Spending on technology at Goldman Sachs rose 20% to $444 million this quarter, earnings today revealed.
That increase came even as the investment bank reported an 11% fall in total operational expenditure.
July 2018’s Q2, 2022, earnings revealed opex of $7.65 billion for the second quarter of 2022.
The 11% decline in opex was “primarily due to significantly lower compensation and benefits expenses”.
(Total Goldman Sachs opex for 2021 meanwhile was $31.94 billion: $17 billion was on compensation and benefits. A comparatively lean, by peer standards, $1.5 billion was on IT and associated spending.)
Goldman Sachs’ technology spending increase came as Q2 net revenues slumped 23% to $11.86 billion in the wake of a broader market decline. The Goldman Sachs IT spend increase came despite market volatility and recession fears and was in line with sustained investment in digital transformation across the broader financial services sector, where the pace of technology change is a defining trend in a competitive space.
Integration after its NNIP and GreenSky acquisitions also contributed $200 million to non-compensation expenses this quarter, CEO David Solomon noted. GreenSky is the largest fintech platform for home improvement consumer loan originations. Goldman bought it for $2.2 billion, closing the deal in March 2022. NNIP is a Dutch asset manager with a strong ESG portfolio and approach. Goldman closed that acquisition in April 2022.
Goldman Sachs IT spend: Private cloud, open source, security...
Like most organisations, Goldman Sachs’ IT spending is both offensive and defensive.
Some big-ticket investments recently include the launch of a new financial data management and analytics platform designed for for hedge funds, asset managers and other institutional clients. The Goldman financial cloud, built on AWS, lets users tap historical and intraday cross-asset data from the investment bank or third-party sources through a unified data platform that aims to open up “near-real time” analytics.
More defensively, like all banks, it continues to invest significantly in cybersecurity amid supply chain fears.. As its 2021 annual report noted: “Risks relating to cyber attacks on our vendors have been increasing given the greater frequency and severity in recent years of supply chain attacks affecting software and information technology service providers. Due to the complexity and interconnectedness of our systems, the process of enhancing our protective measures can itself create a risk of systems disruptions and security issues…”
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(Striking the balance between innovation and security is a Hard Problem…)
For those curious in taking a peak under the hood at Goldman’s sprawling IT estate – the bulk of compute and storage happens on its private cloud for the simple reason that “there's some sensitivities around data and data insurance for us. Our data is absolutely vital. And any tiny exposure of data in a way that we wouldn't have controlled would be really a disastrous event” as one technology VP has put it – this blog is an interesting read.
The bank is a big user of open source software as well, with its Site Reliability Engineering team (responsible for “a diverse technology portfolio of highly complex, distributed software services that underpin the many business lines of our firm”) has openly described its platform strategy as geared towards a “strong preference towards the use of open standards such as OpenTelemetry, and open source software like Prometheus and similar technologies under the umbrella of the Cloud Native Computing Foundation (CNCF).
This likely helps keep IT opex lean.
Goldman’s investment banking revenues were $2.14 billion for the second quarter of 2022, 41% lower than Q2, 2021 as markets tightened. Net revenues in its Consumer & Wealth Management segment were $2.18 billion for the second quarter of 2022, a robust 25% higher than the second quarter of 2021 however.