Behind Goldman Sachs’ Digital Strategy – Banking On The Cloud by James Kaplan & Ishaan Seth – McKinsey & Co
Don Duet, global head of the technology division at Goldman Sachs, discusses the evolution of the firm’s digital strategy and its use of cloud infrastructure and technologies.
Like companies in other industries, banks are racing to take advantage of the opportunities and manage the risks that the digital economy creates. To do so, they will need computing platforms that provide greater agility at lower cost. As global head of Goldman Sachs’s technology division, Don Duet has led the development and execution of the firm’s private-cloud strategy, as well as its thinking about opportunities in the public cloud. “None of this marks a sudden or abrupt shift in strategy for the firm. It’s always been about making continual progress,” he says. In this edited interview conducted by McKinsey’s James Kaplan at Goldman Sachs’s headquarters in New York, Duet discusses the firm’s use of a private-cloud infrastructure—the challenges and risks it faced in conceiving of and launching the platform almost a decade ago and the benefits the firm is realizing through this technology.
McKinsey: Everyone’s talking about the use of digital technologies in banking—what’s changed? Are we at an inflection point in the industry?
Don Duet: I joined Goldman Sachs near the beginning of the IT revolution, when distributed computing was just taking hold. I was able to help design some of the first trading systems for the firm, which were based on Windows PC architecture. Since then, I’ve been in the middle of the shift toward distributed architecture, then the Internet—and now cloud platforms, mobile platforms, and big data.
Through all of this, technology has remained a core competency for Goldman Sachs. Technology engineers make up roughly one-third of our workforce. I think that number is pretty representative of how much we value technology and how much we believe our investments in technology can enable the business.
We’ve been investing in technology for a long period of time—more than two decades—so none of this marks a sudden, abrupt shift in strategy for the firm. It’s a process of continual transformation—moving more and more core parts of our business into models in which things are done electronically, at higher scale, and delivered in a more seamless fashion.
As macro forces like open-source software and cloud architectures have created more opportunity to innovate at a higher pace and lower cost, we’ve seen a general movement in the industry toward digital frameworks and digital business models. Think about how much digital literacy there is today compared with even 10 or 15 years ago. Our customers, our employees, and all the people we interact with across the industry are much more technology literate and want to be empowered through technology. Customers are demanding that we reinvent and recast many of the experiences they have with the firm. We’re rethinking how we do things and the way we articulate our services and solutions to our customers and to ourselves.
McKinsey: How so? What are clients telling you they want?
Don Duet: We work in an industry where there is mostly an institutional focus. But across every aspect of our business, clients are increasingly demanding services that are both personalized and efficient. So we’ve been focused on recasting a number of experiences that would’ve been analog. Customers and clients want to access our services and solutions online, using the devices they choose within the time frames they need. So we’re making investments along those lines and getting products to market. It used to be that the API [application programming interface] to Goldman Sachs was a phone call; increasingly, it’s actually an API.
McKinsey: The cloud seems to have become a major element in the firm’s digital strategy, as it has for a lot of other companies. Can you talk more about Goldman Sachs’s efforts to establish a private-cloud infrastructure?
Don Duet: The journey began almost ten years ago, almost before the term cloud was part of the business vocabulary. At that time, we had reached a certain size and scale of technology investment that forced us to consider how agile we were. We needed to be more responsive in meeting business demands, and we wanted to drive down cost of ownership. We realized that we had to have foundational agility in our infrastructure to deliver computing and solutions to our businesses in different parts of the world, create new software products and services for our customers, and otherwise succeed in different parts of the business. So we adopted an x86 architecture that would enable us to run large-scale grid computing, which allowed us to improve risk management for our derivatives businesses and products. It was a very different model for us; we had been mostly building very specialized pieces of IT infrastructure for specific business products and solutions.
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