Chaos! That's the best word to describe the roar of shouting traders on the floor of the Chicago Mercantile Exchange (CME). The largest futures exchange in the U.S., CME handles more than $2 trillion in trading values both on the floor and through its electronic system.

Jim Krause, CME's CIO, has the daunting task of making sure his IT staff of 500 employees keep the more than 2,500 servers running at top speed around the clock. About 1,000 of these servers power the front-end of the trading system. In addition, Krause has to keep up with providing technology to an organization that's growing at 400 percent a year. Providing excellent customer service has become Krause's first priority.

EnterpriseLeadership.org sat down with Krause to find out how he manages his priorities, how he handles the key sectors of the public with whom he deals, and what factors can change the nature of the futures business overnight.

EL: What is your IT vision?

JK: Understanding what the impact of a change might be for the customer has to be your first priority. The most important things for our customers' satisfaction include reliability, speed, and performance. Functionality plays a role, but it's not number one until these first three are delivered.

EL: You're wrapping up a major Linux deployment. Why Linux?

JK: We will run 1,000 out of 2,500 servers on Linux, with 10  terabytes of storage.

We intend to run Linux on the front end of our electronic system --  getting the orders in and out of the system, and getting market data out of the system to the market vendors and to the traders.

One of the key factors in our decision to go with Linux included speed, and the second factor, cost. The ability to scale quickly at a reasonable cost while we're  improving performance was the driving factor.

We're deriving millions of dollars in cost savings by expanding with commodity-based Intel servers. A Sun server costs more than 50 percent more than a comparable Intel-based server running Linux.

EL: Where are you with the Linux deployment?

JK: We're about three quarters of the way done. We first did all of the things we could do quickly, such as import Java-based applications. We're taking more time to deploy our C applications. Here, we need to have some quality assurance and to make minor changes.

EL: How do you look at speed advantages?

JK: We use milliseconds to measure the speed of our trading activity. In fact, every millisecond counts. When we rolled out Linux to most of our  environments, we saw that just by changing hardware, we gained about a 30 millisecond reduction in throughput. We don't tend to overload servers. Reliability and performance are key. If we're 50 percent loaded, and we get two or three extra milliseconds, we'll add another server and make it 25 percent loaded so we don't incur those extra milliseconds.

EL: Given the nature of your business, what types of IT governance do  you have going on?

JK: We don't say “IT governance”; this is the company business we need to do in order to stay competitive. Our management team goes through the budget process routinely. The team agrees on the priorities for each project and makes adjustments as necessary. So, the competitive nature of our business drives which IT projects get done.

EL: How do you manage people, vendors, and customers?

JK: They don't call me Grumpy for nothing. Just joking; I try to lead, not manage. I show my staff what we have to do and what I expect from them. My goal is to develop people to make the right decisions. So, my management style is to be part of what they do and then let them do it.

As for vendors, we stick with a minimum of two vendors for a particular type of product. Our server vendors include HP and Dell, and some Sun. We want to get the best deals for our company. We've no problems developing a strategic, long-term relationship with a vendor to ensure that we get extra support when we need it.

Customers' concerns will always be my prime priority. How can IT be customer-focused if no one ever talks to a customer? I work with our Projects and Services group to go out on customer calls. We also have a User group comprised of our customers. We routinely hold forums in which we talk about the status of our products, and give customers solutions for fixing problems. We also do customer satisfaction surveys. Everyone in IT has a chance to get in front of customers, either through the forum meetings, or just by talking to customers on the telephone.

EL: Do you have quality programs such as Six Sigma in  place?

JK: Not really. I couldn't tell you all of the tenets of Six Sigma. However, quality is important. We've a fairly extensive quality assurance process which involves the business side of the company.

We don't have really big implementation projects such as taking three years to get SAP up and running. If we do have a project that's going to take a year or two, we break up things into phases and carry out each phase within an allotted time period. We do go back and validate the other phases.

Our business has grown as a result of global competition. By doing things in smaller, manageable time increments, we can react quickly to a business process or business change, in order of priority.

EL: Have you carried out process automation, or do you plan  to?

JK: Our quality-assurance initiatives include regression tests of a specific functionality, such as bootstrapping a server, to make sure we didn't break anything that was new. We have some development methodologies that we use for automating processes.

Since my budget is a big part of the organization’s budget, we're under a lot of scrutiny. The speed and reliability of our electronic trading dominates most of what IT does. We have to make sure we've got the capacity to handle  growth of 400 to 600 percent every year.

EL: What external forces drive your market conditions?

JK: Ten years I would've told that the Chicago Board of Trade was our key competitor. Today, we're both in the futures business, both trading electronically, and both seeing a lot of global competition. For example,  our global competitors include Euronet Life owned by the London International Financial Futures Exchange and a Euronet from Paris, and Eurex, the German futures exchange.

Perhaps in the future, we'll see some consolidations, such as Nasdaq and  Instinet.

EL: What disruptive technologies are you considering?

JK: If our central order book, which holds all of our bids your offers, gets too big, we have to scale vertically as well as horizontally. So, we're looking at blade servers. We're also doing putting forth some extensive research and development efforts to predict what the technology will look like three or four years out. For our switch infrastructure, we're considering gigabit updates in order to scale vertically. Everything right now is 100 megabit port speeds. Grid computing fascinates us. However, we don't know if it will be able to scale vertically.

The current client-service architecture everyone loves still has about two  years of life for us.

The regulatory side of electronic trading means that we have to do a lot of  analysis and real-time review of activity.

EL: How do you spend your free time?

JK: I try to play golf once a week and spend most of my free time with my family. I work six days a week. The exchange trades 24 hours a day, starting up Sunday afternoon and closing on Friday night. We continuously expand, and upgrade users. We've got rigorous quality requirements which requires that we check everything, even it's a process that is automated.

EL: To be successful in your IT department, what characteristics do  employees need?

JK: Employees at CME need to pay attention to details. They also need to understand what has to be done and to make everyone stay focused on those priorities. Some technology folks like to work with technology only; however, capabilities, such as redundancy, fault tolerance, and backup, enable us to keep the customer trading while we fix systems in the background.

Our customers include the largest banks and other financial institutions in  the world. Liquidity drives the commodities market.

The exchange started by traders buying membership. And these folks are still making markets. With electronic trading, you also have a new breed of customer who comprises a trading arcade. These folks make money by trading our products.

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Elizabeth Ferrarini is an IT consultant and free-lance  writer from Boston, Massachusetts. Elizabeth can be reached at elizabethferrarini@yahoo.com.