PricewaterhouseCoopers, the administrator for collapsed bank Lehman Brothers, faces a tough challenge winding down the IT departments in the parts of the bank that have not been sold.
That is the verdict of IT industry analysts, who told Computerworld UK that PwC will have to tread a careful line between reducing costs in the unsold fixed income operations of Lehman, and keeping its IT functions running well enough to support customers who have contracts running for up to a year more with the company.
Yesterday Japanese bank Nomura said it was buying the Indian back office operations too, saving 1,200 IT jobs. Nomura also has moved to acquire the investment and equity divisions of Lehman. Meanwhile, private equity firms Bain Capital and Hellman & Friedman bought the wealth management operations of Lehman, leaving the fixed income operations unsold.
Tony Lomas, partner at PricewaterhouseCoopers and lead administrator for Lehman Brothers, has told the Financial Times it was vital to keep “a stable IT environment” during the wind down of the 750-strong fixed income business. PwC did not provide further updates on its plans when asked for comment.
Chris Skinner, chief executive at think-tank Balatro, agreed with Lomas. IT has to run efficiently for some time, he said, because “when you’re dealing with these trades, they often take six to 12 months to unwind”.
It would be a difficult balance, however, because PwC “will try to get the most value from the business” by not over-investing, he said.
Iain Smith, founder of IT human resources consultancy Diaz Research, said keeping the right IT staff on board would be a challenge because many may be looking for a more secure and long-term position elsewhere. “I can see a real problem here,” he said. “They’ll have to put in place the real financial incentives to keep people, and move quickly to secure their loyalty.”
While outsourcing IT support could be an option, this was highly unlikely, Diaz said. “Given the complexity of the systems, they need people who have a background in those individual systems and a real understanding of the financial products they sell.”
The systems would need to work efficiently, and developers would be required to rewrite code so that the IT links into systems in other financial institutions that are updating their own code. Allowing this to slip, Smith said, “would raise alarm bells”.