Wrestling with a long tradition of Wall Street competition, Microsoft is dipping into a $1 billion development budget hoping to snatch more lucrative broker-dealer business.
The Redmond, Wash.-based software giant's goal: getting technology departments to reverse their preference for UNIX-based software solutions over Microsoft products.
Wall Street, to be sure, uses plenty of Microsoft systems, including its word-processing software, Microsoft Word, and spreadsheet tools like Microsoft Excel.
But for more than a decade, information-technology staffs almost universally shunned Microsoft products for running large databases and trading systems, and managing other big-ticket projects.
That's likely to change, experts say, thanks to the latest versions, and some good reviews, of Microsoft's high-end operating system Windows NT.
Operating Systems
Microsoft makes three types of operating systems, or platforms: Windows 98, targeted at the consumer market; Windows CE, used in palm-sized PCs; and Windows NT, used in high-end workstations and servers.
So far, Wall Street staffs have generally been happy to use Windows 98-type operating systems on their laptops and desktop computers.
But UNIX-based technology is still the choice for trade stations.
However, the result of using both systems has caused technical snafus. Now Microsoft is betting that it can convince Wall Street to fully convert to Windows NT.
Windows NT would then displace UNIX-based systems, such as Sun Microsystems' Solaris operating system and Novell's NetWare network operating system.
Microsoft is investing about $1 billion on research and development to make sure it continues to be the best and most powerful server available on the market, according to Matt Conners, the financial-services marketing manager at Microsoft.
Firm Switches
One firm betting on Windows NT is First Union Capital Markets, the investment-banking arm of Charlotte, N.C.-based First Union Corp.
In a recent upgrade to its network, the firm opted for an environment running on Microsoft products, with the Microsoft Windows NT Server operating system as its backbone.
First Union hasn't actually abandoned UNIX, however.
"We haven't completely migrated from UNIX to Windows NT. We are using a mixture of Solaris and Windows NT environments. Most of the traders still have Solaris," said Sushil Vyas, assistant vice president in charge of First Union's Windows NT Server infrastructure.
First Union's mostly Sybase databases run on Solaris servers.
"We never replaced Solaris with Windows NT, and Solaris is still used for most of the trading-floor operations," Vyas said.
Windows NT primarily replaced Novell throughout the firm, but did not replace Solaris.
Decision
The decision to replace Novell on the back end with Windows NT was driven by the development of many 32-bit applications for the trading community, Vyas says.
"We looked at Windows 95 with the existing back end. But IPX protocol from the back end [Novell] wasn't very suitable for our wide-area network design," he said.
"Fault tolerance for the network was at the top of our list," Vyas added. "Our traders cannot have computers that go down. Up time is key to our business."
Fault tolerance is the ability to continue uninterrupted when a hardware failure occurs. A fault-tolerant system is built from the ground up for reliability, using multiples of all critical components. These include the "brains" of computers, or CPUs, and its memory, disks and power supplies.
Thus, if one component fails, another takes over without skipping a beat. This is particularly important for trading. If the system crashes for even one minute, millions of dollars of lost transaction volume could occur.
First Union says its motivation for Windows NT is partly economic and partly the ease of use.
"Many of the applications commonly used by our employees including Microsoft Excel and market programs from Bloomberg, Reuters and Telerate are available on the Windows NT platform," Vyas said.
Microsoft's Conner explains that because a large number of software vendors are developing Windows NT-based products, it means traders are not welded to any one system, vendor or service contract.
These vendors include Bridge Information Systems, Infinity Financial Technology, Advent Software and The Frustum Group.
With this open architecture, a trading desk can buy off-the-shelf software from Advent, order a Bridge trading system and install Microsoft office and Internet Explorer.
(Later, a Wall Street professional can simply click on his laptop and read the data aboard the subway, heading home to his Upper East Side apartment in Manhattan.)
Firms no longer have to incur costs associated with mainframe maintenance or contract with outside companies to process their daily transactions.
The advantages are not lost on some of the largest Wall Street trading giants, such as Morgan Stanley, Dean Witter, Discover & Co.
This ease will prove to be the key to the success of Windows NT on Wall Street, predicts Lawrence Tabb, group director at Newton, Mass.-based securities industry consultant and research firm The Tower Group.
Growth
The Tower Group estimates that by 2001, 730,000 Windows NT workstations and 100,000 servers will be used on Wall Street, compared to an estimated 467,000 workstations and 48,000 servers by year end.
Over the same period, UNIX-server sales will plummet from 135,000 in 1998 to 84,000 in 2001, while UNIX-workstation sales will decline to 163,000 in 2001 from 383,000 workstations sold in 1998, The Tower Group estimates.
"The consensus is that Windows NT will be an eventual winner of the server wars, and in every category it would be a dominant player," Tabb said.
Tabb added that The Tower Group collected its data for a proprietary study for industrial giant Hewlett-Packard.
Not Surprised
Tabb was not surprised by First Union's move to the Windows NT platform. The firm, after all, is going to support Windows NT on its desktops, making a firm-wide Windows NT switch a sensible decision.
Prior to installing Windows NT, First Union was running Novell NetWare on its network.
Replacing that with Windows NT underscored a phenomena repeating itself across Wall Street: Windows NT is giving Novell a boot.
Apart from the technology benefits, the biggest benefit is the savings incurred. A UNIX workstation costs more than $25,000, while an off-the-shelf system from Compaq or Dell using Intel's Pentium processing on Windows NT costs half as much.
(Most of the UNIX systems run on specialized microprocessors called RISC processors, which are like SPARC-chips used in Sun machines and Alpha-chips used in Digital Equipment machines.)
Rollout
First Union began a phased rollout of the new network architecture in January 1997 on its equity-trading floor at its headquarters in Charlotte.
The rollout involved about 100 new workstations running Windows NT Workstation and four servers running Windows NT Server. The new equipment served about 140 employees.
To ensure a gradual implementation that would not disrupt trading, a fault-tolerant operating environment was first applied to file and print services.
The second phase of the Windows NT Server implementation earlier this year involved approximately 80 servers servicing about 3,000 employees.
The servers are a mix of Compaq and Digital systems, primarily with dual Pentium Pro processors and some with quad-processor configurations.
UNIX KO'd?
With these low-cost options available for the trading community, should one expect Windows NT to steam-roll UNIX on Wall Street?
Not in the short term, Tabb says. He thinks the Year-2000 bug will partly stall a mass switchover. (Many firms are diverting nearly 30 percent of their resources towards fixing the bug, he says.)
At the same time, the bigger firms are still keeping UNIX as a platform of choice, since they really do not want to take chances before Windows NT proves its mettle.
"Smaller trading floors are looking at Windows NT because they do not have [to worry about] scalability issues," he said, referring to the capacity of a system withstanding outages on increasing trade volume.
Need some proof?
Investment-banking giant Goldman, Sachs & Co. placed fourth on listed volume and seventh on Nasdaq trading volume in mid-year rankings by Boston-based AutEx is still using UNIX machines.
By contrast, First Union, itself a growing regional powerhouse, was ranked 45th on listed volume and 41st on Nasdaq volume.
