Q&A: Ameritrade CIO tackles TD Waterhouse buyout, integrating systems

Combined company to lay off one-third of IT staff, consolidate data centers

Ameritrade Holding Corp. completed its acquisition of TD Waterhouse Group Inc. yesterday, creating a combined company known as TD Ameritrade Holding Corp. While the names were easy enough to merge, IT systems and personnel are another story. Jerry Bartlett, who was named Ameritrade's CIO in September, spoke with Computerworld about the challenges ahead and how he will face them.

Your two companies are about 1,000 miles apart. What integration issues will that cause? I don't view that as an issue. Ameritrade has legacy operations on the East Coast -- close to 100 technologists. We have already been operating in a dispersed mode anyway. What's kind of cool about TD Waterhouse is that their entire IT organization, with the exception of literally five people, is right across the street from our Jersey City location. So from a geographical standpoint, we don't view it as an issue in the least.

Ameritrade and Waterhouse are also worlds apart in what you do. How do you deal with that in terms of the integration? That's what led us to do the merger. Ameritrade's been known for the active trader space and TD Waterhouse has been known for accommodating the long-term investor and adviser space. Ameritrade's strategy has been to get into that space. By completing this acquisition, we feel we've advanced our strategy by a couple of years. We're in a position starting today to implement a client segmentation strategy that focuses on the active trader, the long-term investor and the adviser: one platform and one financial services firm.

So what's the biggest challenge in terms of the integration? It's making the personnel and culture things work well. The technologies are fairly similar. Two or three months ago, we already made the decisions on which systems were going to survive and which would be retired.

How many layoffs will result from this merger? Over the last three months, we went through an objective, performance-based assessment of all 800 technologists -- between the two combined firms -- and made decisions there. That's always the hard part. While a merger like this is great and wonderful things come out of it, there's always the downside: The economics drive negative impacts on some associates' lives.

Over the course of the next 18 months, we're going to go from 800 folks to about two-thirds of that. So about one-third of the IT staff will be leaving over the next 18 months. So getting these two teams to gel under new management... that's the tough part.

As CIO, it's my job to set direction and lay out a vision. A huge part of that -- 70% to 80% of my time -- is spent addressing the development of the culture and how the teams come together. It is the single biggest challenge we have.

The integration itself is pure execution. We've done this seven times before. Virtually the same technology management team from the legacy Ameritrade, myself included, will be working on this. We've got a playbook.

While it's daunting and it will probably cause me and some others a couple of sleepless nights, it's just execution. We've done it before.

As the new CIO for Ameritrade, what are your objectives over the next year? The integration is my :No. 1 priority. But, other things we'll be working on: We will be focusing on a data center strategy that's moving us toward an active/active approach. That's not something Ameritrade's done typically. We're going to continue to deliver innovative products to our client base because that's part of aggressively running your business, and not doing that is why many merger integrations fail. We're also going to focus on business intelligence in the data warehouse. With the new company and the new brand we're going to launch in the spring comes a new, cranked-up focus on clients. Knowing those clients is critical. We're hellbent on not pigeon-holing our clients. We need to understand their needs based on their behaviors and offer them a variety of solutions. To do that we need to improve our data warehouse and improve the sophistication of our business intelligence tools.

Have you chosen a BI vendor, or are you developing this internally? We're not going to develop the analytical tool internally. We're in the process of evaluating that. We are refining the underlying structure of our warehouse and our operational data store internally. We've got some folks who have done that before.

When do you plan on completing this BI project I'm hellbent on doing it before the end of the year.

What's wrong with your current data warehouse? Just the structure of many of our databases makes it very difficult to correlate. If a relational purist were to look at this, he'd just shake his head and walk away. While I'm not looking for a purely relational model, I'm looking for something that makes it easier to lay analytical tools on top. We also want to get to a new level of granularity around the data that we collect on our clients' behavior. So we want to be able to accommodate new data related to our client behavior. The other thing is we're actually building a user activity bus, so that every user activity that occurs gets logged into our operational database. So we have to build out the bus and tie in applications so every time a user makes a request it gets published onto a message queue and then stored.

What other technologies are you hoping will help? I've got four data centers that are going to two over the next 12 to 18 months. There'll be excess hardware that I'll be able to leverage. Storage is an area that obviously we're looking at. Part of what we're trying to do there is rationalize it based on tiers, level of services. It used to be that firms -- Ameritrade included -- would buy the high-end and most expensive storage possible no matter whether you're storing e-mails or client-sensitive data on it. Our strategy is to have a more economical approach to our storage.

What are the storage technologies that will help you down that tiered road? We are interested in virtualization. We've not strayed far from the beaten path, and that's something we believe is one of two new areas we want to look at -- the other being voice over IP. But at this point it's too early to say what direction we're going to head.

What are the biggest security threats these days? If you look at what's worrisome, not just for me but for my peers particularly in this industry, it's security and the protection of our clients and their data and assets. If we lose that, we lose. The good news is we've done some amazing things to protect our perimeter. I'm confident that data, while it's in our data centers, is absolutely safe.

In fact, in the November/December time frame, we rolled out brand-new encryption technology. Everything gets encrypted as it's written to tape. Nothing leaves our data centers that isn't on an encrypted tape. We actually changed our processes on how we move tapes. We used armored car services. But our biggest threat is what happens on our clients' computers. That's what worries me more than anything. No matter whether you use biometrics for authentication or tokens or whatever you want to dream up... if a bad guy already has a Trojan on your computer, he can take control, get the data he wants and transfer money. So we're very serious in addressing that, but we feel a bit limited. We've got 6 million accounts.

Copyright © 2006 IDG Communications, Inc.

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