Dr Michael Gorriz, Group CIO, Standard Chartered, on going all-in on the cloud in 2021.
"With core banking, we plan to have 15 countries in the cloud by the end of 2021"
Dr Michael Gorriz, the Global CIO leading Standard Chartered’s ambitious IT modernisation efforts, is refreshingly direct. From IT outsourcing (“it’s massively overrated – but the cloud has changed that”) to life in Germany in the automotive industry (“IT was still a utility function: you’re in the room – but conversations are about 6 or 8 cylinder engines”) he joined The Stack to talk core banking system cloud migrations, the bank’s federated data lake; C-suite structures, and his optimism about Standard Chartered’s future as it – in CEO Bill Winters’ words in a recent earnings report –“sharpens the focus on transforming and disrupting with digital”.
From cars to capital markets…
Gorriz, whose doctorate was in manufacturing engineering and who spent over a decade as CIO at Mercedes-Benz Cars and then the broader Daimler AG group in Germany, made what he describes as a “triple change: company, industry and city” in 2015; swapping Daimler for Standard Chartered, cars for capital markets, and Stuttgart for Singapore. “No surprise, the city was easiest”, he muses. “Like checking in to a 5-star hotel.
"My youngest daughter goes on the subway with her friends; no worries about security. And Standard Chartered was also very welcoming; very international. Not like German auto companies where you might hear 'well, I like strangers, but these strangers are not from here…'” He laughs. “Does that translate? You get the point”.
“So the hardest change for me was moving into the financial industry. I studied physics, in which you study for five years to find simple answers to complicated questions, like ‘why does the earth travel around the sun?’ I mean, that’s quite a complicated problem. But Newton came up with an idea, F = ma, which explains that and a lot more.
“The financial industry is the other way around: simple questions, but you make it so complicated that nobody understands it any longer. A bank is about ‘I lend you money and hopefully I get it back’. This hasn't changed for the last 600 years. But cutting through all the language about complex derivatives to the real problem needs some time. I was probably Standard Chartered’s highest paid apprentice for six months or so.
“After that, you realise it's the same problems which you usually have in IT.”
“For an IT guy, banking is a very, very fascinating industry…”
Standard Chartered has been ambitious in responding to the opportunities afforded by emerging technologies and surprisingly agile in putting them to use. It’s been a busy year for Gorriz’s teams as a result. They have helped launch the bank’s new “nexus” banking-as-a service and Mox, its new virtual bank in Hong Kong.
(nexus – a cloud-based platform that lets digital platforms like e-commerce providers offer white-labelled loans, credit cards and savings accounts co-created with the bank - was incubated at SC Ventures, Standard Chartered’s innovation, fintech investment and ventures arm and started from a business plan mooted by an employee, who now leads the venture with a team of over 100).
Like all banks, Standard Chartered is facing protracted low interest rates and is increasingly focusing on generating more fee-based income. It’s in a solid financial position to do so: well capitalised with low leverage and capital metrics well above regulatory thresholds. And with CFO Andy Halford working to maximise investment in digital capabilities. That gives Gorriz great opportunity to deliver.
He’s delighted to be able to do so. As he tells The Stack: “In automotive, IT is still a utility function, while here it's part of the strategy. I can go to the Board, and talk for two hours about cloud-first. In my previous companies, I would have far less airtime. So banking, for an IT guy, is a very fascinating industry.
“Whenever you do something, you immediately have an effect on the customer side. You have the squads sitting there; they go through comments from our customers and it’s a case of: let's do the next sprint, we can improve that.' And our customer satisfaction scores go up and up and up. That’s really fulfilling for developers, because they see that 'I can do something. I'm creative. I can change the process. And my customer appreciates it'. On the Maslow pyramid, that’s at the very top, because you are creating value.”
To the cloud (everywhere, please)
One of the great shifts of Standard Chartered in 2020 has been – like many organisations – to the cloud, with the bank touting agreements with Azure in August and AWS in November.
With a “bit of sweating, and a little bit of re-engineering” Standard Chartered has even taken its core banking system onto AWS in Vietnam, and plans to replicate the process in every single country it operates in.
As Gorriz puts it: “Unlike other banks, we have a good starting point at Standard Chartered, as my predecessor started a big harmonisation effort. Typically, for one function, we have max two or three systems across the world. It’s not a case of having this whole country where you have a behemoth which nobody dares to tackle. Only four of our countries still had their own core banking system: Hong Kong -- which is our largest market -- and Korea, which we bought more than 10 years ago alongside with Thailand and Taiwan. Just recently I got approval for core banking replacement in these countries; so we will have the same core banking system across our universe, which will allow us to roll out new products and services rapidly across all markets."
He adds: “The cloud is very exciting. It’s the first time I’ve been convinced of outsourcing. Tech outsourcing is massively overrated. I mean, I have 8,000 people sitting in our shared services centres in Bangalore and Chennai. I hire from the same schools as any of the outsourcers; so what's the difference? There is no difference!
"We did hardly any modifications. The SQL code was pretty much standard. There was a little bit of tweaking, but not much... And we've gone from 150 TPS to 4,000 TPS, with the same system
“But the engineering that goes into the cloud, the way that you can reuse and repurpose things which are developed once correctly and with scale in mind: this really fascinates me. I have 26 database engineers in my staff; they take care of Oracle and DB2, and a little bit of MySQL. Amazon has more than 100 engineers only working on Aurora PostGres.
“So we said, ‘Okay, let's, let's go really deep into this’.
Our core banking system – for reference, this is a server-based system, which is fully built in Java; home-grown and built for our purposes. It spans retail and wholesale. It’s a small system, but what it does, it does well. This was running traditionally, on normal servers with DB2 databases.
We said, 'Okay, let's start there’. So we put it on EC2 on Amazon, and we swapped the DB2 out, and we took Aurora Postgres. There was a little bit of sweating, and a little bit of re-engineering involved. But it took us -- with all testing – eight months. Three weeks ago, we launched our first version of it in Vietnam, running in AWS. So now our customers there have access to our newest global features such as quick account opening and FX accounts.
“We did hardly any modifications. The SQL code was pretty much standard. There was a little bit of tweaking, but not much. And just by applying the right configuration to it from Amazon, we were able to, to go from 150 TPS (transactions per second) today, to 4,000 TPS, with the same system. That was the moment where my guys called me and said, 'Michael, we are fully convinced: you don't have to press us any longer!’ And they don't have to pull out their hair for backups and restore. And it's all done as a service.”
Convincing the board
Talking of convincing, how much pressing did the bank’s board take vis-à-vis the cloud?
He laughs: “After showing them our progress and how our regulators have been engaged, they said ‘Okay, Michael, we believe you; it's all good. You have our blessing and you can go forward.' I’ve tried to deliver as much as possible up front, to show that it's working. Now they’re saying ‘when can you get everything on the cloud?’
"Hang on! It will take a while; but that’s what we’re doing…”
“The technology though? We’re convinced. I targeted the payment system and the core banking system. And these two are now in the cloud – to be precise, for each of the two, we have one instance running in the cloud; so it's engineered and refactored for the cloud. By having these essential systems in the cloud, there is no excuse any longer: because if you can migrate core banking with 250 interfaces, into the cloud, then you can do everything.”
So what’s the schedule for country-by-country migration?
“With core banking, we plan to have 15 countries in the cloud by the end of 2021,” the dad-of-three responds, adding: “To be clear, we already have far more than 220 services at the moment, provisioned as SaaS. But that’s stuff like ServiceNow, or SuccessFactors, all the usual suspects; everything plain vanilla we want from the cloud.
“But we really want to use the cloud as a hosting compute bed.
“So at the moment, we have 22 applications in the cloud [i.e. running on hyperscaler IaaS]. By the end of the year, 26; by 2022, another 50; then, another 100.
“Over the next five years we want to have materially more than 50% of all workload in the cloud”
While there are organisations further ahead on their cloud journey than this, there is also no shortage of blue chips considerably less engaged with the cloud. Does he have any tips for CIOs perhaps a year or two behind where Standard Chartered is at the moment?
“At first we did exactly what [AWS CEO] Andy Jassy is always warning against: 'don't try to build your data centre in the cloud!’
That was our initial take: we had our own people running databases, running web services [in the cloud] but we needed much closer alignment with our app requirements. So we pivoted: we made a special cloud migration tribe; brought in a few infra people, a few engineering people, a few app people, and let them do it…”
Has this process changed the bank’s approach to how it makes use of data yet? For example, is it pulling intelligence from cloud-based data lakes/data warehouses? In responding, he notes that the bank’s data structure was initially driven by regulatory requirements.
“We all have to go BCBS 239; we all have to go through IFRS 9; we had the various SEC requirements for screening – and as a network bank, we do a lot of screening for international transactions. So we have piled a lot of money into regulatory programmes.
“The anchor of this is a central date lake, where we pull data from the transactional systems, the basic transactional data, which we need to fulfil all these regulatory requirements. We created this with Hadoop. It’s still on-prem and in the beginning, was only for risk mitigation. We’re actually backing away from this a bit, towards a federated architecture; where we say retail and wholesale have their real time data lakes, but they are federated; there’s a common taxonomy and a way to pull data into the central lake if it is needed there. So there are different data ponds which are used for real time interaction; then the central data lake for accounting, risk reporting, you name it.”
Will that end up in the cloud too? “Yes, absolutely. Possibly in Azure because we have the end-user compute, with Power BI... Multi-cloud is an interesting challenge. What AWS has announced at Re:Invent is mind-boggling; But I also know we need the flexibility of multi-cloud to re-platform.
"The technology coming through is so exciting though. I don't think I have learned so much in my whole life as I've learned in these five years. I’m constantly on YouTube, looking up stuff. I’ve dusted off my Java books. I'm looking at how Spring Boot works. What is Cassandra? What can I do with Hive? I'm probably the worst developer in my whole team, but I'm super interested in this stuff."
Talking of teams, C-suite reporting structure – particularly across IT – remains an interestingly fluid and diverse thing. Who do Standard Chartered’s CISO and CDO report to? Gorriz tells The Stack: “Both the CISO and CDO report to the COO, given how integrated cybersecurity and data controls are to the operations of banking.
"The Technology & Innovation function which I run, is focused on all technologies and engineering across enterprise, business, functions and regions. All my CIOs , also sit in business, functions and regional management teams, so the Technology & Innovation function is truly a partner to the business.. And people are seeing that the digital tools we are building, really generate revenue."
He adds: “Standard Chartered is in 47 countries, including the eight most populous countries of the world: we’re in countries with a combined population of over four billion people. We can do some exciting things with digital and I’m very optimistic about the future.”
