JILT 1997 (2) - Jenkins & Susskind
A New IT Infrastructure for London
Contents
This is a Commentary article published on 30 June 1997. Citation: Jenkins B and Susskind R, 'A New IT Infrastructure for London', Commentary, 1997 (2) The Journal of Information, Law and Technology (JILT). <http://elj.warwick.ac.uk/jilt/ITpract/97_2jenk/>. New citation as at 1/1/04: <http://www2.warwick.ac.uk/fac/soc/law/elj/jilt/1997_2/jenkins/> SummaryThe City is at a cross-roads in its use of information technology (IT), in that it now has an unprecedented but fleeting opportunity to build itself a single, coherent IT infrastructure which would bring reduced costs, increased revenues, numerous new ways of conducting business and could greatly strengthen London's competitive position internationally. The alternative is to let incompatible networks, systems and standards proliferate, driving wedges between vital sectors of the City and losing much of the advantage which should be gained through its current diversity and size. 1. Focus on IT in the CityEarly signs of this stark option were recognised in the summer of 1995, when The Worshipful Company of Information Technologists ('the Information Technologists'), the City's 100th Livery Company, published Focus on IT in the City, a snapshot of the impact of IT in the City [1]. This report, as summarised also in Square Mile 1995, [2] confirmed that London continues to be a world-leading financial centre partly because of its widespread and imaginative use of technology. But it warned against complacency, claiming that London's ongoing position of leadership required regular technical innovation, relentless development programmes, and sustained co-operation in making the City's many systems work together. The report also noted, in all the sectors of the City which were studied, that electronic communication was central to all predictions of the future, enabling - at least - automated trading and transacting, funds transfer, messaging, and the provision of up-to-date data, information and even advice. Yet, vitally, it pointed to the irony that the figurative networking of top managers and decision-makers across all sectors was not matched by actual networking on a common telecommunications infrastructure (other than by voice on the public telephone system); and that, instead, each sector operated on its own preferred networks which were not generally compatible - there were little or no common standards, interfaces, or transmission codes across sectors; nor were there reliable standards relating to security and confidentiality. To avoid further duplication and redundancy of effort and to bring the City together as one system, the Information Technologists advanced the hypothesis that the most promising way to advance IT for the City as a whole was for institutions to co-operate in the development of a new IT infrastructure for London. 2. The PORTFocus on IT in the City was well received both within the City and by the IT community generally, as a result of which the Information Technologists were eager to maintain momentum and test more rigorously this idea of establishing what eventually came to be known as 'The PORT' - the proposed new IT infrastructure for the City. To help with this second phase of the initiative, the services of Andersen Consulting were secured and they generously worked with the Company, on a pro bono basis, in identifying and answering a number of fundamental questions:
The remainder of this paper presents a summary of the responses to these questions, as developed by the Information Technologists and Andersen Consulting during the past year or so. 3. The Current Information Infrastructure and the Threats to the CityFocus on IT in the City confirmed that London's position as the leading international financial centre is already due in some part to its usage of sophisticated information technologies. Yet this source of advantage for the City differs from others, such as its time zone and its use of the English language, in that it is not a natural advantage. Consequently, ongoing and very substantial improvement, imagination and investment in IT are needed if the City is to stay ahead. It transpires, however, that this challenge of leading the way is hampered today by the current IT infrastructure. Although the City is well equipped with physical networks, the innumerable service providers and countless modes of access make for an infrastructure that is cumbersome to use, with institutions often requiring many connections to complete single transactions. The infrastructure is limiting as well, in that the fragmented nature of the available systems inhibits recognition and exploitation of the new opportunities which are being created by the convergence of computing and telecommunications. Moreover, this is an environment in which it is expensive to develop, operate and maintain systems and services. Nor is the prognosis good - if network and service providers and institutions themselves introduce more proprietary standards, the prospect of a coherent, single platform appears remote indeed. Left to evolve its IT information infrastructure without co-ordinated intervention, the City may be exposed to a variety of new threats and challenges. On the one hand, if control over the use and development of crucial parts of the infrastructure came to reside beyond the UK, the City would need to be imaginative in ensuring that its interests were not thereby compromised. On the other hand, another European financial centre could quite conceivably develop a superior infrastructure before London with the result that the City would have to work hard to regain the competitive edge it currently enjoys in virtue of its technology. Equally, it is possible without co-ordinating the City's IT that a single participant could gain a quasi-monopolistic position as the dominant provider of access to information services; and some considerable thought would need to be given in that event to the implications of such a concentration of business activity in the hands of one party. Admittedly, some City-wide system would probably evolve without any concerted management. Yet without strategic co-ordination it would develop as the railways did so many years ago - inefficiently, with unnecessary duplication and with different gauges. 4. A Co-ordinated Approach - The Benefits of The PORTThe alternative is for institutions to co-operate in the development of a new IT infrastructure which will eliminate the multitude of interconnections between institutions and service providers and will enhance the City's reputation as the safest and most attractive of international financial centres. Accordingly, the proposal to evolve The PORT is to have in place - even within three years - an infrastructure to enable the many existing networks and systems of the City to operate together, not just as a single, simple means of communicating but as the principal marketplace for the actual conduct of business, with improved security, compliance, reliability and confidentiality. With commitment to the ongoing success of the City uppermost in mind, The PORT would be developed and controlled within and by the City, offering open access to providers and users and so enabling market competition to flourish. The concept is neither futuristic nor fanciful. Many of the systems and services already exist - some to provide and process information, others to implement regulation, and still others to support the exchange of information. But these systems, and many more, need to be brought together, in a phased and controlled initiative, deploying emerging telecommunications technologies as well as leading edge, information and knowledge processing techniques. The potential cost savings which The PORT could bring are very large indeed. Andersen Consulting has undertaken a study of the likely impact of The PORT on the community of 500 leading banks and broker-dealers and their assessment is that The PORT would reduce the IT expenditure of these institutions (on development, operations and maintenance) by a formidable £500 million per annum. In looking further ahead and drawing on the experience of individual organisations which have successfully re-engineered their operations on the strength of IT, the Information Technologists also continue to foresee that The PORT would bring all manner of other benefits for the City: just as groups within individual organisations have obtained added value from operating on common information systems, then so too with the City - with all sectors able to share information and operate on the same infrastructure, this could well result in vastly improved performance and new revenue opportunities for the City of London as a whole. 5. The Next StepsWith this more detailed vision for a new City information infrastructure to hand, an initial round of meetings with top City executives was conducted in early 1997, in part to gauge the likely reaction from London's leaders and decision-makers. In general, The PORT has been very well received, so much so that there is confidence now to raise funds for and proceed to the next phase of the initiative - the feasibility study. This will be devoted to subjecting the hypothesis of The PORT to far greater scrutiny still and to developing a high level design and prototype for the infrastructure as well as a fully-worked business case supporting the proposal. The feasibility study will also propose a legal and regulatory framework for The PORT and lead to firm recommendations on appropriate structures for its ownership and governance. The City has traditionally been quick to recognise and exploit new opportunities, such as the development of the Eurobond markets in the 1960s and the restructuring after 'Big Bang' in the late 1980s. Now, it must be quicker than ever, because a new City-wide IT infrastructure may be destined to have even further reaching consequences; based on the work and evidence so far, at home and overseas, here is a further and exciting opportunity which should surely be pursued vigorously. Sir Brian Jenkins GBE is a Past Master, and Professor Richard Susskind FRSE is a Court Assistant, of the Worshipful Company of Information Technologists. They would like to thank Andersen Consulting, particularly Cherine Chalaby and Stanley Young, for their contributions to this paper. Footnotes[1] Focus on IT in the City, edited by Jenkins, Susskind, Warburg and Carrington (Worshipful Company of Information Technologists, June 1995). [2] Square Mile 1995, edited by Fessey (The Winchester Group, 1995). p.67. |
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