… And that’s with more investment in innovation.”
Morgan Stanley technology head steps down after rocky twelve months. The securities company said its global head of operations, technology and data, Stephen Daffron, plans to retire, and is splitting up his responsibilities among three executives. Technology was an issue, at times, for Morgan Stanley last year. The company was hurt by some computer glitches within wealth management as it completed a massive technology conversion, which moved the majority of financial advisers in its brokerage joint venture with Citigroup Inc. onto the same platform. In January, Morgan Stanley said it plans to spend more than $500 million over the next 18 months to improve its brokerage technology. A spokesperson told CIO Journal it intends “to use analytics to drive a high-quality, transparent conversation so people can make the best decisions possible… If you get the data architecture right, it makes everything else easy.”
Race for federal dollars causes IT integration issues at Florida health-care provider. Broward Health implemented an electronic health record system in order to qualify for $30 million in federal grants under the Affordable Care Act, but in its race to integrate systems “broke” some applications, its CIO, Doris Peek, tells CIO Journal. Broward Health has obtained $17 million of that money, and hopes to get another $15 million by this time next year, but will have to prove it is making “meaningful use” of the technology to do so. Ms. Peek is using Web-based technology from ServiceNow Inc. to offload help desk remediation efforts her staff doesn’t have the bandwidth or tools to manage.
Sequester, consultants make it harder for hospitals to hire. Hospitals are having trouble competing with the big salaries that consulting firms are offering experienced IT workers. Two-thirds of health-care employers say they’re finding it difficult to attract IT talent, according to a report, Thursday, from professional services firm Towers Watson & Co. Some hospitals are also starting to feel the financial impact of automatic spending cuts called the sequester that took effect April 1. There are about a dozen openings at MemorialCare Health System, said J. Scott Joslyn, senior vice president and CIO. A few people have left to go work for health-care consulting organizations that help augment staff in hospitals and they can earn up to two times what his organization can pay, he told CIO Journal. “I can’t compete with those salaries,” he said.
TECHNOLOGY NEWS
Nasdaq CIO’s bonus gets trimmed after Facebook debacle. Nasdaq’s board cut the bonus for Anna Ewing, its chief information officer at the time of Facebook Inc.‘s disastrous stock market debut, by $263,625. The board also slashed the bonus of CEO Robert Greifeld. Mr. Greifeld’s 2012 award through Nasdaq’s executive corporate incentive plan was docked $542,100. His overall compensation for 2012 nevertheless climbed 18% from 2011 levels to $8.9 million, due to a more than $3 million increase in stock awards, the WSJ reports. The cuts are the toughest penalty so far for Mr. Greifeld following what the board said were “widely publicized systems issues” with the Facebook IPO that Wall Street firms have blamed for some $500 million in losses.
Microsoft’s woes raise stakes for Windows Blue. With hope fading that Microsoft Corp.‘s new Windows 8 software will reignite computer sales, attention is already shifting to Windows Blue, a software project the company has the company has yet to define. The WSJ’s Shira Ovide explains that Windows Blue is a development methodology shift from major projects that launch every several years to frequent updates in line with today’s Internet app life cycle. IDC analyst Al Hilwa says Blue will act to unite Microsoft’s PC and tablet efforts with smartphone software. “Blue is the next milestone in this plan. It brings the phone and PC platform closer together and makes both more compelling,” he said. That said, Office apps for mobile devices running Apple Inc.’s iOS and Google Inc.’s Android won’t be available until the fall of 2014, according to ZDNet’s Mary Jo Foley.
Amazon’s contribution to poor PC sales. Speaking of that grim PC sales report, the WSJ’s Tom Gara shares a note from Global Equities that identifies another culprit than Windows 8: Amazon.com Inc. To power its cloud services business, the company is cutting out middle men like Hewlett-Packard Co. and Dell Inc. for servers from Taiwanese ODM makers. The company has also been on a sales force hiring binge. These new hires, including some from Oracle Corp., will be hitting the streets–er, cloud–to encourage customers to dump on-premises hardware for Amazon Web Services.
Goldman downgrades Microsoft. Goldman Sachs Inc. downgraded Microsoft shares to sell after a Wednesday report revealed poor PC sales and, by extension, a less than enthusiastic reaction to Windows 8. “The company faces critical secular challenges given the deteriorating PC demand backdrop,” analyst Heather Bellini wrote. Shares experienced the worst intraday decline in five months yesterday, Bloomberg’s Amy Thomson and Dina Bass report, closing at $28.93.
Apple agrees to pay $53 million to settle iPhone warranty lawsuit. Apple is agreeing to pay $53 million to settle a class action accusing the company of failing to honor warranties on iPhones and iPod Touches, Wired’s David Kravets reports. The settlement, set to be filed in a San Francisco federal court in the coming weeks, provides cash payouts to potentially hundreds of thousands of iPhone and iPod Touch consumers who found Apple unwilling to repair or replace their faulty phones under Apple’s one-year standard, or a two-year extended, warranty.
Big Data is the new big man on campus. Universities nationwide are scrambling to offer programs in data science, reports the NYT’s Claire Cain Miller. Columbia University and New York University have programs set to go. But it’s North Carolina State University, which started master’s programs in analytics in 2007, that’s setting the pace. All of last year ‘s graduating class received job offers.
IBM invests in Flash storage. IBM Corp. said it will spend $1 billion to support flash storage in its products. GigaOm’s Jordan Novet says the “move could be viewed as a little late in the game,” given flash storage’s popularity for the past year. “It’s become standard operating procedure for IBM to back hot ‘new’ technologies by writing a big check — and an accompanying press release,” Mr. Novet continues. But that doesn’t mean it won’t pay off. The strategy worked a decade ago when the company put $1 billion into Linux.
Apple v. Google: War without end. A U.S. district judge in Miami, Fla. overhearing a patent dispute between Apple and Google castigated both parties for using lawsuits as “business strategy,” reports the Verge’s Carl Franzen. ”The parties have no interest in efficiently and expeditiously resolving this dispute; they instead are using this and similar litigation worldwide as a business strategy that appears to have no end,” wrote Judge Robert Scola in an order Tuesday.
The kids are (not) alright (with Facebook). New research shows that teens are over Facebook, reports Businessweek’s Berhard Warner. While the social network remains a top social media destination, Piper Jaffray says its popularity has fallen drastically over the past year. Beyond jokes–probably true–that no red-blooded teen would want to be on the same social network as their elders, this is serious business for the retailers and marketers who want to tap the $810 billion consumer segment. Piper Jaffray listed Reddit, Twitter Inc. and Snapchat as the new teen magnets.
Analyst: Returns of BlackBerry Z10 outnumber sales. Analysts say that the U.S. launch of the BlackBerry Z10 touchscreen smartphone has been anemic, to the point where returns are exceeding sales in some places, reports the WSJ’s Will Connors. The company released a report denying abnormally high levels of returns. Many analysts expect the upcoming, keyboard-equipped BlackBerry Q10 to sell better. It should arrive in May or June.
Deep-fried data? Companies are preparing to dunk servers in oil. High-profile companies, each responsible for hundreds of thousands of computers that help make the cloud possible, are experimenting with placing servers in vats of mineral oil. “Liquids are denser than air, and therefore better at picking up heat and taking it away,” explains Quartz’s Christopher Mims. Plus, a data center based on such liquid-cooling ”can cut the initial cost of building a data center in half by removing the need for air conditioning and specialized construction, like raised floors. But initial cost aside, all liquid cooling systems can save customers money on energy.”
Yahoo attempts to poach AOL ad chief. Yahoo Inc. has made an offer to AOL Inc.’s top sales exec Ned Brody to take over as head of its North American sales, AllThingsD’s Kara Swisher reports. Mr. Brody has already resigned from AOL, said sources, where he headed AOL Networks — which used to be called Advertising.com. It hawks premium display, video and mobile network ads for the Web portal. Because Mr. Brody has a 12-month, noncompete agreement with AOL, Yahoo has offered to pay him to not work in that period. The attractive terms offered to Brody underscore the difficulty that Yahoo has had in filling the slot, which has been open since former U.S. head Ross Levinsohn left the company a year ago.
WHAT YOUR CEO IS READING
Every week, CIO Journal offers a glimpse into the mind of the CEO, whose view of technology is shaped by stories in management journals, general interest magazines and, of course, in-flight publications.
How to save American finance from itself. Running a central bank is like flying a plane, writes Robert M. Solow, winner of the 1987 Nobel Prize in Economic Studies. Usually small adjustments will do just fine, but every so often there’s a crisis in which fundamental understanding, knowledge of history, and good judgment can make the difference between riding out the storm and crashing. In this New Republic article, Solow digs into a just-published account of a series of lectures Ben Bernanke gave last year on how the Fed (and the Treasury) managed to keep the financial crisis from getting much worse. Solow notes that Mr. Bernanke seems to count heavily on the provision in Dodd-Frank that establishes a committee of regulators charged with keeping an eye on “systemically important” financial institutions. Solow is a bit skeptical about whether that will actually work. But more broadly he argues that “financialization has gone too far.” He acknowledges that any complicated economy needs a complicated financial system: to allocate dispersed capital to dispersed productive uses, to provide liquidity, etc. But, he says, “there is no enhancement of economic efficiency” from trading. While it may provide a little useful public information about market opinion, it’s largely just a way to “transfer wealth from those with inferior information and calculation ability to those with more.”
China’s Internet: A giant cage. China “has achieved something few thought possible: the construction of a distinct national internet,” the Economist writes. The government has successfully kept Facebook, Twitter and YouTube away from users. Supplementing the “Great Firewall” is an “army of cyber-police, hardware engineers, software developers, web monitors and paid online propagandists to watch, filter, censor and guide Chinese internet users,” who operate with trusted Chinese Internet companies such as the social network Renren, the Baidu search engine and various Twitter-like services. Users there have nevertheless successfully waged a number of successful online campaigns, albeit leveled at low-level politicians. Other online causes, such as air pollution, have also caught the attention of the authorities and have led to the strange result of the Internet requiring China to be more efficient at being authoritarian. “This is the online blueprint for what scholars call “adaptive authoritarianism”, says the Economist, a movement that relies on a technological arms-race of monitoring and filtering equipment developed in tandem with mouthed assurances that the masses have online access.
The software revolution behind LinkedIn’s gushing profits. Wired’s Ryan Tate credits LinkedIn Inc.’s Wall Street success partly to a “revolution” in how the company writes software. Months before its May 2011 IPO, the business-friendly social network recruited Google veteran Kevin Scott. Scott stemmed a traditional development methodology that favored writing big gobs of code before testing how it worked in favor of “continuous deployment,” where developers write and check code in “tidy, discrete little chunks.” Here’s the CEO takeaway: “LinkedIn’s big switch to continuous deployment has been linked to very concrete and visible financial success, helping lend credence to the practice and potentially helping to accelerate the delivery of software across the tech industry.” Making the switch also required another risk—again, CEOs take note. For two months LinkedIn halted all development to train its staff and migrate code. “It was a pretty big risk the business took,” said Mr. Scott, “to look at its engineering team and say, ‘we’re going to completely change the way we do software.” The risk has paid off, with LinkedIn banging out enough new features to keep it the “darling” of Wall Street and many of the members who use it.
EVERYTHING ELSE YOU NEED TO KNOW
Economists upbeat on growth prospects. The spring swoon has returned to the U.S. economy, but economists in the latest Wall Street Journal forecasting survey see the economy picking up as 2013 progresses. The survey respondents expect growth to pick up in the second half of the year. On the whole, they see 2013 growth at 2.5%, which would be the fastest pace since 2005. Growth is forecast to accelerate to 2.9% for 2014 and 3% for 2015. Even though the economy appears to be slowing in the current quarter, there are significant positives, including the housing market, that keep the odds of recession low. Economists put just a 15% chance of another downturn in the next 12 months.
IRS staff decline means fewer tax audits. The IRS plans to expend 18% fewer staff hours auditing large businesses with assets of more than $10 million in fiscal year 2013 (which ends Sept. 30) than it did in 2011, the Journal of Accountancy reports. The Transactional Records Access Clearinghouse , a data research organization at Syracuse University, notes ongoing reductions in IRS staff in the individual tax area, and says the number of IRS employees fell 23% between 1992 and 2012, while the number of tax returns filed increased by 27% during the same period. The lower numbers don’t take into account the effects of budget cuts that resulted from the sequester.
Cash-strapped Penney aims to raise $1 billion. J.C. Penney has hired bankers at Blackstone for advice on shoring up its fast-eroding cash, the WSJ reports. Bond analysts don’t think Penney’s operations will be able to generate enough cash to cover the company’s needs beyond a year. The company is looking to raise about $1 billion in cash. One option could be to sell a minority stake in Penney, and the company has reached out to and heard from possible investors including private-equity firms. The cash crunch comes as hundreds of stores are in the process of being renovated in line with ousted CEO Ron Johnson’s vision and will require capital to finish the work and make the stores shoppable.
Tom Loftus contributed to this article.
Source Article from http://stream.wsj.com/story/latest-headlines/SS-2-63399/SS-2-210004/
