Prof. Jayanth R. Varma’s Financial Markets Blog

A blog on financial markets and their regulation

Lehman and its computer systems

Perhaps, I have a perverse interest in the computer systems of
failed financial firms – I blogged
about Madoff and his AS400 last year. Even while struggling to cope
with the fantastic 2,200 page report of the court
examiner on Lehman, I homed in on the discussion about Lehman’s
computer systems:

At the time of its bankruptcy filing, Lehman maintained a patchwork
of over 2,600 software systems and applications. … Many of Lehman’s
systems were arcane, outdated or non-standard. Becoming proficient
enough to use the systems required training in some cases, study in
others, and trial and error experimentation in others.
… Lehman’s systems were highly interdependent, but their
relationships were difficult to decipher and not well documented. It
took extraordinary effort to untangle these systems to obtain the
necessary information.

My limited experience suggests that outdated and unusable software
is a problem in most large organizations. I do hope that the ongoing
of information technology will help reduce these problems by putting
intense pressure on corporate IT to reform their ways. Perhaps,
organizations should consider releasing the source code of most of
their proprietary software on their own intranet to help manage the
complexity and user unfriendliness of their systems. Consumerization
plus crowd sourcing might just be able to tame the beast.


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