Wall Street & Technology is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.


09:47 AM
Connect Directly

The Challenge

Management consultant Asiff Hirji got to know his client Ameritrade Holding Corporation so well that when the chance came to shape the technology strategy at the online broker, he couldn't say no.

Management consultant Asiff Hirji got to know his client Ameritrade Holding Corporation so well that when the chance came to shape the technology strategy at the online broker, he couldn't say no.

So in April, Hirji left Bain & Company and joined the Omaha, Neb.-based Ameritrade as its new chief information officer. He replaced John Mullin, who had been serving as interim chief technology officer.

Hirji had been advising Ameritrade on its acquisition and integration of Datek Online Holdings Corporation since last September and caught the attention of the firm's senior management.

"For me, this was 50 percent managing the technology function and 50 percent shaping the strategy of a firm. It's an atypical role for a CIO," he says. He adds that it's a "reflection of the fact that, for our company, technology is the product and not an adjunct cost structure."

When Ameritrade CEO Joe Moglia hired Hirji, he says his new CIO "has already proven to be crucial in advancing technology and clearing integration plans in his role at Bain. His experience as a technology and product expert is further enhanced by his familiarity with our industry."

One of Hirji's first priorities involved the post-merger integration of the two companies. "One of the first things we said to the management team was that technologists do not handle ambiguity well. Their role is unambiguous. So, we quickly had to establish clarity," says Hirji. But with two technology teams, differing technology and multiple sites, employees had a lot of questions about their future.

Hirji says there were three key things that needed to be determined: the overall technology architecture that the firm would go with, the organizational structure and the process for governing and managing the department.

The merger was approved on Sept. 5 and a timetable was established for converting and integrating the systems.

Within six months, the team was able to decouple Datek's back end - its books and record keeping - and hook that up to Ameritrade's system. "We had two independent front ends talking to a common back end."

As with any merger, there were cultural and employment issues to deal with. The combined firm had 600 technology employees, which had to be winnowed down to 350.

Hirji says that staffing is critical to success. "Pundits in the industry say that technology is the competitive advantage. I don't believe that. I firmly believe that the only sustainable competitive advantage is people. We have some of the best people in the industry, which allowed us to build the most compelling product. My job is to continue to attract, retain and develop them."

One of the first decisions that the firm made was announcing it would keep the Jersey City operations inherited from Datek. That put to rest speculation by some employees that they would be given their walking papers.

Rather, Hirji says, "Every manager had to rank their staff in order from the strongest person to the weakest" and it "went up the chain as far as we could go."


The goal was to identify the best staff and then fill the jobs accordingly. There were three levels. The "A level," or "I love you" category, were the people that the firm was bent on keeping. The "B level" were people who the firm would keep if there was a job opening and the "C level" were told early on there was no role for them in the new organization.

Hirji says one of the problems with a merger is that you have people who are passionate and committed to the way that their operation has built technology in the past, and they have their own set of experiences. He wanted to avoid the situation where people dug in and slammed opposing viewpoints. So, to avoid e-mail "flame wars," the company instituted a simple rule, no e-mailing people unless staff already knew them.

"We hammered into people the concept of having to form a working relationship. If you don't know that person, you haven't earned the right to e-mail them. You have to meet face to face or pick up the phone," says Hirji. "It's about building trust and relationships. We have got people who have never worked together, never met each other."

Hirji spent the first month traveling to the company's different locations and meeting with staff in groups of 20 - doing a "tremendous amount of listening. It can't be my vision of what's happening ... it has to be their vision."

According to its second-quarter financial statements, the firm achieved the expected synergies with more to come.

"We attained the targeted merger synergy run rate of $100 million after tax and expect additional synergies to be realized from the clearing and Web site conversions over the next two quarters," Moglia told analysts in April.


However, it hasn't been easy. First, Hirji notes that integration work can be tedious for staff, who "want to do the cool work," like product development. "The integration work has to happen." However, he says, when you "give people a boring job to do" they will spend the least amount of effort to get it done.

To keep the integration staff interested and feeling like part of the team going forward, they were give the chance to also engage in the "cool" work, provided they met their integration obligations first. That, he says, boosted productivity.

"One of the biggest challenges in integration was getting the clearing conversion done." Even though the firms were both online brokers and had "roughly the same customer base," when it came to clearing, there were differences in policies and procedures that had to be reconciled.

To "make it work on one platform," the business procedures had to line up. So, an executive was put in charge to oversee the conversion and the firm created a clearing team to pore over details. Then, over a weekend, the team had to "decouple the back-end system of one trading platform and hook it up to the other, without affecting the trade balances."

A SWAT team was also created for the day the conversion took place to deal with glitches, which were minimal.

One area where Ameritrade did have a snag was when it made its Streamer product available to the total client base. It required a plug-in and, "Little did we know that deep in the bowels of the plug-in, there was a bug that didn't show up in testing." The firm had to "rip out the plug-in," retest the system using another plug-in and roll it out again. Rather than snipe at each other, Hirji says, the two camps of technologists worked through the problem and solved it.

Next on his agenda is converting the two Web sites into one platform and one "Ameritrade experience." The firm also struck a deal to buy 20,000 retail accounts from mydiscountbroker.com, owned by SWS Group, Inc.

Hirji says what attracted him to Ameritrade was the "opportunity to shape the organization from the business side. Online brokerage is a compelling business. It continues to grow and there's good margins to be made."

He says with Ameritrade's cost structure and products, it's best positioned to capitalize on opportunities as the market consolidates. Nobody thought that Ameritrade would be able to buy Datek, but it did and, "We integrated it faster than anybody thought we could," Hirji adds.

Moreover, while other online brokers are retreating from foreign markets, Ameritrade is dipping its toes in the foreign waters. Last fall, it set up in Canada, allowing Canadian investors to trade U.S.-listed stocks.

But it's here in the United States where Hirji sees the most opportunity in three categories: "People who are leaving traditional off-line brokers and coming online; people who never had a broker before are coming online; and people who are switching to online brokers."

Hirji says Ameritrade will start differentiating between more and less active investors, the way that its competitors already have. "We will continue to bring them the kind of tools and capabilities hedge-fund and program traders have." That means giving investors faster trades, better transparency into the marketplace and more control over their trading.

Though he wouldn't elaborate, Hirji says that he expects to see more automated-trading strategies made available to retail investors, and the firm plans to launch an alerts and trigger system sometime in the summer.

He notes that Ameritrade has now gone from being considered an acquiree to an acquirer and that suits him just fine. "That tells me we're successful in the eyes of the marketplace. We delivered beyond the synergies expected. My job is to build on that and make it better."

Register for Wall Street & Technology Newsletters
Exclusive: Inside the GETCO Execution Services Trading Floor
Exclusive: Inside the GETCO Execution Services Trading Floor
Advanced Trading takes you on an exclusive tour of the New York trading floor of GETCO Execution Services, the solutions arm of GETCO.