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One manager's IT lesson

As Ameritrade's new CIO, Asiff Hirji runs a tech operation that handles 116,000 stock trades a day. Though he's upping IT spending, his approach breaks with those of boom times.

As the new chief information officer at Ameritrade, the second-largest online brokerage, Asiff Hirji is responsible for overseeing an operation that handles 116,000 trades a day, with client assets of $39.1 billion.

Hirji, who joined Ameritrade in March, is also overseeing the last steps of Ameritrade's merger with Datek, announced in April 2002.

That merger followed a difficult period for the online brokerage industry, which saw daily activity plummet after the bursting of the dot-com bubble. Ameritrade used that period to consolidate the industry, acquiring National Discount Brokers as well.

As the economy slowly shows signs of recovery, things have been looking brighter for the industry. Ameritrade's stock has been trading at 12-month highs, daily trading volumes are up and the integration of the Datek operations is being finished ahead of schedule.

CNET spoke to Hirji about his new role and what he thinks IT's role will be in keeping things going.

Q: Following your merger with Datek last year, there were plans to trim your IT staff from 600 people to 350 people. That's a pretty big cut. What sort of impact will that have on internal development?
A: For us, technology is not an afterthought. It's a cost of doing business. We are the product. Technology is the business. Compared to many companies, our IT budgets are not going down, depending on product development or innovation. They are--if anything--going up.

As a practical course of action after a merger, one plus one does not necessarily equal two. You're naturally going to have synergies in systems infrastructure and people. It is testimony to the quality of our people that we have completed vast proportions of our integration much faster than anyone has anticipated.

So, you do expect to continue to increase spending on IT?
That's a testament to the fact that, for us, technology is the product.

Everyone talks about doing more with less, which is what we all should have been doing in the first place.
As CIO, I wear two hats for the company. Half of my time, I manage the tech function for Ameritrade. The other half of the time, my role is to shape and execute strategy at the firm. As we do that, we look very hard at what areas we're going to invest around and what kind of pricing we're going to use. Let's say our tech budget was X pre-merger. Post-merger it's larger than X, but not X plus whatever it was at Datek. Everyone talks about doing more with less, which is what we all should have been doing in the first place.

I'm sure that you hear from other CIOs that they spend 70 percent on maintenance. That's not true here. The biggest percentage is technology development, the core of our business.

Have you seen a big change in the way that vendors approach you now?

What's changed is the ability to get a more tailored solution--one that meets the kind of economic criteria you're looking for. Back in the hey-day, it was hard to even get some vendor's attention. What we find now is that the vendors are a lot less arrogant and present more tailored services to you and tailor the way that they support you. If you're one of the few companies with a checkbook out there buying, you get a lot of attention.

Let's talk about the integration. How difficult was it to combine the two companies' technologies? In earlier reports, Ameritrade had said things would be integrated by this summer.
The reality is that most mergers fail. In the merger with Datek, we did something no company has done before, to my knowledge: We took two highly integrated trading systems, de-coupled one from its back end and hooked it up to the other. We took the Datek front end and hooked it up to the Ameritrade back end.

By the end of the summer, we'll have one platform that supports both the front-end environments against one single back end. We have something like 17 different client experiences. By the end of the summer, all will run off of a common front-end platform. We're going for unified experience, for both legacy Datek and Ameritrade clients, which we'll roll out over the fall.

How did you do it?
You have to identify what each of the various systems does, identify where the points of integration are and plan how you're going to de-couple and re-couple. We planned integration for a weekend when we hoped trading would be lighter. On that Friday, we started after the market closed and we moved over almost a million accounts and tens of billions of dollars in assets.

Part of your job is to focus on corporate strategy. How does that blend in with your role as CIO?
A lot of companies struggle with how to marry corporate strategy to technology. My role is to bring to the discussion what the potential of the technology is, what we can do and conversely, what the weaknesses and strengths are--what we can handle this quarter versus what we cannot handle.

What kind of infrastructure are you working with?
We have basically three different types of systems. We have our front-end transactional systems, which take orders and present information--it's the basically the Web site.

We now find that vendors are a lot less arrogant and present more tailored services to you.
Then we have the back-office systems, which handle the processing, statements and order management. Finally, there are the enterprise systems, human resources, and administration. Those run on different infrastructures that our group manages.

The Web sites are primarily Intel boxes--in some cases Linux, in some cases Windows NT. The back office is a combination of large-scale Unix systems, and in some cases proprietary systems that we've written to run on either (Windows-Intel) or Linux. And the enterprise systems are basically on Unix environments.

Clearly, a lot of your work deals with mission-critical situations. How do you handle that?
We handle contingency and disaster recovery with two data centers running 24 hours a day that act as fail-overs for each other. We have a disaster recovery site and hot backups for our systems. They're tested every few months to ensure that we can survive a major incident. The data centers are quite far apart--if ever we had something that affected both, the world would be having much bigger problems than Ameritrade going down.

You mentioned that you use Linux. Have you been following the legal situation with regards to SCO and its claims to the Linux code? If so, what impact has that had on your decisions?
We follow what happens in the marketplace, but as far as we're concerned, Linux is a production-scale system. Where it is productive to deploy, if it has the best system to deploy, we deploy it.

How much do you rely on outsourcing? What's your opinion of all the new managed services being offered today, including the new utility computing models?
If it's an enterprise system application, we're more likely than not to outsource to someone--that's not something that we need to have a core competence in. If it's something like a trading tool, however, we're not likely to outsource--that's our core competencies. Anything that is not what we could consider to be a core competency, the argument is: "Why aren't we outsourcing?"

As for utility computing, we're looking at it. It's hard for those kinds of services to be relevant for a company like Ameritrade. You can't separate technology from product. Take an ASP (application service provider) that's offering CRM (customer relationship management) solutions--that is a compelling product. It just has less relevance for us. If services came on that were more relevant to us, we'd take a look.

What are you doing with Web services?
If you're a manufacturer, Web services are very important, because they're how you talk to your supply chain. But in financial services, it's not necessarily a real factor. The kinds of exchanges that I have to deal with have very well defined protocols that have been around 35 years. It's not going to be that big of a deal for us as a brokerage. But the concept of putting distributed and mainframes systems under a Web services (wrapper)--obviously, that's something that we should be doing. We've deployed the Web services philosophy.

We're a member of many of the steering committees and working groups for financial versions of Web services. If that makes the communications of financial transactions more secure and faster, great. There's less road to hoe in our industry than in others, because we've had to have the ability to seamlessly interact with each other and the markets for years. Otherwise, you couldn't be an online broker.

Security is obviously a huge issue for you. What's your biggest concern, and how do you deal with data protection?
There's two big areas. There are new requirements that have been put upon us by the industry regulators and the government--such as the Patriot Act--with which we have to comply. And we have an ongoing set of activities that look at the security of our transaction platform and our client information. We actively hire the best-of-class people of what are essentially hacker firms, and every quarter we have them attack us. They come back with any vulnerabilities that they find, and we go back. We take security very seriously. We do a complete soup-to-nuts assessment, physical and technological, on a semi-annual basis. As a firm, we have been doing it for about three years. We have a very good head of security--one of my direct reports--who, like all good security heads, is paranoid.

How do you evaluate suppliers? Is there a specific return on investment you look for?
Depending on whether we're looking at hardware or services, it will be a little different. First and foremost, we look at things that increase flexibility. We would not be happy with a solution that constrains us down the road. If the choice is between architecture A and architecture B and one gives us more choice, we'll go with that. Secondly of course, is cost, cost, cost. In this environment, we should be able to get good pricing.

What's your tech nightmare? What keeps you up at night?
I worry most about the people. You get competitive advantage by getting the best people in the industry. My job is to maintain and enhance the quality of the staff. As we go through the merger and do the things we're doing, how do you retain and manage the best staff? If you have the best people, you'll win, regardless of what happens.