Credit Suisse Sells Its Own Virtualization Software to Others

On June 2, Credit Suisse announced that its very own virtualization management software, which the bank’s global R&D group had been working on for years, was now for sale through a startup, called DynamicOps, which is entirely funded by Credit Suisse’s venture group.

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It’s an interesting “first” for Credit Suisse, spinning a company and a product out of IT. And their timing’s excellent, since IT leaders are now feeling increased pressure to maximize the ROI of virtualization efforts, analysts say.

The VRM (virtual resource management) product has managed thousands of Credit Suisse’s virtual desktops and servers at multiple Credit Suisse data centers worldwide since 2005.

Its most important feature: it allows business lines and users to self-provision computing resources, reducing lead times from when business requests server power and when IT actually delivers it.

“We’ve derived tremendous value and gains in using this for desktop and server provisioning, clearly in the areas where we’ve consumed the self-service provisions,” says Steve Yatko, managing director of Credit Suisse’s global research and development group, where the VRM baby was born. “Now we’re moving to minutes versus weeks and, in worst cases, maybe a month.” (CIO profiled Credit Suisse’s virtualization efforts and former CIO Tom Sanzone in 2007, in “Taking Virtual Servers to the Next Level.”)

According to DynamicOps CEO Rich Krueger, the VRM product “is, essentially, an IT service-delivery platform for ongoing management of virtualized servers and virtual desktops.”

Credit Suisse quietly founded DynamicOps in January 2008; it now has 15 employees, including CTO Leslie Muller, a former senior technologist at Credit Suisse. At this point, Credit Suisse’s Next II venture group, which is a part of Credit Suisse’s investment banking division, is the sole investor in DynamicOps.

What’s interesting in the new relationship is that while the Next II group serves as DynamicOps’ board, notes Krueger, Credit Suisse’s IT department is now another customer to DynamicOps, with its own support and sales staffers. “We treat Credit Suisse like a large and very important customer to us,” Krueger says.

As to Credit Suisse IT’s relationship expectations, Yatko says, “we would expect it to be no different than our existing partnerships that we have, only that we know some of the ins and outs of the software.”

Benefits of Virtualization Management Software

In enterprises today, virtualization technologies such as server virtualization can reduce data center and capital costs, provide faster provisioning capabilities and enable more flexible computing resource allocation. (To read how Credit Suisse’s former CIO makes virtualization meaningful to his bosses and Wall Street, see “Does Your Work in IT Matter to Wall Street?”)

Over the years, Credit Suisse realized that while virtualization trimmed data center costs and increased the efficiency of its computing resources and business operations, it also caused some unintended “operational complexity.” And that’s where the VRM product came in. VRM provided an agnostic approach (meaning it could work with any of the virtualization products out there, such as those from Microsoft or VMware) to managing virtualized environments: this created “a repeatable process for the deployment, tracking and ongoing management of virtual machines,” according to Credit Suisse.

A self-service portal allows business users control and flexibility. “It allows end users to say, ‘I want these application components, I need them for five days and put them on the best place they should run,” Yatko says. “It manages the whole lifecycle, and they just paid for what they needed and what they used.”

At the same time, adds Krueger, VRM is ensuring that “you’re meeting the organizational governance, compliance and tracking of these assets through their entire life.”

Virtualization is on nearly every IT shop’s radar screen, but increased pressure on TCO and ROI with virtualization implementations have become common, says Stephen Elliot, director of enterprise system management at IDC. “TCO is becoming a big issue with large production environments,” he writes in an e-mail. “Management solutions can lower TCO and improve ROI when deployed with the right staff, process and deployment.”

As to DynamicOps chances in the virtualization tools market, Elliot, who has not had an official briefing on its product set, says “they have an opportunity, and if their claims are true, they might actually be ahead of many other vendors.” Partnering with the virtualization vendors such as Microsoft would help, he says.

DynamicOps has “as good a chance as anyone else,” Elliot says, “but they have to get aggressive with marketing—no one knows them and they are not on any short lists.”

Why Did Credit Suisse Do It?

The strategy of non-vendor companies that build software or services in-house and then sell try to them commercially is unusual but not unheard of. “I have heard of a few times that this has happened,” Elliot notes, “but more often the team leaves and gets funding versus getting funding from a related ‘parent company’ fund.”

Besides being the top online retailer, Amazon.com has become a technology services provider, “finding ways to monetize its vast IT infrastructure,” notes a 2007 CIO profile.

This experience is entirely new for Credit Suisse. “This is a first of a kind, to come from within IT,” says Yatko.

In the announcement, CIO Karl Landert says that “forming DynamicOps provides Credit Suisse with the opportunity to realize a return on its software investment, as well as properly form and fund a software organization that can help meet its current and future technology needs, as we continue to roll out our dynamic data center vision.” (To read about Landert’s promotion and former CIO Sanzone’s sudden departure, see “Credit Suisse CIO Jumps Ship to Merrill Lynch Amid Industry Turmoil.”)

Credit Suisse has already “made our leap in terms of competitive advantage,” Yatko says, “and now it was about being able to realize the full value of our software asset and perhaps offer that as an industrywide capability that could add value and really demonstrate the entrepreneurship of the technology organization. It made sense.”

As to competitors using the VRM product, “we still have a unique advantage to early adopters who will be consuming this technology,” Yatko says.

In fact, Credit Suisse stated that the VRM software is currently installed in other large IT organizations in financial services as well as other industries. “We’re selling to and working with a lot of clients who are other financial institutions that compete head to head with Credit Suisse,” says DynamicOps CEO Krueger.

Virtualization is spreading widely within financial services. Credit Suisse competitor Merrill Lynch, for example, plans to virtualize half of its 63,000 employee desktops within five years, thereby cutting 50 percent from the cost of managing and owning PCs and servers, notes a recent article.

In addition, Yatko points out that a vendor in growth and startup mode, like DynamicOps, might be able to do even more with the VRM product than could have been done internally at Credit Suisse. And, in the long run, he says, that will only help Credit Suisse as it continues to build upon its data center strategy with a known vendor by its side.