The Ameritrade IT-Business Alignment Model

At Ameritrade Holding Corp., technology doesn't support the business, it is the business. The company likens itself more to an Amazon.com Inc. or Google Inc. than to a conventional brokerage. And unlike some of its competitors, Ameritrade has given IT management a prominent seat at the table in formulating strategy.

Gaining alignment between IT and business is a direct result of CIOs having the ear of the CEO, said Asiff Hirji, Ameritrade's chief operating officer, at the Gartner Financial Services Technology Summit in New York on Monday. "It's impossible to separate IT and business strategy," he said.

Ameritrade's recent acquisition of TD Waterhouse provided added impetus for combining the roles of CIO and chief operating officer at the company. Grafting TD Waterhouse's branch network onto Ameritrade's online business model requires close collaboration between IT and operations, Hirji said.

Hirji, who was Ameritrade's CIO for three years before being named chief operating officer earlier this month, shares strategic planning responsibility with the company's CEO and CFO. The planning process is simple: At the beginning of each quarter, business heads state their goals, such as increasing assets or average trades per client, and their budgetary needs. At the end of the quarter, goals are reviewed against performance, and the budget is adjusted up or down accordingly.

The quarterly planning window differs markedly from most firms where projects get funded six to nine months in advance. The problem with that approach is that the margin for error is too high. "If I'm estimating out six to nine months and I'm wrong, then I've lost a nearly year's worth of planning," Hirji said.

From its beginnings as a discount brokerage, Ameritrade has evolved into a full-service financial-services provider with 6 million customer accounts and $220 billion in assets. Along the way, the company has had to offer more services while remaining a low-cost provider. It has done that by continually focusing on systems enhancements; 70% of its IT budget goes toward building new functionality and 30% toward maintenance, Hirji said.

Integral to its design philosophy is soliciting customer input. The company has thousands of customers who actively test new functions before they're deployed systemwide. "Active capture of customer input is baked into our design philosophy," Hirji said. CIOs that don't play an integral role in business planning are an endangered species. Said Hirji, "Companies with low technology intensity are better off outsourcing their entire IT operations."