NASDAQ parent co. inks $1.5B outsourcing deal

By Thomas Hoffman, Computerworld |  Business

The National Association of Securities Dealers Inc. (NASD), which owns and
regulates the Nasdaq Stock Market Inc., has outsourced the bulk of its information
technology operations to Electronic Data Systems Corp. in an agreement that's expected
to yield more than $500 million in cost savings over the next 10 years.

The contract, valued at between $1.5 billion to $2 billion, doesn't cover Nasdaq's
IT operations, which are primarily run by an internal staff. The agreement follows a
technology alliance that NASD and EDS created in October 1998 called NasTech.

Under the new deal, EDS will be responsible for application development and
maintenance, Internet and intranet development, Web hosting, distributed systems
support and NasTech's day-to-day activities.

The agreement is primarily designed to support NASD's daily operations and those of
the NASD-R, the organization's regulatory arm. By July 1, 350 NASD IT employees will be
transferred to EDS and will work from NASD's technology center in Rockville, Md. EDS
will also manage another 350 third-party consultants. Roughly 20 IT employees will
remain at NASD to oversee architecture and planning-type activities, said Gregor
Bailar, executive vice president and CIO at NASD in Washington.

Under the contract, EDS will manage existing IT activities for NASD and NASD-R and
will also help support future developments, such as the organization's possible
expansion to extended trading sessions.

One of the first NasTech projects, launched this month, is a pilot program that
would allow broker/dealers to file financial reports to NASD-R via the Web, said Mary
Schapiro, president of NASD-R. It's not clear when that project will be completed since
NASD is about to enter a "blackout" period for IT projects as part of an effort to
keep its IT environment year 2000-ready, Schapiro added.

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