Alliance Eyes System Options After Merger With Equitable

Alliance Capital Management L.P. has narrowed the list of options it is considering in its search for a new portfolio accounting system that could ultimately support over 500 users. Over the past few weeks, the firm selected two off-the-shelf finalists to pit against a mostly homegrown alternative. The evaluations come in the wake of the merger of Alliance and Equitable Capital Management Corp.--a marriage that leaves the new Alliance with some $110 billion in assets.

In its initial evaluations, Alliance weighed the pros and cons of SunGard Data Systems Inc.'s Invest One, Securities Software & Consulting Inc.'s Camra, Princeton Financial Systems Inc.'s Pam, Texas Instrument Inc.'s Maximis, DST Systems Inc.'s Portfolio Accounting System (PAS), Magnus Inc.'s Securities Management System and Prism, a system marketed by SunGard subsidiary, Information Systems of America (ISA) Inc.

Alliance senior vice president Ron Valeggia, the executive overseeing the project, declines to name the two shortlisted vendors. However, he says that because the firm maintains such a large pool of assets under management, a PC-based system would be "inadequate" as an accounting platform. (Among systems the firm considered, SS&C's Camra and Princeton's Pam are PC-based only.)

According to Valeggia, Alliance is also considering an in-house development project which would involve, in part, enhancing the firm's existing mainframe-based portfolio accounting and management systems. He says that the firm is interested in a system that would incorporate Unix servers and a relational database management system, in addition to the mainframe.

The firm expects to provide access to its new system--whatever it may be--via a Teknekron Software Systems Inc. digital data distribution platform, which Alliance has employed for more than two years (IMT, March 6, 1992).

Regardless of whether the homegrown option gets the go-ahead, Valeggia emphasizes that the complexity of the firm's business needs will likely demand a considerable amount of in-house development anyway. "We don't expect that the vendors on the short list will be a drop-it-on-the-table and convert-to-it exercise," says Valeggia.

Prior to the merger, both Alliance and Equitable operated as separate subsidiaries of Equitable Life Assurance Society--a large insurance firm based in New York. In the deal, both firms have been drawn under the aegis of a single Equitable Life subsidiary bearing the Alliance name. The newly consolidated company incorporates both the accounts and the staff of its two component firms--a fact that makes establishing a standard portfolio system a more complicated undertaking.

Before the merger, Equitable Capital--in addition to managing variable annuity assets for its insurance parent--also provided statutory and regulatory accounting services to Equitable Life for its general account. Alliance, on the other hand, served as a global investment advisor to Equitable Life--as well as managing mutual fund accounts for outside clients, such as pension plans and other institutional investors.

In the merger, Alliance agreed to take over the insurance accounting responsibilities for its Equitable Life parent.

Alliance's search for a new portfolio accounting system is being conducted by a team comprising six personnel--including both senior-level managers and staffers from the firm's accounting and systems groups. Formed in late April, the team issued a so-called questionnaire to seven vendors in July, Valeggia says. Based on the replies, the list was then whittled down to the two finalists.

According to Valeggia, the search team in recent weeks has split into two groups, with three members "benchmarking" the off-the-shelf systems to see how they compare to Alliance's wish-list of requirements. Meanwhile, the second group will continue to analyze the feasibility of an in-house development. Valeggia says the firm hopes "by the end of December to be able to say that we've got a viable purchase option; [or,] if not, what our strategy would be."

The search team received input regarding the system's functionality from a larger group of 25 Alliance personnel--an array of users from all of the firm's business units. Both the homegrown evaluation team and the vendor evaluation team report to Valeggia as well as to the firm's comptroller.

The portfolio accounting evaluations follow Alliance's move last April to Equitable's headquarters, located at 1345 Avenue of the Americas in New York City. Prior to the move, the firm completed a consolidation effort, merging both Alliance's and Equitable's accounting data onto a single mainframe platform.

The consolidation involved three systems--two of them supporting Equitable, and a third which provides portfolio management applications to Alliance managers.

From Equitable, the new Alliance inherited the so-called Portfolio Accounting Recordkeeping and Trading System, known as Parts, for domestic portfolio accounting. Parts was marketed by the development arm of investment manager BEA Associates Inc. in the early 1980s.

BEA no longer markets Parts. However, a number of firms continue to rely on the system as the core of their domestic portfolio accounting platforms. Such firms include Scudder Stevens & Clark and Fischer Francis Trees & Watts.

Valeggia says that the Parts system underwent considerable customization at Equitable and is now deemed proprietary by the firm. Parts currently handles the firm's principal accounting functions, as well as statutory and regulatory accounting for parent Equitable Life. It runs on a series 3000 Hewlett-Packard Co. processor.

Also in use at Alliance is a mainframe-based proprietary application for processing of the firm's equity accounts and its parent's variable annuity accounts. This system was also inherited from Equitable. Valeggia says that the mainframe-based system, "because it services insurance-mediated assets," handles crossover accounting with the Parts system for regulatory purposes. He also says, however, that the process is "not being done in an elegant manner," as operations staff have to re-key data into Parts.

Alliance brought with it another homegrown application, which now runs on Equitable's mainframe. The system is primarily an investment advisory system. Valeggia says that the firm's mutual funds business is not subject to the same amount of regulation that is imposed on insurance accounts--therefore the existing system has little fundamental accounting functionality.

According to Valeggia, a key factor in the upcoming decision is the Teknekron-provided digital data distribution system. Alliance's portfolio managers continue to have access to the firm's proprietary portfolio management system via the Teknekron platform. Valeggia expects to derive a similar advantage from the Teknekron platform for the firm's portfolio system of the future.

Because of the digital data distribution system, Valeggia says, "the investment professional at Alliance is really an independent entity; we don't legislate technology." He says that in addition to the portfolio management system, the firm's users access real-time market data and applications via their Teknekron-supported desktop PCs and Unix-based workstations. As a result, Valeggia says users may design their own applications drawing on data from any or all of these systems.

The Teknekron system is distributed via an Ethernet local area network. The LAN supports a series of Unix workstations from Sun Microsystems Inc. as well as IBM-compatible PCs. Communication among the PCs and the Sun workstations is handled via Sun's Network File System (NFS).

According to Valeggia, another factor in the portfolio accounting system decision will be the vendor organizations behind the systems. "We're very much interested in developing strategic partnerships; what's really important is the organization," he says. "And we don't necessarily like a lot of vendors in the fray."