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Scottrade reinvents PMO for speed and volume

As CIO of the discount online broker Scottrade Inc., Ian Patterson pays attention to speed and volume. In this interview, Patterson talks about the transformation of the company's program management office from creaky to competitive.

As CIO of online discount broker Scottrade Inc., Ian Patterson pays attention to speed and volume. A former IT strategist at consulting firm Deloitte Touche Tohmatsu, Patterson has barely come up for air since joining the St. Louis-based broker in 2005. He led the design and implementation of the firm's new $25 million data center, the largest technology investment ever made by the privately held company. When a creaky program management office (PMO) threatened to hold back the fast-growing company, Patterson re-engineered the process with a quick and dirty scorecard and intense participation by his business partners.

Ian Patterson
Ian Patterson
In our interview with Patterson earlier this month, he tells us about the results of that PMO makeover (think speed and volume) and reminds us that technology is handmaiden to the company's highest-held attribute: customer service. But first, we start with a few questions about what's it like to serve some 2 million traders at a time like this.

Given the news, let's start with the customers who use Scottrade to make trades. Does your business increase or decrease when there is volatility in the market?
Patterson: When there is volatility in the market we typically see an increase in our business. We've seen a large spike up for about the last month.

Are there special challenges for your management team during a time when the stock market changes, say, 800 points in a matter of hours?
Patterson: We build our systems to have expandability and the capability to grow. The interesting thing about this is you can't test for the type of things that have gone on in the last months. We do a lot of capacity planning and monitoring throughout the year, but when you see something like this hit, you have to be flexible enough to make changes through that.

I remember reading that your systems are mostly internally managed.
Patterson: They are, and it's because of our high touch point with the customer. And that's from [President and CEO] Rodger [Riney] all the way on down. He truly believes that if we are going to have that central point of contact with the customer we need to be responsible for our bread and butter.

What does it take to do that at a company that has such high volume and customer contact? Can you describe your IT organization?
Patterson: We have about 275 people right now. That's grown over the three years that I have been here, pretty significantly. We probably today run 900 servers in production, give or take a few; the split of the group is probably, today, 50/50 infrastructure people versus the development and business side, so there is probably 130, 140 infrastructure people and about the same on the other side if you take project management, QA and development into the mix.

You are a Midwest-based company in an industry concentrated in New York. Has it been a challenge to find good IT people?
Patterson: When I first got here three years ago, it was, 'Who can we find here and let's get the best and brightest out of St. Louis.' As the reputation of Scottrade has grown, we have been able to bring in people from outside. So we have hired from an IT perspective out of both coasts.

We are also now doing a lot of recruiting work at the University of Wisconsin, University of Illinois/Champaign Urbana and [Missouri University of Science and Technology.]

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Are you seeing an increase in resumés from the likes of Lehman Brothers, given what has happened?
Patterson: We are. From all the majors.

I wanted to go back to another question about your operations and external customers. How many people may be trading at one time, and do you have bandwidth problems?
Patterson: No, we don't have any bandwidth issues. I can tell you that we have seen logons in the last couple of weeks in that 100,000-150,000 range. I am not sure that they're trading, but they are all logged on at the same time. I think quite a few of them are probably watching and waiting for the right point.

Let me point something out that I think is very interesting that we are seeing. And I think this is something that is across the board right now for everyone in our industry. Anybody who is online at home on a 3 Meg ISP … it's not so much that you're going to see latency from us as it is you only have so much you can bring in from a quoting perspective. It is not so much trading, it is quoting. You have some of these people who are fairly active traders, and they are trying to get streaming quotes on 200-300-400 symbols at a time. Their bandwidth is going to be completely sucked up simply because of the changes in the market and the velocity and speed of those changes that are occurring.

A PMO in high gear

So, on to your internal customers. I understand you have set up a program management office. How has that benefited the business?
Patterson: What we have done is take our executive committee, so Rodger [Riney] and all of his direct reports -- there's 11 of us -- and meet on a monthly basis to review and prioritize all of the projects that we are going to do as a business from an IT perspective. That's what a typical program management office would do.

The critical differentiators we have is, No. 1, the speed of the decision making we do and some the things we have done to tweak that speed. No 2. is the collaboration and the cross-company communicating and how we put that into place. And No. 3 is the breadth of the projects that we are managing is different now and a differentiator.

OK, let's start with speed.
Patterson: The way we do our process has evolved over the last couple of years. We started with developing a business case and did the typical best practices of PMO, and said, 'OK, in our scoping phase of our lifecycle, we need to develop business case for all our projects.' Being a high-growth, fast-moving company, that lasted about two or three months, and the executives said, 'You know, we really aren't seeing the value of this. We know what the business case of what we want to do, and there is a lot of extra work having to put these things together. Isn't there a better way to do it?'

We came up with a business value assessment that is a quick, 10-minute deal that we do to analyze and come up with a metric of the value of a project. We use six criteria. So, how does this impact our customers? What is our competitive advantage? How does it impact our associates? And then there are financial criteria, with very broad ranges, so the requestor should be able to easily peg the project.

So, instead of developing this 15-page document of a business case --which, by the way, from my old consulting career I did many times -- we have come up with this quick and dirty, objective way to put together within 10-15 minutes what is the value of this project to the business.

Then what we do with that, is we come in to our quarterly meetings with the work request, a one-page document that says, 'Here is the project we want to do, here is the rough order-of-magnitude estimate of the timing of the resources and any external costs, and here is the business value assessment.'

So in total it should take an end user a day of sitting down to develop all three of these pieces to come into the program management office to give us a snapshot of how much this project is going to cost, what the project is for and what is the value. Then we bring those in once a month and the executive committee of the PMO does the thumbs up, thumbs down or puts it on hold for six months for some business reason.

And your quick-and-dirty scorecard: Is there a software program that you use, or is it done on the back of the envelope?
Patterson: No, we have a template that we use. Anybody in our organization can go on to our intranet, open up the template. They fill out the various pieces.

We are managing about 60 projects at any point in time now. And we would not have been able to do that without the tools we have put in place that give us this visibility.

Has the PMO helped to anticipate future needs?
Patterson: It absolutely has. When I talk about 60 projects, there's probably 100-120 total projects, so we've got another 60 in the pipeline already. And trying to manage that flow and make the decisions of which ones we're going to implement is exactly why we did it.

We came
up with a business value assessment that is a quick, 10 minute deal that we do to analyze and come up with a metric of the value of a project.

Ian Patterson
CIOScottrade Inc.
What is the third result of your PMO approach you said was unusual?
Patterson: Cross-company communication. There are a lot of organizations where IT is this animal out there on its own. We are not that way. That's the other thing we have been able to do with the PMO, because we have a meeting once a month. Our executives take half a day out of their schedules once a month just to go through the projects: Here is where we are at with everything on our plates.

So I don't have to ask you my next question: "Do you sit at the executive table?"
Patterson: Oh yeah.

You know, now that I think about it, what is this company besides IT? It's a little hard to understand what the CEO does in this case.
Patterson: I can tell you that Rodger is very, very proactive and involved in everything that goes on with IT. And we are a technology-driven company. But we also are a very, very customer service, customer-oriented company.

That is why you [might ask], since 99%-plus of your trades are being done on the Net, why in the world do you have 370-plus branches? Well, we have those for the customer service perspective. So we really are a kind of an oddity, because we do have the bricks and mortar and the majority of the business in the click. It is a mix that works well for us. Believe me, the people in IT all the way down to the database administrator really understand the focus on the customer and what we are doing out at those branches, because it is a critical part of our business.

Let us know what you think about the story; email: Linda Tucci, Senior News Writer

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