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USAA’s Steve Yates Turns IT into a Business

Yates uses "thrifty" experience to streamline IT and gain respect of senior management.

When a new CEO of USAA (San Antonio) joined the company in mid-1999, he made it clear that he was not happy with the IT operations of the financial services company.

Shortly after the new CEO, Robert G. Davis, came on board, Stephen Yates was named president of USAA Information Technology Co. (IT CO), the division of USAA ($62.5 billion in assets) that develops and maintains IT for the entire company, including technology for the insurance, banking and investments divisions. "Our CEO started talking a lot about IT and he was definitely focusing on technology," Yates says. "He also said some pretty scathing things about technology and how he wanted more return on IT investments. He is a real believer in technology."

Already in the spotlight, Davis set some impressive goals for IT CO, Yates adds. For example, he expected USAA to become an e-business—and fast. "A big proponent of the Web, the CEO said 70 percent of transactions will be completed electronically and he said IT should be ready to provide the capability," Yates reflects. "Today, we have 70 percent of transactions completed electronically in the investment business," with banking at 50 percent, life at 25 percent and P&C around 10 percent, according to Yates.

Fast Learner

With some tall orders facing him, Yates—whose previous experience was mostly in manufacturing, most recently as vice president of information technology at Rockwell International—not only had to deliver results, but he had to learn insurance. "The vocabulary and the knowledge I had to gain was huge," he says. "I was definitely swimming upstream in the beginning. For the first year, I was taking in skills and absorbing a lot of knowledge."

Yates not only had to provide capabilities for electronic transactions, but he also had to completely change the way the IT at USAA was run because the new CEO wanted to run IT CO more like a business. "We had to change the way things were approached financially," Yates says. "We now have financial success. We have really produced more financially than anyone expected us to. We are getting more product out the door than we ever used to. Our savings are others' business unit's profits." Yates notes that in the past two years, IT customer satisfaction has risen 18 points, based on surveys with the business partners. "Our reliability is up, our productivity is up and we are doing it all for less."

Yates, who considers the reputation he has for IT CO's financial success as one of his greatest accomplishments, says he learned his "budget-conscious ways" at his former employers. "At some engineering companies there is a very thin margin, maybe one percent," he says. "You have to do things efficiently, and my experiences have helped to build my project management, planning and budgeting skills.

"Being thrifty forces you to be creative with your assets," continues Yates. "We had small budgets in manufacturing, much smaller than USAA's IT spending. When you put my Scottish thriftiness up against USAA's huge budget, suddenly tens of millions of dollars are found."

Yates' budgeting prowess has also helped him build a strong relationship with his peers. "IT has a high trust relationship with management," Yates boasts. "If I put a project on the table, it gets a good reception. We are truly a part of the senior management team."

Being a Change Agent

And being a part of the senior management team means understanding all aspects of the job. "A CIO in today's market has to have tenacity and has to know how to push programs," Yates says. "I am a change agent and I have to be the champion of new ideas. I have to let the business know that there are opportunities to make things even better with technology."

One reason why IT CO has gained respect under Yates is because the entire 3,000-person IT shop relies on teamwork to get the job done. "One of my biggest challenges is communicating our goals to all employees," Yates says.

"For example, if we are changing a Web platform, we have to make sure that everyone knows why we are doing it," Yates says. "If you get everyone on board the same project and everyone understands the plan, productivity is a whole lot higher. There are no second-class citizens in the IT shop," he continues. "Being privately held, we have always had a small-town culture."

In fact, the small-town culture has made attracting top talent at USAA IT CO all that much easier. "For IT employees, it is more about the job than the company," Yates says. "It is about the challenge of IT and if the project's cutting edge."

Also, Yates adds, seemingly little things in an IT shop are really big things. "IT employees want to know, 'Are the users easy to work with?'" he says. "At USAA the CEO is a big proponent of IT and the senior managers are very appreciative."

With a large part of the transactions now coming in through the Web, voice response units and 24-hour call centers, USAA's IT has to be up and running 24/7/365 to serve its client base-US armed service members and their families located around the world. "We have to make sure the software is thoroughly tested before it goes online," Yates says. "It has to work the first time because IT has service-level agreements with our business partners."

For instance, the agreement with USAA's bank may stipulate that IT will only be "down" twice a month for maintenance. "Every time we launch a project the agreement is getting squeezed tighter and tighter," Yates adds. Accordingly, USAA is building a "hot" parallel data center that can run when systems are down for upgrades, Yates says.

Another large project that is taking place under Yates' watch is the complete re-platforming of the personal auto insurance policy administration system. "We have over 300 people working on it," Yates says. "It is a huge project and there is a lot of money tied up in its success. It is coming along."



President USAA Information Technology Co.

Size Of IT Staff: 3,000

Education: University of Alabama, bachelor's degree in industrial engineering; master's in industrialengineering.

Interests/Hobbies: "I have three motorcycles. Once a year, I go on a three- to four-day motorcycle tour."

Ideal Vacation: "Go to the British Virgin Islands, charter a boat and go sailing."

Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio

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