Taking Stock

By John McCormick  |  Posted 2003-11-01 Email Print this article Print

The online brokerage had to buy rival Datek in order to survive. But growth can kill, too, unless you merge systems carefully.

Taking Stock

The trimmed team worked from the back forward, consolidating the clearing of transactions onto Ameritrade's system first.

"In the end, the clearing systems were a wash. They were equally modular, they had equal cost performance, equal capacity," says Hirji. "So, from a risk-mitigation point of view, you'd rather move a million [accounts] than move two [million]" over to a new system.

Moving Datek accounts into Ameritrade's databases for clearing was relatively straightforward. A procedure was created that duplicated Datek's data sending and receiving process on the Ameritrade clearing platform so that files could be easily sent between the two systems.

Melding ordering systems wasn't as easy.

Both companies' systems consisted of two pieces—an order manager, which handles the customer's request, and an order router, which communicates that request to the appropriate stock exchange.

The team decided to keep the Ameritrade order manager, since it was more robust at handling trades.

But it found that the Ameritrade and Datek order routers were equally strong and decided to keep both. However, the team felt that the Datek order router was faster and better at handling certain functions, such as trailing stops—a price point set by the trader to automatically initiate the sale of a stock—and plans to consolidate order routing on the Datek system.

The combination of order manager and order routers presented a problem: The Ameritrade and Datek systems could not reliably recognize an order as it passed between the systems. The answer: an electronic token that is now attached to each order, for tracing.

"It wasn't exactly easy to unplug [the Datek order router] and plug it into the Ameritrade system,'' Hirji says. "[But] that's what we did. We went through that pain,'' knowing the improved order-processing speed could be a competitive advantage. This fall, the company expects to start promoting five-second trades.

With the clearing and order systems combined, the company consolidated data centers, keeping Ameritrade's main data center in Kansas City and Datek's in Secaucus, N.J. Scuttled: a backup Ameritrade facility in Omaha. The remaining two centers would back up each other.

Another loose end was the empty CIO seat. Ameritrade's management was looking for a person who understood both business and technology and knew what it was trying to do with the Datek merger. It found Hirji, who accepted the job in April 2003. David Shpilberg, who heads Bain's information-technology practice, says the company had mixed feelings about letting Hirji go. But it wouldn't be the first time a CIO was hired from a consultancy brought in to handle a critical technology change.

By the time the final big task—unifying the Web sites—came to the front, Hirji was on board.

But making all the trading tools from both sites available to all customers of a unified site proved problematic.

Datek's Streamer was built to run on Windows servers, not servers, such as Ameritrade's, that use Solaris, Sun's version of the Unix operating system. To adapt the constant-quote service for use on its servers, Ameritrade used a Java plug-in to provide a link back to Datek's Streamer servers.

But the plug-in didn't always work due to a fault in the program. As a work-around, Ameritrade added a Web server to the system that allows traders to link directly to Streamer.

Streamer may now work, but Ameritrade's site is still considered lacking in tools and not easy to use, according to Gomez Inc., which monitors and ranks Web sites by cost, customer satisfaction and other parameters.

Phylis Esposito, Ameritrade's chief strategy officer, notes that Ameritrade ranks well on its ability to execute transactions, which was the company's first priority. Only recently has the company been able to turn its attention to making the site easier to use and navigate. Coming: the ability to initiate a trade from any page on the site. Hirji calls this a "persistent trade ticket'' and says it will appear when the new Web site rolls out, most likely before the end of 2003.


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