Asiff Hirji, CIO at Ameritrade, agrees. "Rather than maintaining the old, we're much more focused on replacing it with new and more innovative functionality."
When it comes to maintenance, Ameritrade, which is based in Omaha, Neb., spends at a rate well below TowerGroup's published average. Only 30 percent of the IT budget at Ameritrade is dedicated to maintenance, Hirji notes. That's largely because "Ameritrade is an e-commerce company," he says. "Our systems are not legacy-based, 30-year-old COBOL programs."
Additionally, the rapid pace of change in technology means that the life cycle is short for the technology that Ameritrade deploys. "The functionality we provided four years ago is completely irrelevant to what we're delivering to the client today. The functionality is being refreshed within a year," Hirji continues. "We're like many other companies - we strive to deliver essentially disposable hardware. It is more effort to diagnose what is happening on one server and why it's gone wrong ... than it is to rip out the box and put a new one in."
Allan Woods, vice chairman and CIO of Pittsburgh-based Mellon Financial Corp., says that strategies for reining in IT maintenance costs depend on whether the maintenance involves applications development or infrastructure. At Mellon, the two areas have very different cost structures. Of the $600 million Mellon spends on technology each year, roughly 60 percent goes to application and systems development and 40 percent to infrastructure, such as computers, networks and disk drives.
Discretionary spending in applications runs about 70 percent of the budget, versus 30 percent for non-discretionary maintenance, which Woods characterizes as spending needed to "keep the lights on." For infrastructure initiatives, about 80 percent of the spend goes toward keeping the lights on and only 20 percent is discretionary.
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