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Server investments pay off in financial service

For much of the financial services industry, the aftermath of 9/11 revealed huge gaps in backup strategy. The New York Board of Trade, a major commodities exchange, found that what documentation existed for its 20-year-old clearing system based on Tandem NonStop went up in smoke.

Consequently, when NYBOT began planning to replace its legacy trading system with one based on BEA WebLogic, the last thing it thought about was cost justification. "We didn't have any choice," explains David Sternberg, director of clearing technology. "9/11 made the system necessary."

Obviously, organizations have varying requirements for cost justifying new IT efforts. According to Gartner Vice President Yefim Natis, the situation is no different for BEA WebLogic projects. "Application servers are established technologies," he says, adding, "In most cases, the question isn't whether you need an app server, but which one to use, or whether to use Microsoft .NET or J2EE."

The conventional wisdom is that costs are generally lower for Microsoft solutions because professionals, such as Visual Basic programmers, are paid less than Java counterparts, and because Wintel is cheaper than UNIX hardware. In recent years, that logic has been turned on its head because the newer .NET framework's technology requires many of the same object-oriented skill sets as Java and J2EE, and because J2EE does not have to be tied to UNIX.

Changing to survive
At NYBOT, there was little question about the need for a new clearing system using standard, off-the-shelf, well-documented technology. Anticipated savings, such as lower maintenance costs from using IBM RS/6000 UNIX servers rather than Tandem machines or the likely reduction in overtime, didn't clinch the argument for the new BEA-based system. For the business, it was simply a matter of survival.

Nonetheless, using the notion that time is money, the team made a quick build vs. buy comparison. Since few of the veterans who developed the system in 1981 were still on staff, NYBOT could have done the rewrite itself. "But most people had moved to other areas of the business," Sternberg says. "Bringing them back, even part time, would have been very disruptive." Further, while internal development might have been less costly up front, long-term maintenance would prove far more expensive.

NYBOT found an off-the-shelf clearing system developed by onExchange, a BEA partner. With that option, NYBOT estimated it could shave 12 to 18 months off the implementation timeframe. "We didn't compare hard numbers or empirical data," Sternberg explains. After consulting mid and upper management, "it just seemed that purchasing the system was the right decision," he says.

Unlike the old batch-oriented system, which processed trades after hours, the new system, deployed on BEA WebLogic Server 8.1 and an Oracle database, completes trades as they happen, dispatching data by Java Messaging Service that's converted to MQSeries feeds to member firms. Although the benefit of real-time trades wasn't quantified, it provides a strong weapon for retaining the loyalty of the exchange's 700-plus member firms.

Although the system won't fully cut over until spring of 2005, NYBOT is already realizing tangible benefits. For instance, in February, it planned to introduce three new offerings. Previously, it would have been happy to develop that many new trading products or services in a year.

Naturally, the benefits don't come without costs. Besides expected costs, such as capital outlays for new software and hardware, recruitment of a WebLogic specialist, and consulting, there were several surprises. For example, the project was delayed roughly six months to handle the cleansing and reconciling of data from the legacy systems the new clearing system would touch. Not every surprise was unpleasant, however. "Because our DBA knew DB2 and Oracle, there were some costs we were able to avoid," Sternberg adds.

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