Big Issues For 1996: The Internet, NT; App Development And Outsourcing Too

Of all the big issues for trading room technologists this year, the Internet was by far the biggest. And when they weren't concerned with TCP/IP, those technologists were pondering their desktop O/S strategy and developing applications to leverage hefty investments in data distribution platforms. Meanwhile, Wall Street's CIOs pondered whether they were getting a decent ROI from their technologists, and evaluated whether outsourcing was a route to follow. Some thought so.

The Internet--and related technologies--attracted a lot of attention because it provides a low-cost way of delivering information and applications. Internet technologies, such as Sun Microsystems' Java language, offer the opportunity to develop applications that can be delivered to multiple platforms.

For example, software houses are now using Java to deliver a whole host of applications--including pricing calculators, investment analyses, portfolio management programs, spreadsheets, and display apps--over the Web.

Even more intriguing, some vendors--including CSK Software with Slingshot and Quote.com with Qlive--have developed software that allows users to deliver near-real-time data and news via an intranet or the Internet.

First Union National Bank used Java to link IPC turrets with proprietary customer data, so that information about incoming callers now appears on traders' screens. FUNB used Java because it can support information on multiple platforms.

And FUNB was also an early user of Sun's Javastation Network Computer, but not yet in its trading room. Thin client NCs (essentially bare bones computers that run Java apps) could provide cost-effective solutions to applications that are server-based. And if they catch on, they will fuel moves away from distributed computing and back to a more centralized IT approach.

Meanwhile, Scotia Capital Markets began using its intranet to deliver research to traders. Even trading of all things is now possible over the Internet. For one, Daiwa Securities developed an Internet version of its US Treasury Odd-Lot trade execution system.

For another, PC Quote added trade execution to its Internet-based PC Quote 6.0 workstation. And BankBoston teamed up with Concept Five Technologies to develop a Web-based spot foreign exchange transaction and real-time price delivery service.

Tibco--which began 1996 without such a silly name--predicts that by 1999 all financial information, including real-time data, will be delivered using Internet technologies.

Thus, the vendor jumped into the game in December with a product called Tibnet. It brings Tibco's publish and subscribe technology to the Internet and intranets and was developed in conjunction with Cisco Systems, the market leader in network routers. By bringing Tibnet to the Internet, Tibco is aiming to target industries other than finance and trading.

Now that most Wall Street firms have bought or developed a digital data delivery platform, they are turning their attention to building elaborate applications to rest on them. For example, this year JP Morgan began providing its equity traders with multidimensional data visualization software. PaineWebber gave its mortgage-backed securities and derivatives traders an object-oriented data visualization and analysis package from Mathsoft. And Goldman Sachs and Fidelity Investments purchased distributed object software from Expersoft.

Trading technologists--who were once focused on very proprietary technologies--are increasingly embracing the mainstream computing world. Distributed objects, data warehousing and application toolkits are finding their way into Wall Street tech labs, and sometimes to live systems. And the vendors of such products are learning the hard way that financial trading is a leading edge testing ground.

Meanwhile, the market for digital data distribution platforms is consolidating, and it's dominated considerably by Reuters. Measured by number of positions, about half of the world's trading rooms use either Reuters Triarch or the Information Bus, a product of Reuters' subsidiary Tibco, according to estimates compiled by Waters Information Services.

Dow Jones Telerate, Midas-Kapiti International, and CSK Software (aka Micrognosis) are minor league by comparison.

Two Wall Street giants--JP Morgan and Prudential Insurance--announced surprise decisions to outsource large pieces of their IT business to save considerable money. Until now, financial companies have long been known to keep a tight hold on their technology for fear of losing competitive advantage. A spokesperson for JP Morgan said it would be possible to save as much as $346 million over the next seven years by outsourcing because the firm's outsource partners are larger companies and therefore have bigger economies of scale.

Prudential Insurance outsourced maintenance of its legacy mainframe-based applications to IBM's Integrated Systems Solutions Corp. (ISSC), while JP Morgan outsourced desktop support, voice, data and distributed computing to Computer Sciences, Bell Atlantic, AT&T Solutions and Andersen Consulting. Other companies that responded to Morgan's request for proposal were Electronic Data Systems and ISSC. In 1997, outsourcing could become a trend.