The London Stock Exchange (LSE) is bringing management of its day-to-day IT operations back in-house after completing a four-year technology programme.

But under a two-year contract extension with Accenture, signed last week, the consultancy will continue to handle new software development.

LSE chief information officer David Lester says the decision to bring operations back in-house reflects how far technology is a front-office capability for a trading exchange.

‘IT will differentiate the LSE so bringing staff in-house – to align them with our core objectives, strategic direction and rewards over the next five years – will help us achieve that,’ said Lester.

The transition process for the infrastructure operations and application maintenance team of up to 150 staff started last week, and is expected to be completed by January 2008.

‘IT is crucial to what we do so we want to ensure that we continue to lead the world by aligning the service delivery function with the exchange and its business,’ said Lester.

Accenture has worked with the LSE for the past 15 years, including the development of the TradeElect core trading system that will go live next month.

LSE chief technology officer Robin Paine says the timing of the change in strategy is linked to the expiry of the existing Accenture contract.

‘Now is a natural time to bring operations services in-house because the contract was due to complete and we are seeing the culmination of four years of transition with the new trading system launch,’ he said.

Bringing service delivery in-house, rather than software development, is unusual for financial services outsourcing because software innovations are where companies can differentiate themselves, says Ovum analyst Phil Codling.

‘The competitive advantage to be gained from having cutting-edge IT systems is so great that having a core team of hot developers in-house to develop proprietary systems unavailable to third parties is the common trend,’ said Codling.

LSE’s service delivery and software development have been outsourced to Accenture since 1992. Under the terms of this week’s deal, a 100-strong Accenture team will provide software development services to develop the LSE’s major trading and information systems.