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Last fall, Ameritrade Holding Corp. closed its $1.29 billion acquisition of Datek Online Holdings Corp., creating the worlds largest online brokerage company in terms of daily equity trades. While studies have shown that more than 70 percent of mergers fail, Ameritrade, in Omaha, Neb., recently reported continuing growth in its core online brokerage account base. The company opened 31,000 new accounts in April, for a total of 2.92 million accounts, with an average daily volumeof 124,000 trades.
Some of that success can be attributed to Asiff Hirji, who was appointed Ameritrades CIO in March. First as a consultant, now as CIO of the company, Hirji has been tasked with shepherding the merger and integration of two vastly different corporate networks.
eWEEK Labs Senior Writer Anne Chen recently spoke with Hirji about his corporate network strategy and how he will lead Ameritrade through the third, and last, phase of its technology merger and beyond.
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People were surprised when Ameritrade purchased Datek. How are you pulling it off?
Nobody gave us any credit for being a suitor for Datek, and when we announced we had purchased the company, they had to pick their chins up from the floor. Its now nine months after the deal closed, and we have completed the bulk of the conversion ahead of schedule. Quite frankly, were already looking ahead at what types of products and services we want to roll out.
Can you explain the processes and practices you used as you integrated the two infrastructures?
Technologists by nature are not comfortable with ambiguity. Unfortunately, post-merger integration is possibly the most ambiguous thing you can do. To succeed, we had to build trust and make sure there was no pandemonium.
We also stamped out all religious wars. Most mergers fail, and it takes a very well-managed, well-planned merger to succeed. We basically looked at the functionality of all the systems and determined the maintenance and performance costs of each one.
For the process itself, we decided to take the best of each organization. For example, when we looked at operating processes, it was clear the legacy Ameritrade had a more mature operating organization. But when it came to product development, we lifted the Datek processes because [they] fit better with the overall organization.
How did you handle the merger of two IT staffs? Did you handle all of the conversion internally?
In most mergers, the acquiring company usually loses the staff of the acquired company. In December, we very methodically went through and force-ranked the staffs of both companies and put them into three buckets. By the end of January, we told every person on staff whether they were staying or going, even if we wanted some of them to stay through June or September. We started with 600 IT staff members across the combined entity and will end up with about 350 by the end of the year.
We have consultants from Bain & Co. helping with problem solving as part of managing the integration effort, but we are not using external technology consultants for our merger.
What is the integration project you are most proud of?
We did a clearing conversion that happened over a weekend in March. It is a type of project that, as best I understand it, no one has done before. We took two highly different and fully functional trading systems, decoupled one of them [the Datek system] and hooked it up to the Ameritrade system. We moved almost 1 million accounts and $10 billion in assets with a lot of transactions in flight. And on Monday morning, everything was business as usual.
What merger projects are left for you to work on?
In terms of priority, we had conversion, integration and the Web site. We have done everything, save the Web site. We have two independent front ends right now. We will migrate to a common front end by the end of September.
We have about 17 or 18 different client experiences that we support today. Those include Ameritrade, Accutrade, Datek and Datek Gold. All of those sites are currently running on two different infrastructures and architectures.
Our goal is to have one common platform in order for us to see the most cost savings. The Web site will initially be on a Unix and Linux hybrid platform for the front end, and we will migrate that more and more to a complete Linux environment as much as possible.
What role does Linux play in your new corporate network?
Were looking for solutions that offer more flexibility. Were also looking at any option that reduces costs. Linux reduces costs while increasing flexibility, which is great. A few years ago, vendors would sit there and try to convince us that Linux was not ready for full corporate-scale applications. It was ready, and they were just plain wrong.
The industry has rolled out Linux, and weve been working on Linux for a few years now. We will continue to work with Linux, and it will continue to play a large role in our platform. We believe it gives the right trade-off between costs, reliability and security.
Many organizations are focused on cutting costs. Is the mission of the IT organization at Ameritrade changing to simply a cost-cutting vehicle rather than a critical piece of the strategy?
Both the companies were very pragmatic, and by that I mean they tended to be careful about how they spent their money. Technology here is the product, which is why the technology budget has not been cut. We are, however, squeezing our vendors hard and trying to get deals from vendors we cannot refuse. Our goal is to do more with fewer dollars so that we can reinvest our savings in new projects for our clients.
Its a really nasty time in the industry because margins are down. We have the lowest cost structure, bar none, here. By not flashing our budget, by squeezing dollars out of vendors and by investing in products, we are the stronger competitor and in a better position than others.
What new projects can we expect from Ameritrade during the next few months?
We have the privilege, or the misfortune, of being a leading adopter of new technologies. Were currently working on a number of product enhancements and features. Were rolling out streaming quotes to all Ameritrade clients. We are also making some enhancements in options functionality and in order management platforms.
We use XML pervasively in our platforms to make sure our systems are modular, and we will continue to do so. You could unplug our order manager, for example, and plug in another order manager with the same Web services interface, and the rest of the code wouldnt know any different. It is part of our design philosophy.
We will work to enhance the experience on the Ameritrade and Datek sites. Because were migrating to one platform, were taking the time to rethink how navigation works to improve the overall experience for our active clients. ´
Senior Writer Anne Chen can be reached at [email protected].