Liffe to spin off IT department

One of the world's best known financial exchanges has outlined ambitious plans to spin off its IT division and boost its revenues...

One of the world's best known financial exchanges has outlined ambitious plans to spin off its IT division and boost its revenues through technology consultancy and hosting services.

Nick Huber

The London International Financial Futures and Options Exchange (Liffe) is committed to transforming its IT department into a technology company as well as an internal IT service provider.

The move into service provision reflects the increasing competition between the financial markets and the importance of IT departments as a commercial asset.

But Liffe's grand plan failed to impress analysts who argued that previous attempts by companies to spin off IT departments had not been successful.

Over the next year Liffe's 300-plus IT staff will become part of a separate technology company within the Liffe holding structure. The plans were endorsed last year by Liffe shareholders.

In a multi-pronged strategy Liffe plans to act as an IT consultancy for exchanges moving to electronic trading as well as offering hosting facilities for other companies to run their own electronic marketplaces. Liffe will also develop its trading platform, Liffe Connect, as a trading system.

Mark Hemsley, chief information officer for Liffe, said, "It allows the technology department to become quite entrepreneurial in and outside the department. I think that a growing proportion of Liffe's income could come from consultancy. We [could] run a completely managed service."

He stressed, however, that the plans were still in their early stages.

The Liffe strategy echoes the diverse business model of OM Group, the Swedish technology supplier and exchange which launched an unsuccessful hostile take-over bid for the London Stock Exchange last year.

But analysts argued that Liffe's IT division would struggle to double up as a services provider and consultancy.

"I do not know anyone who has been successful in spinning out an internal department," said Richard Holway, director of IT analyst Ovum Holway.

"Ten years ago Barclay's Computer Operations were talking about spinning it out but they canned it. ITNet only became successful when they became totally independent from Cadbury's and did a management buy-out," Holway said.

The London Stock Exchange has outsourced the lion's share of its IT department and services to Accenture, formerly known as Andersen Consulting, but Liffe will keep most of its IT department in-house, to maintain competitive advantage.

"Our systems management and network staff sit side-by-side with our compliance staff who are monitoring the market. It is a symbiotic relationship," said Hemsley.

Liffe's e-commerce drive will be carried out in partnership with three other firms including consultancy giant Cap Gemini Ernst & Young.

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