Charles Schwab Corporation Takes Stock in High-Tech Innovations

Since its establishment in 1975, the Charles Schwab Corporation has been an innovator of financial services and technologies. Bringing an entirely new concept to the securities market, it was the world's first discount brokerage firm. Unlike full-service brokerage firms, Schwab did not actively manage portfolios, make investment recommendations, or offer proprietary research. Instead, its strategy was to empower the individual investor by offering unbiased products and services at discounted prices. Schwab was also the first discount brokerage to offer a no transaction fee mutual fund service.

Throughout its history Schwab continued to pioneer new and unique services, especially those which leveraged high technology. Schwab was the first discount brokerage to offer 24-hour a day, 7-day a week automated telephone service, the first to allow for immediate trade confirmations via direct contact with the exchanges, and the first to offer a PC software package that allowed customers to access up-to-the-minute research and account information and make trades.

Technology has enabled the company to continually improve its productivity, offer state-of-the-art products, and provide superior customer service. "At its core, Schwab is really a technology company that happens to be in the financial services business," noted Dan Leemon, Schwab's chief strategy officer.

David Pottruck, President and Co-CEO also stated, "At Schwab, technology and customer services are two sides of the same coin. Technology has long been a powerful force behind Schwab's evolution."

This commitment to technological innovation has also been recognized by the IT community. Top IT magazines, including InfoWorld, PC Week, Wired, and CIO have all honored Schwab with various distinctions for their use of technology.

In 1996, Charles Schwab Corporation began offering online Internet trading. This proved to be a highly successful strategic move, which resulted in 2.2 million online accounts by the end of 1998. With the growing demand for online trading came the need for additional, cutting-edge network capabilities that could support the ever-increasing number of customer transactions. It was also vital that Schwab's system be highly dependable to prevent the threat of downtime.

Schwab anticipated the power that this new trading medium offered to individual investors and aggressively prepared for online investing. They began by building two data centers in Phoenix, Arizona. The first facility was built in 1993 and a second was added in 1998. These two centers are linked by high-speed fiber optic lines for traffic load balancing and optimum system redundancy. Additional precautions were taken to increase network reliability, including locating the centers in areas that were served by separate power grids and telecommunication switching facilities.

By March 2000, Schwab's web site averaged 40 million hits per day and processed more than 70% of its trades online. Due to this tremendous increase in web-based trading, the two data centers were running at full capacity. The decision was made to expand system capacity by building a new data center facility to replace the second Phoenix facility built in 1998. The new building, located in Chandler, AZ, would feature a high-performance cabling infrastructure and completely new network equipment, including some of the most advanced equipment available from manufacturers such as Cisco and IBM.

Ground breaking for the new data center began on March 15, 2000. The goal was to have the facility up and running in one year. Tim Littleton, Senior Staff Technologist for Schwab, was responsible for planning the design and managing the network infrastructure of the new facility. "Our business runs on our network. Even one minute of downtime during trading hours would cost us millions. My objective was to maximize network reliability and redundancy with a state-of-the-art data center."

For their network infrastructure, Mr. Littleton selected the Vision^® cabling system from The Siemon Company and CommScope, Inc. "We evaluated a variety of different cabling solutions and felt that Vision^® was the right fit for us. The combination of product and system performance, comprehensive warranty coverage, and outstanding project support gave us a comfort level that we were choosing the right solution for the project," said Littleton. "In fact, when time was tight during the cutover, Nick Papakalodoukas, our local Siemon sales person, pitched in on Saturday to help with jack terminations."

Siemon supplied thousands of connections for the project, including multimode SC connectors, RIC fiber enclosures, HD^® patch panels, MC^® modular cords, S110^® blocks and XLBET frames. CommScope UltraMedia™ (category 6) cable was installed to all racks and servers, while multimode UltraFiber™ was used as the backbone from the entrance facility to the main cross-connect.

Given the importance of the data centers to Schwab's business, minimizing downtime was essential. However, this was especially difficult given the scope of the move and the requirement to only work after trading hours. To solve this problem the project team came up with an innovative transition strategy. Completely new network equipment would be installed at the Chandler facility along with the existing switches, hubs, and routers from the Phoenix location. Once the existing equipment, which stored critical customer information, was relocated and back in operation, the team could gradually transfer data and processing to the new equipment one rack at a time.

Moving the existing network equipment and getting it back up and running was no easy feat. The entire process — detaching, loading, moving, and re-installing the equipment — had to occur in the timeframe of just one weekend to get the system back on line for trading Monday morning. Littleton selected Comtel Technologies Inc., a Siemon Certified Installer, to handle all aspects of the cutover. "Comtel has a proven track record meeting tight deadlines for large projects in this area," said Papakalodoukas. Since time was so tight, the active equipment was shrink-wrapped right on the racks. The racks were cut free from all cable serving them and then loaded on 15 tractor-trailer trucks and taken to the new Chandler facility. Comtel staff worked around the clock that weekend reinstalling the racks and terminating cable. The end result was a flawless execution of Comtel's first phase of the installation plan — all in less than three days!

With the existing network equipment back up and running at the new Chandler facility, Comtel and Littleton's team now focused on transitioning operations to the new equipment. Over the next three months Comtel worked nights and weekends to complete all copper and fiber terminations for new equipment, allowing Littleton and his staff to gradually migrate operations to the new network. By the end of the project Comtel successfully installed miles of category 6 and optical fiber cable, over 10,000 thousand copper ports, and 3,600 SC connectors. Schwab was able to complete the network transition without disruption to customers.

The cutover from old building to new was complete on November 1, 2000. Charles Schwab Corporation now boasts a new data center facility with a high-performance cabling system, state-of-the-art active equipment, including IBM Winterhawk servers, the latest Cisco switches and routers. Network services include massive SONET and Self-Healing Network Service (SHNS) fiber rings along with diverse carrier transport services, which ensure Schwab maximum bandwidth and network redundancy. In addition to the many advanced network capabilities, Schwab has also invested heavily in redundant support services, including redundant air, power, and fire protection systems.

Today, Schwab has more than 7.7 million active customer accounts, including both online and traditional accounts. Schwab.com leads the online brokerage industry with more than 4.3 million online accounts, and online trade orders account for more than 81% of Schwab's total trades. Schwab knows the importance of technology in the financial industry. They continue to embrace technology as the core of their business and the foundation of their success.