Ameritrade COO Talks About Business-Technology Mix

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September 12, 2005 (Computerworld) -- NEW YORK -- Asiff Hirji last month was promoted to chief operating officer of Ameritrade Holding Corp. after serving three years as CIO at the online brokerage. Hirji discussed his new role overseeing business and IT operations and offered advice to other IT and business executives during a question-and-answer session at Gartner Inc.'s Financial Services Technology Summit here late last month.

Asiff Hirji, COO of Ameritrade Holding Corp.

How do you see the role of the CIO moving more toward a business role? In financial services, the technology and the business is going to get more tightly tied together. I do see the evolution of the CIO being more oriented toward the business. I could imagine the head of a business division becoming the CIO. I'm still making that transition from CIO to COO.

How will you align Ameritrade's technology and business strategies? I have to believe that Ameritrade is a bit of an anomaly. We are a financial services firm, but we have more in common with the Amazons, eBays and Pricelines than we do with, say, Citibank or Fleet.
It's impossible for the technology strategy and business strategy at Ameritrade to be misaligned, because there's no such thing as a technology strategy here. We are a technology company and we have business strategy, ergo the technology supports that business strategy.

Will you be making changes at Ameritrade, which is seen by many as a niche online trading company rather than a financial services firm? We, like most companies, have gone through an evolution. We started life as a discount broker. As we grew to 6 million account relationships and $220 billion in assets, there's a whole plethora of [new] services that our clients are now asking us for. That's been the driving logic behind the TD Waterhouse transaction .
It's also the driving force behind our client-centric strategy. We are a very low-cost, very highly profitable and very scalable financial services transaction processor. We can leverage the backbone we have. Our platform is the most scalable, most cost-effective trading platform on the planet. There's no difference if your trade originated on the phone, online or at a branch. It processes through that same platform.

Many organizations see IT as an inhibitor of change. How does a CIO or COO change that perception? I think a lot of that frustration probably has to do with [users saying], "I can't get IT to actually do this project on time. They're never on budget." I'm guessing that's where a lot of that frustration's coming from. We fix that primarily through governance. When we put the new structure together for Ameritrade, we said let's understand two things: [First], our industry is really dynamic. So if anybody knows in January what's happening in September, they must be God, because there's no one else on the planet who can figure that out.
Second, we're crap at estimating. If we're crap at estimating, I'd rather you estimate on something that's six to nine weeks out as opposed to six to nine months out. We have a very simple rule. Every single project we do, six to nine weeks is the max time it will take.

Most companies seem to focus on keeping the lights on versus delivering robust and reliable systems. Is Ameritrade any different? Back in my consultant days, the typical client would spend roughly 70% of the budget on maintenance and 30% on new stuff. For us, it's absolutely the inverse. That's a number I track very specifically. We manage to that.
Second, we look very hard [at spending] by area. Typical spending goes into things that do not differentiate. We try very hard to suck all money out of that and pour it back into the things that do differentiate. We believe the only sustainable competitive advantage is the quality of our own tool. Frankly, my job boils down to one thing: attract, retain and develop the best and brightest staff. You do that, [and] everything else takes care of itself.

What can the average IT operation do to increase its percentage of new development compared with maintenance? [If] your payment system is [built] on '60s Cobol, no one's going to throw that out. Maintaining that thing is really expensive, so there's no way on this planet that you're going to get to 70/30 on that.
But every new business or new initiative can be on open-source technologies with horizontally scalable, as opposed to vertically scalable, systems. [Such systems can be built by] people who are trained in Java and know what object-oriented code is and know what "SLA" stands for. When they build a system and manage a system, you will be at 70/30 in those parts of your world. There are companies in India or China who know stuff [like Cobol] cold. And they can run it cheaper than you can.

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