There's never been a better time to play "Let's Make a Deal" with vendors, according to John McKinley, chief technology officer at New York-based Merrill Lynch & Co.
In terms of IT infrastructure, McKinley said the industry is undergoing a broad-based deflation period where the unit cost of almost everything is going down year over year. McKinley made the remarks in a speech at TowerGroup's annual financial services conference here last week.
"I came from the world's cheapest organization: GE," said McKinley. "As a buyer during a deflationary period, you always want to buy on a spot market. You don't want multiyear contracts. You want to ride that price erosion as rapidly as you can."
McKinley pointed to the cost of enterprise-class storage systems, which he said cost him 19 cents per megabyte 16 months ago. "Now I'm buying at 9 cents [per megabyte]," he noted.
"It's a great opportunity right now. I remember going out to bid recently to address some bandwidth extensions from New York to London and I was able to triple the bandwidth at half the cost. That's the nature of the competitive environment we're in," McKinley added.
He also said he expects Merrill Lynch's IT team to buy software at 75 percent to 80 percent off retail prices. Otherwise, "I'm disappointed," he said.
McKinley said Merrill Lynch is about two and a half years into it's "efficiency journey," in which cost-cutting methods such as outsourcing and offshore development have played key roles.
"Ninety-two percent of my controllable cost at Merrill Lynch is labor," he said. "And so when we were looking at re-engineering our expenses ... we dialed way back on external professional services, because I can see the bottom-line impact within two to four weeks. That's powerful when your trying to do real-time course correction."
McKinley has also focused on efficiency through consolidated storage-area networks, XML tagging and open systems such as Linux.
Still, players such as Microsoft Corp. must do a better job of creating interoperability across platforms, McKinley said.
"I've got a very large Unix and Linux environment, and I have a large Microsoft environment. I want [software] that allows me to seamlessly and richly tap into the functionality and information on all three of those towers," McKinley said. "I think it's paramount to [Microsoft] succeeding long term as an enterprise player."