Freddie Mac Looks To Move On From Accounting Fiasco

The world doesn't stand still while a company gets its house in order. While Freddie Mac was putting out fires, it was missing opportunities. Now it's bringing IT work in-house and replacing custom and proprietary code with off-the-shelf software.

Chris Murphy, Editor, InformationWeek

August 18, 2006

2 Min Read

The project's on track for a November rollout. Iles' team is testing the new system this month, taking actual changes made last year to accommodate new types of loans and seeing if the new system lets staffers make those changes faster and cheaper, and still produce the right decision on whether to buy a loan.

Testing is one area where Freddie Mac's financial problems could pay broader dividends. The company emerged from the accounting fiasco with a new compliance discipline that requires documentation of system requirements and functionality, and the IT team is using testing to make it even more valuable. "Good requirements tell you what to test," Iles says. The Chicago team took more than four weeks documenting the existing system and outlining what it wanted to get from the new one, getting input from the people who've been maintaining the legacy system along the way.

Mind-Altering Approach

Freddie Mac's buy-and-integrate, standards-based, more-disciplined approach to IT projects is working. But the more difficult step will be to make it part of the culture--a mind-set rather than just a useful tool. By year's end, the company hopes to have put its roughly 1,700 IT pros through 20 hours of training in its new approach to systems development. Even then, Smialowski knows a lot more time, training, and project experience still will be needed to "make it part of the DNA."

There's an urgency to what Freddie Mac faces. Its market continues to get more competitive even as it gets more complex, so the company needs the speed and flexibility of its new approach. "It's not a matter of 'Tell me all the products you'll ever offer, and let me write them into the system,'" Smialowski says.

Freddie Mac is betting that it can use industry IT standards and off-the-shelf software and still differentiate itself with tech-enabled services. It's also betting its people can change--away from the custom-programming mind-set, and out of the firefighting approach that got it through the accounting wreck--and into a strategic planning mode. But they'll have to do it without losing their sense of urgency, mission, and purpose.

Continue to the sidebars:
Fewer Contractors, More Staffers
and On The Watch List

This story was modified on Aug. 23 to correct Joe Smialowski's title.

About the Author(s)

Chris Murphy

Editor, InformationWeek

Chris Murphy is editor of InformationWeek and co-chair of the InformationWeek Conference. He has been covering technology leadership and CIO strategy issues for InformationWeek since 1999. Before that, he was editor of the Budapest Business Journal, a business newspaper in Hungary; and a daily newspaper reporter in Michigan, where he covered everything from crime to the car industry. Murphy studied economics and journalism at Michigan State University, has an M.B.A. from the University of Virginia, and has passed the Chartered Financial Analyst (CFA) exams.

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