US banks make cool technology, realise it can be sold

NEW YORK: Big Wall Street banks, after spending massive amounts of money and time to get their old, creaking systems in better shape, are now trying to sell technology they've developed in-house to other companies.

US banks including Goldman Sachs Group Inc, Morgan Stanley and JPMorgan Chase & Co are spinning out or selling a range of tools that pertain to data security, mobile applications and "systems integration," the process of flattening layers of aging technology.

So far, the banks are not making much money from these efforts, especially compared to what they have had to spend on technology in recent years. Between upgrades of hardware and software, creating new apps and bolstering cybersecurity defenses, tech is fast becoming one of the industry's largest expenses.

U.S. banks collectively spent $62.2 billion on technology last year, according to research firm Celent. Selling technology externally recoups only a tiny fraction of that amount. But moving tech from the expense line to the revenue line is an important shift for big banks, which are desperately hunting for new areas of growth as regulations have hemmed in traditional profit engines like trading.

"Banks are looking for other ways to squeeze out profit," said Jonathan Lehr, a managing director at venture capital firm Work-Bench which invests in business technology startups. "They get more eyes on their homegrown technology and it's a good opportunity to build their brand with potential recruits."

Goldman has arguably been the most aggressive developer and seller of its own technology to outside companies, something it has been doing on and off since the dotcom boom of the 1990s. Its chief executive, Lloyd Blankfein, is fond of saying Goldman is more like a technology company than a bank.

Goldman is now hoping to capitalize on the popularity of "bring your own device" policies, wherein employees conduct business on their own mobile phones and tablets, rather than on company-issued devices.

The bank is working with software company Synchronoss Technologies Inc to spin out a business that secures data on mobile phones, partly through software called Lagoon that allows employees to access work apps on their own mobile phones, and partly through an email service called Orbit.

In their joint venture, which was announced in October, Synchronoss will market and sell Goldman's products, and the bank will receive a portion of earnings. The Synchronoss deal follows Goldman's spinoff of Symphony, a messaging and information system it developed internally that now boasts 75,000 users on and off Wall Street.

Tom Jessop, a managing director in Goldman's technology business development group who is in charge of the external sales effort, said the bank isn't building technology for the sole purpose of selling it. But, "in certain instances where we've built something we think is best-in-class, we may look to commercialize it."

Morgan Stanley has started to take a similar tack under Chief Operating Officer James Rosenthal who decided that selling its own technology was a high priority.Morgan Stanley is looking to commercialize a technology it created called Treadmill, a so-called container management platform, according to people familiar with the bank's plans. Containers allow developers to build, test and run their software applications easily. In turn, businesses that use a container management platform are able to operate their software at scale across their systems.

The bank is weighing whether to partner with an outside technology firm to sell Treadmill or whether to spin it off as a standalone company, the people said.

Morgan Stanley has experimented with this idea on a small scale in the past. For instance, it sold a company called Author, which makes presentation templates, to Thomson Reuters Corp several years ago. But Treadmill represents Morgan Stanley's biggest attempt to export its technology so far.

Shawn Melamed, who is spearheading Morgan Stanley's effort as head of technology business development, said that while commercialization was something the firm had approached "opportunistically in the past," it now has a more focused initiative in place to identify internally developed technologies that may have widespread use.