Outsourcing: Nice work if you can get it

When it comes to outsourcing, Mo Hirani knows his stuff.

As Executive Vice-President and Chief Technology Officer of Penson Financial Services Canada Inc., he has been immersed in IT outsourcing to the securities industry for the past three years. Hirani is also a member of a three-person committee that drives technology for the firm as a whole, while making sure it maintains its ability to offer and service products required locally.

To some extent, Hirani is living the IT executive’s dream. For starters, the Penson group of companies is very IT intensive. As technology-focused providers of a broad range of securities clearing and related services to the brokerage industry, a good quarter of the firm’s 650 employees worldwide are IT professionals. And as Dallas-based parent Penson Worldwide, Inc. is only ten years old – and the Canadian subsidiary only six years old – Hirani is working with a pretty clean technology slate.

“In the past year or so, we’ve built an entire new network infrastructure in our Montreal operation,” he said. “We designed and implemented a data centre from scratch, and that’s from floor to ceiling; I’m not just talking about the cabinets or the equipment; we actually designed the data centre itself from the raised floors to the HVAC to every other aspect of it.” With no mainframes to worry about and the latest technologies to work with, Hirani is in an ideal position compared to many IT execs. “We have no issues of combating legacy systems, which a lot of other CIOs have inherited and must somehow build upon,” he said. “With a ten-year-old firm, it’s a lot easier to come up with new ideas and plan how to deploy the best of technologies that are becoming available.”

Without the usual legacy encumbrances, Hirani believes he can be more nimble in meeting or staying ahead of market demand. “We can have a front, middle and back-end that is entirely Web-based. Integration to data processing models is very easy, and we’re able to offer very extendible integration possibilities.”

Integration challenges

Still, like any other IT exec, Hirani has various issues that he’s grappling with. Topping the list is making sure that the company is able to integrate all of the applications it has worldwide and to deploy solutions in a timely manner so that the firm keeps ahead of market demand. So far, according to Hirani, Penson has been very successful doing this.

“It takes a really good feel for what’s out there in the market to figure out that no matter what client comes in the door and what vendor relations they have, we’re going to be able to make it work,” he said. “It’s a big challenge and it takes a very flexible design to try to do that.”

One of the keys to such flexibility lies in not being completely married to one particular language or platform. “You’ve got to pick a couple of analogous platforms that don’t conflict, but rather complement each other,” Hirani observed, “because invariably you’re going to deal with vendor relationships or third-party applications which draw more closely to one versus the other.”

Hirani is determined to have Penson benefit from its enviable technology position. “We have the benefit of hindsight and the benefit of newer, better technology at our disposal,” he noted. “We want to make sure we don’t become saddled with the kind of legacy infrastructure that some firms have to deal with today.”

Towards that end, Hirani is intent on having his platforms complement each other and have a certain amount of reusability between each other, so that they do not become onerous to support moving forward.

The STP issue

Being in the financial services sector, STP or Straight Through Processing is one of Hirani’s key focuses. STP refers to the technology and processes around reducing the time it takes to negotiate and settle trades. The financial services sector is expected to spend over US$12.2 billion in this area through the end of this year.

“STP seems to be the big thing in our industry of late. It’s almost akin to the Holy Grail. Everyone wants to find it; everyone wants to know what is,” said Hirani. “There are a lot of different definitions of STP out there. You’d be amazed how many firms boil it down just to doing a simple business process from A to Z.”

Penson is taking more of a macro approach to STP. The company is looking at the entire process – from time of trade execution, through the trade going through the market, then through the banking process and risk-management process, to the point that it is posted in an account for cash or securities.

“We look at that process A to Z, and we’ve integrated all of those vendor applications and trading systems into our network, and through the downstream processes with the various banking agencies and depository agents. Everything is automated all the way down to the delivery of that trade confirmation to your door,” said Hirani. “I would estimate that 99.5 percent of our trade volume is automated in this fashion. It’s probably the best example of integration in our company.”

All things considered, Hirani finds life without legacy systems pretty satisfying. When asked what keeps him up at night he replied, “I’ll tell you honestly. What keeps me up at night is my eagerness to get to the next day’s work. It’s a really nice problem to have.”

Jealousy will get you nowhere.

QuickLink: 058237

–David Carey is a veteran journalist specializing in information technology and IT management. Based in Toronto, he is editor of CIO Canada.

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