THE London Stock Exchange (LSE) is halfway through a four-year programme to convert its technology infrastructure to a commodity platform based on Windows and Intel technology.

First outlined in early 2003 (Computing, 10 March), the LSE's technology roadmap (TRM) aims to achieve about £8m in technology cost savings, while boosting scalability and enabling the company to add new markets quickly and easily.

The LSE's chief information officer, David Lester, says that moving to a commodity environment based on Intel servers and Microsoft's .Net software will radically alter the cost structure of the exchange.

'If you're trying to drive more liquidity into your markets, if you can scale more cheaply than anyone else, you can provide transaction price points that make you a more attractive trading venue,' he said. 'The only way to do that is by having a superior IT platform. Technology is most of the cost base of an exchange, so it was key.'

Lester aims to decommission the current trading platform underpinning Sets, the LSE's trading system, by early 2007. 'This is a completely new route, a completely new architecture,' he said. 'The Sets market will not be switched off, but the underlying technology platform, whatever we decide to call it, will be replaced by our TRM.'

The Sets platform is based on high-end HP Tandem NonStop servers running bespoke software environments such as Cobol or C.

'To double this capacity in the old Tandem environment would cost millions of euros. To double capacity in the new commodity hardware environment is costing hundreds of thousands of euros,' said Lester. 'That gives us lots of interesting business benefits, both for customers and shareholders.'

In its last financial statement, the LSE promised to cut IT costs by about 20 per cent by 2007/ 2008, an £8m reduction on the £41m it spent on IT in 2003/2004.

'When I started in 2001, we did all the "low-hanging fruit": renegotiating all of our contracts through MCI, Accenture and HP, and so on. We were able to bring IT costs down by about 20 per cent, and make us one of the most efficient of the major exchanges,' said Lester.

'To get it down by the next 20 per cent was really about building a more homogeneous and business-agile environment.'

Because exchanges are relatively fixed-cost businesses, the ability to scale up the number of transactions an exchange can handle, at a lower cost than anyone else, is crucial for price.

The 20 per cent cut in costs that Lester is committed to achieving will be derived from both cheaper operations and cheaper development processes.

'Before, you were based in Cobol, running on HP Tandem systems, and in that kind of procedural language built in the early 1990s. All the other main European exchanges are back there in Tandems and VMS and Cobol,' he said.

'The .Net framework really adds a lot of productivity benefits to the developers, and we've seen it already. Instead of mid-size projects costing £1m to £2m and taking nine to 12 months, the quotes I'm now getting are hundreds of thousands of pounds, taking three to six months to do.

'So we're bringing down the IT costs from a homogeneous environment, and making the development costs a lot cheaper and the time to market a lot quicker.'

William Conner, lead analyst for financial services technology at Datamonitor, says the LSE's choice of .Net for the platform is an interesting one.

'Most people who do large numbers of transactions mostly go to J2EE. In the surveys we've conducted of tier-one players, most people see Java as the platform of choice,' he said.

'However, .Net has progressed a lot in effectiveness and robustness. The Java versus Microsoft war is a lot less relevant today.'

The LSE has so far ported 37 of its 52 systems to .Net, although not yet the most important.

'We're now getting to the mission-critical ones that have to be there when the market opens,' said Lester. 'There are three mission-critical systems to go live: one this year and two next year. And then we're done as far as the roadmap is concerned.'

The next big component of TRM is the replacement of the London Market Information Link system with a new one, dubbed Infolect. Once that is live, the only core systems remaining will be the market surveillance system and the Sets trading system, expected to switch over by late 2006 to early 2007.

'Infolect is going through customer tests, the surveillance system is going through design, and the trading system is in the latter stages of functional design and technical architecture design,' said Lester.

'The build for the trading system will start in May, with customer tests slated for next year.'

Infolect is mission critical to IT overhaul

THIS summer, the first of the LSE's core IT systems will switch over from its current HP Tandem NonStop servers to a commodity platform based on Windows and Intel, the heart of chief information officer David Lester's 'technology roadmap'.

Infolect is a rebuilt, functionally-enhanced replacement of the LSE's London Market Information Link system.

'It's mission critical,' says Lester. 'If that's not there, then the market is not there.'

Infolect provides real-time market data to information providers such as Reuters and Bloomberg, as well as to all the major banks.

The system has just come out of build testing and is now due to go into customer testing. The LSE will spend a period of parallel testing the Infolect system before putting it live in the summer.

'It's completely backwards-compatible with existing systems, so there's no change for the market,' says Lester.

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