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Bull’s Eye

Merrill Lynch takes aim at maximizing IT return.

Merrill Lynch takes aim at maximizing IT return

In November, Merrill Lynch announced one of its biggest IT initiatives to date: the replacement of 28,000 workstations used by its retail brokers, or financial advisers, with a new Wealth Management Workstation built by Thomson Financial. The new workstations feature quick and easy access to market data, news and account information; online collaboration with clients and between financial advisers; and CRM and portfolio management tools.

The deal shapes up as one of the largest outsourcing projects ever undertaken by the financial services giant.

"The existing environment is Merrill-owned desktops, servers, networks and content," said Marvin Balliet, chief financial officer at Merrill Lynch's global technology and services group. "The new environment is a Thomson desktop that's owned by Thomson, running a Thomson application."

Based on Microsoft's Windows XP enterprise computing platform, the new workstations are also faster and more reliable than the current ones, which are based on Windows NT and Windows 2000. "The jump from NT to XP is huge in terms of reliability and capability," said John McKinley, chief technology officer at Merrill Lynch.

To help ensure a smooth transition, Merrill has turned to VMware, a Palo Alto, Calif.-based manufacturer of "virtual machine" software, which enables multiple copies of an operating system to run on the same hardware platform.

"Seventy percent of our initial use of VMware is to support a graceful transition within our retail base," McKinley said.

By creating a stable, uniform platform for managing operating system and application updates, VMware is projected to save Merrill millions in hardware and software costs.

"VMware enables us to solve a variety of challenging IT issues in a quick, cost-effective manner," said McKinley.

"By embracing virtualization technology and standardizing on VMware, Merrill Lynch has seen a 40-50% cost savings," he added.

During the transition, financial advisers are being provided with dual-system access, enabling them to toggle between the older and newer systems. "We're using VMware to manage risk in transition," said McKinley. "VMware is running on each financial adviser's desktop."

Once the transition is completed, VMware will play an even larger role at Merrill.

"Once we go to full deployment of the Wealth Management Workstation, we'll focus on using VMware more as a server-side infrastructure rather than a desktop," said McKinley. "The more strategic role is in reengineering our server infrastructure."

By consolidating the workloads of multiple servers, VMware is expected to save Merrill $2 million in hardware costs alone over the next five years. "We're looking to take out a couple of hundred servers through more effective utilization," said McKinley.

The product will also streamline development and testing, he said. "VMware will enable better utilization of our disparate software development and quality assurance environment."

By harnessing large farms of Intel servers, Merrill is aiming to hike utilization.

"Our goal," said McKinley, "is to knit together commodity four-and eight-way Intel boxes into a single logical metaserver." The idea is analogous to storage-area networks, or SANs, he added. "Storage was running at 15 to 20 percent utilization. After SANs, they're running at 55 to 60 percent."

A Better Image
The concept of running multiple images of an operating system on a single platform dates from the mainframe era.

"IBM championed the virtual machine concept two decades ago with its VM operating system," said McKinley. "They continued on that path with Linux on the zSeries."

VMware applies the same concept to today's smaller Windows-based machines. "The approach that's compelling to us, instead of relying on a large metaserver, is knitting together a fabric of cheaper Intel boxes into a logical mainframe," said McKinley.

For Merrill, the server consolidation project is part of a larger movement to improve IT efficiency. "In aggregate, we've reached the era of austerity," said McKinley.

The successful project also provides a welcome respite in a year in which Merrill has been hit from all sides with bad publicity. In May, it agreed to pay $100 million to settle charges by the New York State attorney general that it had pressured analysts into issuing rosy projections about Internet companies in order to win their investment banking business. As part of the agreement, Merrill had to issue a public apology in which it promised to keep its investment banking and research divisions separate.

In June, two Merrill employees-Peter Bacanovic, a financial adviser, and Douglas Faneuil, a client associate-were placed on administrative leave after an internal investigation turned up irregularities in stock transactions performed on behalf of Martha Stewart. And in September, Merrill fired two executives-Thomas Davis, vice chairman, and Schuyler Tilney, a managing director in investment banking-after they had refused to testify in an investigation by the Securities and Exchange Commission and the U.S. Department of Justice into financial transactions initiated by Enron in 1999.

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