UNDER THE COVERS II

What was on your agenda in 1998?Probably something very different from what you're working on now. That's true, at least, for our 1998 cover features. for one thing, The IT executives on the following pages have more responsibility(rede: more work). they may have finished rolling out their 1998 projects, but they still have to maintain and update that technology. Meanwhile, they've had even more piled on their desks. So turn the page to see what it's like under the covers.

Two years ago, Howard Sorgen was about to complete the rollout of Merrill Lynch's $825 million TGA project (more on that later). Now Sorgen is working to enhance Merrill's Internet offering.

Sorgen's among a select group of Merrill IT officials charged with taking Merrill Lynch Online (MLOL) from its current iteration--which offers services like order entry, account access, bill payment, research and funds transfer, as well as a whole host of e-commerce services--to the next level.

In fact, Sorgen (who's still Merrill's CTO for the U.S. private client group) says the new MLOL, due out December 1, 1999, won't look anything like the current version, which went live in June 1999. "Merrill Lynch Online will be completely revamped for a new infrastructure, new look [and] increased functionality," Sorgen says.

It will also mark the debut of Merrill Lynch Direct (MLD), a channel within the overall MLOL service for "self-directed" clients who don't use Merrill's financial consultants. Instead of paying one fee for total access, as regular MLOL users do, MLD clients will pay $29.95 per trade for U.S. equities, mutual funds and bonds. Other services will include real-time positions, funds transfer, online account enrollment and bill payment, and Merrill Lynch research. Consumer services such as eShopping, a business-purchase hub, and a Visa signature rewards-points program will also be available. New functionalities are scheduled to be added at a rate of six releases per year.

Merrill's been building its IT staff to keep pace. In February, it purchased the assets of DE Shaw Financial Technology (DESoFT), which has since been renamed the Intelligent Technologies Group (ITG). Sorgen says the group proved a valuable addition to Merrill's Internet arsenal. "They had front-end experience, [the] user interface," he says, which nicely counterbalanced Merrill's scaling and capacity knowledge. And ITG made a significant contribution to the new functionalities added to MLOL on December 1. "It was 30 percent their effort, 70 percent the existing Merrill Lynch team," he says. Now Sorgen plans to add 30 to 50 more people to ITG's staff.

But if you thought Sorgen had abandoned TGA in favor of Merrill's online efforts, you'd be wrong. Merrill continues to roll out software releases for TGA on a quarterly basis under Sorgen's tutelage.

MLOL, MLD, TGA....sound complicated? Sorgen says it's all part of the same plan. "In 1995, we decided to concentrate on financial consultant and client technology," he says. That decision gave priority to TGA, MLOL, interactive sales technology for the call centers, personnel technology, a firmwide client information management system, and e-commerce initiatives.

The idea behind TGA, one of the most ambitious IT projects in recent history, was to give all branch offices the same tools and functionalities: the same basic platform, the same set of office software tools, the same information services and the same industry-standard technologies. Merrill even built a portable TGA for financial consultants on the road.

The project, which bet on Microsoft Windows NT at the desktop and server level, is now live on 27,000 workstations in 703 branch offices domestically. In fact, as Sorgen proudly notes, it rolled out in October 1998, a month ahead of schedule.

And it was built to last well into the next century. Sorgen gave TGA enough headroom "so we [can] roll out as many applications as we can quarterly," Sorgen says.

Y2K has not interrupted that strategy. Merrill Lynch implemented a freeze on infrastructure effective October 15. But Sorgen doesn't see that as an obstacle. "We completed certification by June 30," Sorgen says, "and each new application is recertified."

Sorgen's also revising back-office and operations technology in the service centers. "We're putting in state-of-the-art workstations that include advanced computer telephony," he says.

Then there's Merrill's plans to gear up for decimalization and after-hours trading. "We are continually re-architecting the infrastructure to take on increased transaction and market data volume demands that will rise with decimalization. Scalability is always an issue," he says.

But Sorgen has a strong IT organization behind him. He reports to John McKinley, who joined Merrill as CTO in October 1998. McKinley coordinates among the four business CTOs and the CTO for infrastructure enterprise, but "the business owns IT application development strategy," Sorgen says. So he also reports to John "Launny" Steffens, vice chairman and head of the brokerage division. "It works very nicely," Sorgen says. "We discuss standardization and platform leverage with other CTOs and John McKinley, while applications are directed from business."

Sorgen's also assembled a pretty strong team for himself. Both Anthony Pizi and Philip Gilligan continue to report directly to Sorgen, but since the rollout of TGA, they've both been promoted to first vice president and have more responsibility. Pizi, chief architect for the private client group, has more firmwide responsibilities. And Gilligan has added MLD to his purview.

Sorgen particularly enjoys participating in Merrill's technology investment committee, which determines equity stakes in third-party technology. "It's a cool way for any firm to leverage technology," he says. "You utilize the software, have a say in the direction of the company and get to participate in the upside. You get psychic as well as monetary income from that."

Interviewed by Samara Zwanger

This past December marks Brian Slater's 28th year with Chase. It's also his last. Slater is planning to take a break early next year, "but I've got one or two things I'd like to do before then."

In fact, when we caught up with him in October, he was just getting involved in a greenfields project to develop a new desktop. Or as he put it, "the ultimate thin solution": a virtually supportless desktop. That project is being fostered at Chase's new technology centers in Tampa, Dallas and Lowell, Mass.

"Those new sites are providing an opportunity to address one of the major issues we have in technology: the cost of managing and deploying desktops," says Slater. "We're looking at a way to break the current model." The Chase team is currently assessing four options, the most promising of which will then be installed in Chase's test labs. From there, the desktops will be deployed in the centers and then, if the solution proves scalable, across the enterprise.

Now, you might have noticed this isn't the type of project trading room technology heads typically oversee. The truth is, Slater's actually been given a broader mandate. When we spoke in 1998, Slater was senior vice president in charge of global markets technology. Chase has since realigned internally. Slater now heads infrastructure and architecture for the wholesale bank--which includes not only global markets but global services and the global investment bank as well.

Why the change? Well, Chase wanted to bring all the pieces together and "leverage our operational capabilities across our business," says Slater, something he admits Chase hadn't "done as much as we would like to have done."

Of course, times have changed. "It used to be business lines could live quite happily with their own operations and technology, and it really didn't get in the way. But now, with e-commerce and STP, you've got to bring it all together," Slater says.

In fact, Slater says there's a major effort underway across the wholesale business to replace many of the systems that "carried us through from the former organizations" with a component-based architecture. After all, Chase has grown through acquisition and integration, and many of its systems reflect that heritage. So now, Chase is rebuilding discrete business functions as components. These new components are then tagged to the current system, which allows the bank to shut off functionality from the existing system. "So as you get more and more components in place, there's less and less of the old systems left. In the end they just basically disappear," Slater says.

This isn't an effort to tear it all down and start again. "The driver in terms of technology is how we can take the benefits from the business model that we already have in place," says Slater. "I think XML is one of the key ingredients to that, along with messaging infrastructures that really go across multiple platforms."

Chase's wholesale units are using messaging infrastructure to ensure there's a platform that allows those components to communicate, and then applying XML-based data descriptions to make the most efficient use of the messaging infrastructure, Slater says.

"What we've done as part of this architectural effort is to wrap a consistent layer of services that we'd expect to have in a messaging infrastructure and to do some work in designing the XML layer," says Slater. In fact, the bank, which has largely standardized on IBM MQ, had help from IBM to structure the approach, he says.

Meanwhile, the decision to use XML was largely driven by the global markets business, where information has to pass among disparate systems. That decision was made more than a year ago, well before XML was a household word. Chase is also a proponent of FpML, though Slater says other organizations are working harder in that arena.

Ultimately, Chase intends to take an active role in supporting standards, FpML among them. "We not only want to get the benefit of using it internally," says Slater, "but we want to be able to go and plug Chase into the rest of the world and understand the information that flows in and out."

But then, it has to. The bank is being forced to improve efficiency. The drive to T+1, CLS and straight-through processing and the virtual disappearance of "End of Day," as it used to be known, demand it.

Meanwhile, Chase's trading rooms are nearing capacity, and its investment banking business is requiring more support. In fact, the bank has already moved all nonessential personnel off the trading floor. The next step: another set of trading room revamps. "There are no specific plans yet, but Chase has to start thinking about it in the not-too- distant future," Slater says.

But then, Slater leaves behind a set of standards that are now established globally. In fact, his long-term mission to settle on one data distribution system is nearly complete. "Tibco hasn't completely gone yet, but it's over 90-percent done, " he says. For the trading room, Chase continues to work with Reuters on Kobra as its standard desktop app. Microsoft NT 4.0 is the standard desktop operating system. Chase's Trading Technology Units rely on Unix servers from Sun.

So what's Slater going to do after he "de-Chase-ifies?" "There are many options still to be explored," he says. There's too much going on and it's too exciting to miss, he adds. "In all the years I've been in technology, this is probably the most change we've ever seen in the shortest time. I don't want to disappear just when it seems to be getting really interesting."

Interviewed by David Rivers

The man who developed a risk measurement and control framework at Bankers Trust is now charged with a similar task at Merrill Lynch.

Yes, Clinton Lively, former managing director of Bankers' global risk management group, has moved to Merrill. He's the new--and first--head of the portfolio risk management group. Lively, who declined to be interviewed for this article, arrived at Merrill in June 1999.

He and his team are responsible for creating an integrated framework for risk management firm-wide that combines market and credit risk disciplines with others, such as process risk, says a spokesperson.

Lively joined Merrill in the wake of a reorganization of the risk management operation. In October 1998, the credit and risk management functions were integrated under Richard Dunn, executive vice president and head of credit and risk management. Dunn is the senior risk official at Merrill as well as Lively's boss.

Lively's work at Bankers Trust certainly gives him the right background for the job. When Waters interviewed him in 1998, Lively recalled how at Bankers, "initially, there were no standards for measuring risks--everyone you talked to would describe their positions in different terms."

So, standardizing measurement techniques and developing "a common vocabulary" for risk became Lively's top priority. "We spent the first several years on implementing and developing definitions of risk management for different types of products and risk," he said then. His group ended up with what he called "a very conservative" VAR metric as its primary risk measure, complemented by thorough stress testing.

But he also pointed out that risk management is more than just the methodology you use. "There are a lot of other things that go into a risk control function--most importantly, having a clear understanding of what your positions are and having a market opinion about the underlying variables," he said. "It's basically self-knowledge and market opinion--the core requirements of any business."

Two years ago, Mel Taub and Frank Bisignano had their hands full integrating Salomon Brothers and Smith Barney. Now they're integrating Citibank's corporate bank and Salomon Smith Barney's (SSB) investment bank, creating the Global Corporate and Investment Bank (GCIB).

A new IT staff had to be assembled to support the new entity. That's because each of Citigroup's three businesses--the corporate and investment bank, the consumer bank and the asset management bank and private bank group--runs separately, with its own technology team.

GCIB's new IT team is led by senior executive vice presidents Taub and Bisignano. Taub manages the cash and trade operations and technology, as well as mainframes, architecture and engineering, while Bisignano oversees distributed global markets trading and all back-office securities operations processing.

The creation of the corporate and investment bank meant rebuilding and expanding trading floors, rebuilding applications, keeping everything--including disaster recovery--operational, and ensuring reliability.

In November, Bisignano and Taub--with the help of Peter Fischer, head of operations, and Tom Sanzone, chief development officer for global operations and technology--orchestrated the smooth transition of GCIB's 700 fixed income traders into its 390 Greenwich location, the final step in bringing all the New York-based traders under one roof. "The business consolidated fairly easily and quickly," says Fischer. It also resulted in the retirement of "hundreds of applications," Sanzone says.

As for the GCIB union, the work is far from done. GCIB is co-locating in Sydney and consolidating floors in Hong Kong and Tokyo. And Fischer says the Canary Wharf build in London, which is combining traders from SSB and Citigroup, is the largest project of its kind in Europe.

"It's not about going to buildings and getting rid of existing technology," says Taub. "The technology is to increase revenue but just as much it's about reduction of costs." Sanzone adds. "Where there's the same business function on two different platforms, it makes sense to merge the two."

In addition, there's all those industry changes, such as decimalization and T+1, to worry about. "In Japan, [the focus is] real-time gross settlement," says Bisignano. "It's extended hours trading and the T+1 environment in the U.S. The industry is changing, and it's on every continent."

That will require more "capacity in networks, desktops, mainframes, core infrastructure," says Sanzone. "Extended-hours trading will stress us. We still have significant batch cycles, so to extend the window of processing will take creativity." Electronic trading in fixed income is coming, too, he says. He's also thinking about data mining, which is not currently consolidated across the firm. "It's about customer activity and relationships and helping create new business," he says.

Meanwhile, "the functional currency phase" for the euro is rapidly approaching. That involves every system that moves currency, says Taub. It also means restating historical data in euros. "It's a huge project to replace bank processing systems in European countries to a standardized approach and simplify it," he says. Over the next couple of years, he'll also be working on Citidirect, a new Internet-based delivery system for Citigroup's corporate customers.

And remember NextGen, SSB's retail broker workstation? SSB finished rolling it out "a little over a year ago," says Taub. "We've added applications, particularly intranet and Internet, and video to the desktop. Refreshing technology will be a key initiative [in 2000]."

Interviewed by Samara Zwanger

John Deane's been on something of a tear since he landed at AIM two years ago. In fact, his aptly named Project Slash and Burn has resulted in the replacement "of every PC, router, wire and turret for more than 2,000 users," Deane says.

In fact, "virtually no part of the company is untouched," says the CTO of AIM Advisors and chairman of the corporate technology committee for parent company Amvescap.

And there's still more to do, in particular T+1, which Deane calls "the biggest event of my entire career. That will take 30 to 40 percent of my time. It will make Y2K look like a walk in the park in terms of internal effort."

In the meantime, there's the constant upgrade and maintenance requirements of the new portfolio management and trading systems to worry about. "We have a major upgrade to the trading floor and portfolio management [systems] every six months," he says.

In addition, Deane, like many of his colleagues on the buy side, has turned his attention to customer relationship management, a job that will take until the summer to complete. And no, he's not doing it by himself. AIM is evaluating Siebel's call center technology. "The thing we like about it is we don't have to do a lot of coding," Deane says. AIM would go live with 800 to 900 positions in Houston during the first quarter.

Then there are the installs. When last we looked, AIM didn't have messaging middleware and Deane didn't have any plans to change that. "We're not of a size that we can get a payback from middleware," he said at the time.

That was then. AIM went live with Neon about a year ago. "It's business-driven," he says of the decision. "As we bring other parts of the global firm into Houston, it's a godsend for intersystem communication."

But Deane's had to learn the hard way at Amvescap. When he joined in 1997, he faced a decentralized organization that had multiple business units, each with its own set of systems. He immediately stepped in and helped select enterprise-wide technology standards. "We are centralizing common platforms--portfolio management, trading, securities settlement"--the most important pieces, he says.

Amvescap chose the MacGregor Group's Merrin Financial Trading Platform (MFTP) for equities trade order management, Bloomberg for fixed income trading and Thomson Financial Services' Portia for portfolio management. "The business goal is to create products anywhere in the world and be able to package and distribute anywhere in the world. Without common platforms, it costs twice as much."

Following that philosophy, Amvescap recently signed a 330-position license to extend MFTP to its asset management operations globally. MFTP currently runs at AIM's and fellow Amvescap unit Invesco's offices in Houston, New York, San Francisco, Dallas, Atlanta and London. It's now being installed in 14 offices worldwide with rollout to finish in July 2000.

Deane's also made a few adjustments to the market data operation. Back in 1998, AIM was using a Triarch digital data distribution feed for international equities, a direct feed from Bridge for domestic equities and Bloomberg for fixed income. But after experiencing some reliability problems in Houston, AIM "migrated away from Bridge as a quote vendor," Deane says. Now AIM uses Triarch and Reuters Plus. "It was a six-month project to move pretty exclusively to Reuters, and we got Tibco with it," he says.

Deane's also keeping a close eye on ECNs. "We can't afford to ignore them," Deane says. He's willing to install any ECN as long as he has the real estate and the ECN has the volume. He's a bit wary, though. "We thought Optimark would be changing things in a dramatic way. The technology works but hasn't drawn the market volume." Right now, AIM is hooked up to a number of ECNs, including Archipelago, Instinet, Island, Optimark and Posit.

He's also continuing to grow AIM's Internet efforts. Each business unit now has a content and strategy Internet team, usually attached to marketing. The IT department oversees certain sites directly, including the corporate sites and the primary internal client site. The technical side is located in Houston. "They put it together, host it, do the content, keep it running," Deane says.

The e-commerce unit, which supports all of Amvescap except for a previously established unit in the Invesco Funds group run by vice president Margaret Reilly, reports to Deane as well. "The Internet is changing distribution channels, not the products themselves," Deane says. "We're committed to being a top-tier competitor in terms of matching people feature by feature. In September, Invesco was the first mutual fund to [enable users to] initiate an account online with no broker. That was enormously successful."

Of course, all this work has taken far more hands than AIM initially had. That's meant adding "as many people as we could find with experience," he says. And AIM's IT staff has ballooned from 150 to 350 in 36 months as a result. Now, as AIM's technology reputation grows, Deane says, it's getting easier to recruit. Another positive sign: "our turnover has gone from 30 percent to 10 percent."

And while Deane has done much to bring AIM up to date, he's still taking a "wait-and- see attitude" regarding FIX. He's concerned that the software isn't up to the demand. In addition, internal business clients aren't pressuring him to get compliant. That's not to say he doesn't support the concept. "I'm actively interested in FIX and things like STP," he says, adding that AIM recently joined the GSTPA. "Personally, I think STP will require these kinds of protocols."

But, overall, "the buy side hasn't evolved that fast. Compared to large sell-side firms we're like the little kid brother. We don't have a spare $50 million lying around."

Interviewed by Samara Zwanger

A year and a half ago, Nigel Webb was Greenwich Capital's managing director and COO. But soon after our November 1998 issue hit the street, Webb moved to Garban Intercapital. Actually, that's not true. When Webb took the job as global technology director, it was just plain old Garban.

Garban has undergone some pretty dramatic changes since then--in particular a demerger from United News and Media and a union with Intercapital Group. And that's meant a lot of work for Webb, who oversees all IT (everything from day-to-day computer systems to future strategy) plus all communications systems and connectivity. Needless to say, reducing overlap among systems has been a top priority following the merger.

And that's meant setting firm-wide technology standards for the new Garban Intercapital, including Oracle Financials for accounting and Bridge BTRS for market data distribution globally. The Oracle system--which Webb calls "a tremendous help" in unifying the firm--was actually inherited from Icap, who in turn inherited it in its merger with Exco. Webb expects to roll out the system globally by the end of third quarter 2000.

BTRS, meanwhile, will roll out at almost all of Garban Intercapital's offices at the beginning of 2000. It, too, was inherited from Icap. Webb is standardizing Garban Asia and Europe on the Garban Trading System for fixed income trading and relying on GUIBOS, another one of the company's home-grown systems, for money markets and derivatives trading as well as back-office operations. For decision support, he's looking at Dart, a wholly-owned Icap subsidiary.

Webb is also busy consolidating Garban Intercapital's many locations. The firm is reducing its London real estate from six buildings to two. It's also consolidating to two locations in New York. And between the "buildings, systems, people--there's a fairly large amount of overlap," Webb says.

But reducing system duplication will also save costs, which is a priority for Webb and upper management. Webb points out that IT executives walk a fine line. "As a cost center, technology costs must be kept in perspective. But technology is the way forward, we need to invest in it."

While Webb feels he's "through some of the worst," he doesn't expect to rest much in the New Year. The integration won't end with the century. Nor will changes in the market. "To be able to compete you need the right technology," he says. That's particularly true for brokers, where "technology is a key driver for change." Technology can also be a deciding factor in attracting business. "Brokers live or die based on technology."

That's quite different from life at Webb's previous employer. As he points out, "banks do trades for their own sake, and technology is an enabler."

But it was at Greenwich that Webb realized that there are "certain applications you need to build in-house." That's especially true in the brokering world, he says, where "there aren't that many software vendors building for brokers."

Besides developing technology internally, he's turned to third parties. Intercapital and Bloomberg have been working together since before the Garban merger to deliver data and applications to Open Bloomberg. That technology, which "is pretty much in place," is in beta tests and scheduled to go live at the turn of Y2K.

Webb is also working with Trading Technologies to develop front-end technology that will interface with Garban Intercapital as well as carry data from other providers. "The deal clincher is to have the right technology on the client's desk," Webb says. "Trading Technologies provides us with a means of putting on the desk a screen that interacts with us and is compelling because it has more than Garban--it provides data from a number of other sources." And, adds Webb, it's all on a single screen, so customers won't have to go to multiple providers. He's also managing a relationship with Moneyline--which is partly owned by Garban Intercapital--to create a front end for GTN, Garban Intercapital's treasury system.

What's the common thread? Providing clients with a range of distribution channels. "The key is to have electronic distribution to get it to market; it's a critical priority. A broker is as valuable as the number of people who want to do business with us."

That's why Webb's also looking to develop an API so that large financial institutions can connect to the broker directly. "There are a whole bunch of players who want to code to our systems," he says. "That's the kind of role for standards like FIXML." Webb's team is in the "fairly advanced stages" of defining the APIs.

"The thrust toward electronic trading and electronic brokering is the biggest single development effort" Webb is facing. "Keeping [the alliances] going--some are managed out of the States, which has specific requirements, and some out of Europe--and coordinating them is a full-time job," he says.

But while Webb is personally keen on the public Internet, he says client resistance is an issue. "We'll move only as fast as our clients let us. Performance and firewall questions are still there. We use Internet technology, but mostly to deliver through private lines and service providers like Bloomberg. As confidence and Internet performance expand, we'll use more of it." And because he's using the technology already, the move from private to public Internet shouldn't be too painful, he says.

Interviewed by Samara Zwanger