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II On Technology: The Online Finance 40

Our annual selection of the upstarts and veterans, the entrepreneurs and executives who are leading the way in the world of e-finance.

For financial technologists the excitement is finally starting to come back. Statistical indicators -- the major stock indexes, IPO activity, corporate profits -- are all up. Market researchers expect securities industry technology spending to increase this year for the first time since 2001.

Such buoyancy may give pause to investors who worry that another bubble might be in the making. But the elite of e-finance are more sanguine. The executives spotlighted on the following pages in Institutional Investor's fifth annual Online Finance 40 are transforming their dot-com-era ventures into mature, moneymaking enterprises. Increasingly, they are executives of top financial institutions -- led by three-time No. 1 Steven Elterich of Fidelity EBusiness -- who oversee big online operations that are enhancing their firms' overall profitability and efficiency. Or, like Yahoo! Finance general manager Nathan Richardson (No. 4), they are entrepreneurs who are steering their Internet start-ups into the corporate mainstream.

There is cause for some exuberance. At Citigroup, corporate technology officer William Belew (No. 7) reports, the global online customer base jumped last year by 6 million, or 25 percent. Charles Schwab Corp. vice chairman Dawn Lepore (No. 8) and her rivals at Ameritrade Holding Corp., E*Trade Financial Corp. and TD Waterhouse USA are seeing monthly trading volume grow by as much as 50 percent. Archipelago Holdings' Gerald Putnam (No. 12) and MarketAxess Holdings' Richard McVey (No. 30) have IPOs pending.

Yet all remain sober and realistic. Long-struggling payment processor CheckFree Corp. may finally be making money as sales pick up, but CEO Peter Kight (No. 6) notes, "Negotiations are certainly as tough or tougher than they have ever been."

The Online 40 profiles were compiled under the direction of Global Technology and Banking Editor Jeffrey Kutler and written by Kutler, Senior Editor Steven Brull, Senior Writers Loch Adamson and Justin Schack, Staff Writer Rich Blake and Contributors Jane Adams, Marianne Sullivan and John Wagley.

1 Steven Elterich

PRESIDENT,Fidelity EBusiness

Last year's rank: 1

"We want to be the place that's the starting point for managing all of one's financial needs."

Fidelity Investments' $2 billion technology budget is staggering; only a few global financial institutions spend more on systems and operations. But Fidelity's Steve Elterich has had an additional luxury: stability. The Boston-based mutual fund colossus' e-business chief since 1999, Elterich never had to contend with the cutbacks that have been the bane of other financial industry tech executives. His budget, virtually unchanged for the past few years, helps to explain why privately held Fidelity remains such a high-tech powerhouse. With 5 million enrolled customers, Fidelity's proportion of equity trades that are online increased from 89 percent to 93 percent over the past year. "There's not much more business we can get beyond 93 percent," concedes Elterich, noting that special situations will always require human intervention. But there's still plenty of opportunity to automate mutual fund trades, only 55 percent of which are initiated online. This year Fidelity plans to entice holdouts by introducing a voice-response system that is more natural sounding. Fidelity also is upgrading its platform for active stock traders, is enhancing its electronic options and bond trading capabilities and is redesigning NetBenefits, the portal for retirement plan participants that Elterich, 54, developed a decade ago to launch the firm into the Internet era. Ultimately, Fidelity wants to secure clients' loyalty by serving as an all-purpose financial hub, says Elterich: "If we have a great hub, our share of everybody else's wallet will go up."

2 Sanjay Gupta


Not ranked last year

"If you go online, you get the same recommendations as you would in a banking center."

Can the largest banks, growing ever bigger through mergers and constantly restructuring to shave costs, maintain their competitive edge? Skeptics say no, but Bank of America Corp. is proving them wrong -- at least in Sanjay Gupta's department. He not only runs the biggest Internet banking business in the world, with 7.2 million active customers at year-end 2003, but he's setting all sorts of growth records. In just the past two years, the Charlotte, North Carolina­based bank has added 4.2 million online clients. Gupta, 35, had much to do with the spurt. Two years ago, working under then­Internet chief John Rosenfeld (who last March moved on to head BofA's military banking operations), Gupta spearheaded the promotional campaign for the bank's free online bill-paying service. The tactic, since copied by many competitors, attracted much of the new online clientele: BofA's e-bill payers jumped in number last year from 1.8 million to 3.2 million. With 44 percent of its retail customers online (up from 32 percent in December 2002), BofA has edged past Wells Fargo & Co., the perennial leader. But that penetration will dip when BofA completes its pending merger this year with FleetBoston Financial Corp., which has 22 percent of its 5.5 million customers online. "It's a little too early to say what the Fleet merger will mean," says Gupta. "But our companies do have similar philosophies on e-commerce."

3 Avid Modjtabai


Not ranked last year

"We've been leveraging the Internet to deepen customer relationships."

Back in 1995, Wells Fargo & Co.'s initial move onto the Internet was a big -- and risky -- departure from the banking norm. Now that e-finance, heavily influenced by the pacesetting Wells, has gone mainstream, the bank's top Internet executive, executive vice president Avid Modjtabai, is drilling down into the little things that, she says, will mean greater customer satisfaction. "One key goal," explains Modjtabai, "is to reduce the number of clicks" required to complete a task. Another soon-to-be-finished project will enable customers to "start filling out an application anywhere in our system and come back to it at a later point," says Modjtabai, 42, a Columbia University MBA and former McKinsey & Co. consultant who has been heading the Internet services group since January 2003. "They can initiate the process in a store, save the application and go back to the Web site later to enter their spouse's ID number." Wells's retail clients who are active on the Web increased by 33 percent last year, to 4.8 million; that's 43 percent of checking account holders, a penetration rate matched only by Bank of America. More than 400,000 small-business and commercial accounts are also online -- but Wells stresses that the Internet complements traditional, off-line delivery channels. "Our goal is to make the customer experience across channels seamless," says Modjtabai.

4 Nathan Richardson


Last year's rank: 5

"There are millions of U.S. households not tracking their investment information. That spells opportunity."

Yahoo! may be one of the most popular destinations on the World Wide Web, but its financial section is no mere consumer news portal. Says Nathan Richardson, who has been running Yahoo! Finance for two years, "We want to be the only place people go for financial information globally." That's a tall order, but Richardson at least has bragging rights. At 9.5 million unique visitors per month, Yahoo! Finance outdraws Microsoft Corp.'s MSN Money (8.6 million) and Time Warner's CNNMoney (7 million), according to Nielsen/NetRatings. Yahoo!'s total has risen by 1.5 million over the past year, fueled by the stock market recovery. But Richardson believes that content changes, including a revamped format, expanded stock-price analytics, analyst ratings from StarMine Corp. and data on exchange-traded funds from Morningstar are contributing to the growth. The 33-year-old Richardson is moving Yahoo! Finance in an increasingly sophisticated, institutional direction. "We have a strong user base in financial institutions," notes the former Citibank emerging-markets banker who joined Yahoo! four years ago. "Everyone aspires to be as smart as people in financial institutions." A new attraction, Richardson says, is the News Tracker search tool -- "the first step in a very aggressive push for us to be the ultimate aggregator, having the most relevant search capabilities for financial services and instruments."

5 William Hartnett


Last year's rank: 4

"Our technology is being used in some of the biggest and most demanding transaction systems."

Straight-through processing isn't just a back-office headache for securities firms. It's a priority for any industry struggling to streamline complex transaction flows. Bill Hartnett, a ten-year Microsoft Corp. veteran and head of its financial services group, believes that the Redmond, Washington­based technology giant is perfectly placed to be a problem-solver for all. Whether at a bank handling corporate payments, an insurer paying claims or a brokerage confirming trades, Microsoft systems are becoming ubiquitous all along the processing chain. "We've come a long way from what many people think Microsoft is," says Hartnett, 50, referring to the company's desktop-software heritage. "We are really in every part of the industry now -- deep down into the most complicated and demanding part of the data center." STP solutions logically follow. Take, for example, an electronic payments initiative based on Microsoft's BizTalk Accelerator, involving Bank of New York Co., Scandinavia's Nordea and Charles Schwab & Co. Microsoft's deepening penetration in finance is evident in a recent market-data system upgrade at the London Stock Exchange using Microsoft's .Net framework; in the adoption of .Net by such wealth managers as AXA Rosenberg Group and Lydian Trust Co.; and in advanced securities trading systems from the likes of Townsend Analytics and UNX, built on a Microsoft base.

6 Peter Kight


Last year's rank: 6

"There are simply more e-bill distribution points attracting more consumers, who are paying more bills."

As the dominant processor of electronic bill payments, CheckFree Corp. depends on banks for the bulk of its revenue, which totaled $291 million in its fiscal first half ended December 31. That doesn't prevent CEO Peter Kight from complaining that "some banks just didn't get it." They were too slow to market the bill-paying services that, Kight has long argued, are critical to locking consumers into long-term banking relationships. Evidence is mounting that more and more banks are finally getting it. Twelve million consumers (up from 8 million a year ago) are initiating bill payments through 1,120 online sites (up from 784) serviced by CheckFree. And the Atlanta-based company that Kight founded in his grandmother's basement in 1981 turned a half-year profit of $2 million (reversing a loss of $35 million a year earlier) and boasts a $3 billion market capitalization, 81 percent higher than in March 2003. What's changed? Online banks are increasingly eliminating fees for bill payments -- a boon to them and CheckFree alike. "The true test of the value of what we do is when the financial institutions drop their fees," says Kight, 47. "Offering the service free is more profitable; it gets customers away from the paper, manual, voice and teller processes."

7 William Belew


Not ranked last year

"We listen carefully to our customers and invest in what they're telling us."

The $1.26 trillion-in-assets Citigroup, based in New York, has grown so big and complex, and the Internet is now so ingrained in its operations, that it no longer designates a technology czar. (Vice chairman Deryck Maughan wore the crown a few years back as head of the Internet Operating Group.) A dozen business units have chief information officers, and it's William Belew's job as corporate technology officer to keep them all more or less on the same Web page. Wearing several hats -- including that of chairman of the Information Technology Leadership Council, which sets companywide IT strategies and priorities -- Belew doesn't have to resort to dictatorial tactics because, he says, "online technologies are absolutely mainstream; each business invests in these capabilities, and they're a key part of customer service and go-to-market strategies. Just look at the number of accounts online." The global total grew 25 percent last year, to 30 million; that includes 2.6 million Smith Barney brokerage accounts and 2.2 million retail Citibank accounts in North America. Growth is especially strong in Asia, says Belew, who before joining Citi in 1998 was CEO of Delta Air Lines technology subsidiary TransQuest Information Solutions. "We're seeing the kind of acceptance on the Internet that we've always been hoping for," says Belew. "We're not surprised by it as much as we are delighted."

8 Dawn Lepore

VICE CHAIRMAN,Charles Schwab Corp.

Not ranked last year

" is our most-visited branch."

Profits are rising again at Charles Schwab Corp. (they quadrupled last year, to $472 million), and that's giving the discount brokerage giant's technology a shot in the arm. The San Francisco­based firm has been focused on what vice chairman Dawn Lepore terms "usability," or design improvements, on the Web site for the 4 million online account holders out of Schwab's 7.5 million total. "We really want to make sure customers are treated well and relationships are very personalized," says Lepore, 49, a 20-year Schwab veteran who was chief information officer for eight years before taking on expanded operations, technology and administrative responsibilities in 2001. Daily trades climbed above 200,000 in January for the first time since the tech crash, but Schwab, through acquisitions and strategic shifts during the market downturn, has branched out well beyond retail e-brokerage, and its tech initiatives reflect that. Securities on the brokerage's institutional trading network climbed from 5,000 to 11,000 last year. Notes Lepore, "We've fully automated execution of orders up to 10,000 shares." CyberTrader, the firm's subsidiary for hyperactive traders, introduced an instant messaging system to deliver technical assistance and analyst commentaries. "Sometimes traders don't have time for the phone," explains Lepore. And in the back office, Schwab is embracing grid computing and the Linux operating system. Says Lepore, "The cost impact is huge."

9 David Krell

PRESIDENT AND CEO,International Securities Exchange

Last year's rank: 11

"The floor-based exchanges are the last bastion of monopoly markets."

In February 2003, less than three years after he opened the International Securities Exchange with three partners, David Krell was presiding over the nation's biggest equity-options exchange, with an average daily volume of 1.13 million contracts, for a 30 percent market share, compared with 25 percent at the formerly dominant Chicago Board Options Exchange. Two new features have vaulted the New York­based ISE part of the CBOE: a "one size for all" quoting system, introduced in January 2003, which attracted volume from the proprietary trading desks of major investment banks; and new technology that automated complex trades, such as "spreads" and "butterflies," which previously could only be done manually, at higher commission rates. Now CEO Krell, 57, is going after the harder-to-penetrate index options market, which is dominated by the CBOE and other exchanges that have exclusive licensing agreements with such index providers as Dow Jones & Co. and Standard & Poor's. "By the end of this year, we will have more than a dozen, maybe two dozen," index options, predicts Krell, who co-founded ISE with former E*Trade Group vice president Marty Averbuch, ISE chief operating officer Gary Katz and E*Trade founder William Porter. Krell wants to cater especially to large institutional traders, who he believes will come to drive options industry growth as they have done in equities. "One of our major tasks internally is to identify the kinds of tools that these users need," he says.

10 Mitchell Caplan

CEO,E*Trade Financial Corp.

Last year's rank: 12

"This has been, by far, the single most gratifying year of my career."

What a difference a year -- and a new CEO -- can make. In January 2003, Christos Cotsakos, a self-styled marketing visionary who personified E*Trade Financial Corp.'s go-go climb to the top ranks of Internet brokerages, resigned after an embarrassing series of disclosures about his compensation. (Cotsakos was reportedly the only employee who received a bonus in 2002, when the company lost $186 million.) His successor, Mitchell Caplan, set right to work on tone as well as substance. The former head of TeleBanc Financial Corp., which the Menlo Park, California­based E*Trade acquired in 2000, moved headquarters from Silicon Valley to New York; recruited three independent directors; and reallocated the bonus pool to benefit the rank and file. The market timing didn't hurt, either; as stocks rebounded, so did trading volumes in E*Trade's 2.8 million-account brokerage business. And E*Trade's banking customers rose 25 percent in 2003, to 638,000 -- an indication of successful cross-selling between the units. The company reported $203 million in profits in 2003, on $1.5 billion in net revenue. Late last year Caplan, 46, entered into talks with Canada's TD Bank Financial Group to acquire its TD Waterhouse USA subsidiary (see Frank Petrilli, No. 25). The deal fell through, but Caplan is unperturbed. "That was plan B," he says. "It would have gotten us where we wanted to go more quickly, but we still have plan A, which is to get there ourselves, and we're fine with that."

11 Joe Moglia

CEO,Ameritrade Holding Corp.

Last year's rank: 14

"It's not in anybody's interest to have a price war, but if we do, I want to be at the firm with the highest operating margin. That's us."

When Joe Moglia joined Ameritrade Holding Corp. in March 2001, its prospects were bleak: Stock trading, the online brokerage's main revenue source, was in the doldrums, and with no market recovery in sight, many analysts doubted that the company had a future. Moglia, a former senior vice president in Merrill Lynch & Co.'s private client division who succeeded Ameritrade founder and chairman J. Joe Ricketts as CEO, has done more than quiet the skeptics. The Omaha, Nebraska­based operation tripled its net income in the fourth quarter, to $72 million, and, boasts the 54-year-old Moglia, "We made more money in the last three quarters [$177 million, on $622 million in cumulative revenue] than in the company's 28-year prior history." Customer accounts passed 3 million in September, and the all-important daily trades figure jumped from 154,000 at midyear to 254,000 in January. That's plenty of cause for optimism. But, Moglia says, "our job is to manage this company for good times and bad times." Even as revenue rose 25 percent in the most recent quarter, expenses fell 25 percent. Moglia has cut Ameritrade's workforce from 3,200 to 1,780. "We have powerful operating leverage," explains Moglia. "It's built on a tremendous technology infrastructure, which is our advantage in the marketplace."

12 Gerald Putnam

CEO,Archipelago Holdings

Last year's rank: 15

"I think we've got the winning market model and the winning cost structure."

Technology has never been a problem for Archipelago, the electronic communications network founded by Gerald Putnam in 1996 to challenge the traditional stock exchanges. The system's speedy access to liquidity has made Chicago-based Archipelago Holdings the leader in Nasdaq Stock Market share trading, having surpassed Instinet Group last July. Profits, however, were another matter -- until last year, when the company says it made money for the first time. That's no small feat in the hypercompetitive, low-margin stock-execution business. Putnam's big coup was buying the Pacific Exchange's equities business in 2000 and converting his electronic communications network into a full-fledged exchange, now known as ArcaEx, freeing it from having to pay trade-reporting fees to Nasdaq. Last fall Archipelago attracted a $125 million investment from private equity firm General Atlantic Partners and announced plans to do an IPO this year. Now Putnam, 45, is pursuing the big prize: New York Stock Exchange listings. "The first reaction is, 'Who are you guys, and why should we talk to you?'" Putnam says of Archipelago's new corporate client group, which is courting issuers to list on ArcaEx. "Then you tell them you're trading more of their stock than anyone else, and they start listening."

13 Mortimer (Tim) Buckley


Not ranked last year

"You invest for the long term, and we run our firm -- including the technology function -- the same way."

In 1992 Vanguard Group's then-president and current CEO, Jack Brennan, launched an educational campaign to make all employees technology-literate. "It was called IT Voyage, and everyone had to get on board," recalls Mortimer (Tim) Buckley, the Valley Forge, Pennsylvania­based mutual fund giant's chief information officer. As the firm has upped its investment in training and technology, "our expense ratio has decreased commensurately," asserts Buckley, from 0.31 percent in 1992 to 0.26 percent today (while assets increased from $98 billion to $715 billion). Since the mid-1990s, when Vanguard began to test the interactive waters in a partnership with America Online, the Internet has only heightened the cost advantage. "It's almost like the Internet was made for us," says the 34-year-old Buckley, who has spent ten years at Vanguard -- not including a 1994­'96 hiatus to get a Harvard MBA -- and became CIO in 2001. With as many as 80 percent of its more than 400,000 daily customer interactions now occurring online, the company invests heavily in what Buckley terms "client-facing technology"; recent innovations include an institutional investor Web site and a customer service architecture that enables Vanguard representatives to see exactly what is on the computer screens of shareholders seeking assistance.

14 Seth Merrin

CEO,Liquidnet Holdings

Last year's rank: 20

"The NYSE's market share is going to fall dramatically in the next year."

Seth Merrin isn't surprised: He launched Liquidnet three years ago, anticipating that mutual funds and pension plans would grow frustrated by the high costs and difficult logistics of executing big stock trades on the major exchanges. Now institutional traders are flocking to New York­based Liquidnet's Napster-like peer-to-peer network to negotiate block trades anonymously among themselves. Merrin, who made his mark on the buy side in the 1980s when he pioneered trade-order management, offers a big incentive to go off-exchange: Commissions are 2 cents per share, compared with 5 cents at traditional brokerages (which are excluded from Liquidnet). The average Liquidnet trade is about 41,000 shares, compared with 471 shares on the New York Stock Exchange and 782 shares on the Nasdaq Stock Market. Liquidnet's average daily share volume more than doubled in 2003, to 14 million, even as the Big Board and Nasdaq suffered slight declines. Sixty-three new members have begun trading on Liquidnet in the past 12 months, bringing the total to 188. The liquidity is begetting more: In February average daily volume was up to 19 million shares. "In the past year we went from being a novelty to a must-have," says Merrin, 43. "This should be a watershed year."

15 Jeff Maggioncalda

PRESIDENT AND CEO,Financial Engines

Not ranked last year

"We will bring personalized advice and portfolio management to the tens of millions of people who otherwise couldn't afford it."

Post­Enron Corp., Worldcom and other scandals, corporate sponsors of retirement plans are taking their fiduciary responsibilities more seriously, says Jeff Maggioncalda, CEO of Financial Engines, a pioneering provider of online retirement advice. As a consequence, they are turning increasingly to Financial Engines to help them upgrade and personalize the information available to employees. Apple Computer, Merck & Co. and Motorola are among more than 950 plan sponsors -- up from 850 a year ago -- offering Financial Engines' analytical and planning tools to some 3.5 million participants. That mass-customized approach fulfills the company mission set forth by Nobel Prize­winning economist William Sharpe (No. 9 in last year's Online Finance 40), Stanford University professor of law and business Joseph Grundfest and Venture Law Group co-founder Craig Johnson when they formed Financial Engines in 1996 and hired Maggioncalda to run it. The privately held, Palo Alto, California, company has boosted revenue more than 50 percent a year for the past five years and is cash flow positive, but Maggioncalda, 35, a former McKinsey & Co. consultant, won't speculate on when it might go public. He prefers to tout a product released last fall, called Personal Asset Manager, and a forthcoming upgrade that will let clients speak directly to financial advisers over the phone. "We're not just talking about online advice," says Maggioncalda. "We're talking about truly personalized financial services for the masses."

16 Stanley Shelton


State Street Corp.

Last year's rank: 16

"Electronic trading is becoming the norm in all markets. We believe we are a natural provider of the services."

Stanley Shelton first came up with the idea for online foreign exchange trading a decade ago, launching State Street Corp.'s Global Link trading infrastructure in 1996. Today, besides overseeing all of the Boston-based company's trading activities, Shelton, 49, is chairman of broker-dealer State Street Global Markets and founding partner of its research arm, State Street Associates. All the while, Global Link's foreign exchange component, FX Connect, has steadily expanded. With 425 buy-side firms and 43 liquidity providers participating, FX Connect more than doubled its daily volume last year, to $20 billion. Global Link has moved into other arenas with Futures Connect, Fund Connect, Money Market Connect and Equity Connect, which facilitates cross-border trading. "Sitting at the crossroads of 15 percent of the world's tradable securities, we're interested in connecting our clients to each other and their suppliers of liquidity," explains Shelton. Last fall he introduced a by-product, the State Street investor confidence index. "We're not sure, frankly, anyone else could do this," he says. "We have an extraordinary, 30-year history of trading data to calculate these measures."

17 Edward Nicoll

CEO,Instinet Group

Last year's rank: 13

"We haven't done as good a job as we should in telling U.S. customers that we can execute their orders in Europe and the Far East."

Edward Nicoll took the helm of Instinet Group in September 2002, when the Reuters Group brokerage spin-off acquired Island ECN, and he has been in a rebuilding mode ever since. His restructuring and cost-cutting efforts paid off in last year's third quarter, when New York-based Instinet posted its first quarterly profit since 2001 (though it still lost $74 million for the year). In January, Nicoll completed the consolidation of Island, where he had been chairman before the merger, with Instinet's electronic communications network; this move came on the heels of putting the ECN into a business unit apart from its brokerage arm. "Separating the broker and the ECN was a major step forward," says the 50-year-old Nicoll, adding that the two businesses could be perceived as in conflict; the ECN aims to match multiple customers' orders, while the broker actively represents its customers' interests in the marketplace. To enhance its offering, Instinet last month introduced Continuous Block Cross, which enables institutions to negotiate large block trades among themselves in a private network; it differs from the successful Liquidnet platform (see Seth Merrin, No. 14) in that other brokerages can participate. Instinet last July lost its market-share crown in Nasdaq Stock Market trading to Archipelago Holdings (see Gerald Putnam, No. 12).

18 James Toffey


Last year's rank: 17

"EBay did $24 billion in sales last year. We do that much business in a single morning."

James Toffey is hardly alone in trying to drive fixed-income market operations into the 21st century. (See, for example, ESpeed's Howard Lutnick, No. 19.) But no one is moving faster to bring multiple asset classes onto an online trading platform. Seven years after Toffey, a former head of fixed-income trading at Credit Suisse First Boston, founded TradeWeb, the Jersey City, New Jersey, company has expanded from its base in U.S. Treasuries into nine other products, including commercial paper, mortgage-backed securities and, as of January, European government securities. The system is, as technologists say, scaling beautifully; it has even attracted acquisition bids from the likes of Reuters Group and Thomson Financial. Average daily volume climbed 42 percent in 2003, to $85 billion. "What we do on a normal day equals the daily volume of the New York Stock Exchange and the Nasdaq Stock Market combined," boasts the 42-year-old Toffey. TradeWeb's Treasuries volume is still growing apace -- by 29 percent in 2003 -- but it accounted for only one third of the system's 2003 total of $18.5 trillion. Mortgage-backeds, spurred by low interest rates and the refinancing boom, jumped 240 percent. And, notes Toffey, "on many days mortgages equaled or exceeded our Treasury line." Next in the diversification queue: global credit markets and repos.

19 Howard Lutnick


Last year's rank: 19

"We can offer the best technology at a low cost because our network is built and paid for."

Scalability and leverage -- vague buzzwords to many -- are Howard Lutnick's mantra, as real, he says, as the steady gains in transaction volume (11 percent in the fourth quarter of 2003, to $10.3 trillion) and revenues (20 percent, to $39 million) posted by ESpeed, the technology company that Lutnick spun out of New York interdealer brokerage Cantor Fitzgerald in 1999. As a supplier to Cantor and some 700 other financial institutions, ESpeed has come into its own since the September 2001 terrorist attack, which killed nearly 700 Cantor employees at the World Trade Center and pushed the firm -- and much of the U.S. Treasuries market -- into electronic trading. Treasuries, however, were just a building block. Today Lutnick counts 18 different financial products trading over that same infrastructure; foreign exchange, mortgage-backed securities, interest-rate swaps and equities were all added over past year. "We planned from the beginning to leverage our network and expertise into many products, which no one else had done," explains Lutnick, 42, who is CEO of both ESpeed and Cantor. "The basic platform is the same; it's just a matter of setting rules that are applicable to each market." The ESpeed menu is sure to expand; Lutnick says the platform can accommodate at least 40 products.

20 Matthew Bannick


Last year's rank: 22

"The combination of PayPal and EBay will enable global commerce in a way that has never been seen before."

Since Internet auctioneer EBay, which is based in San Jose, California, acquired e-payments pioneer PayPal in October 2002, PayPal membership has doubled, to 40 million, and PayPal's share of EBay's gross sales ($24 billion in 2003) has climbed to 65 percent from less than 50 percent. There's only one way to keep up that kind of growth: by expanding internationally. That's why EBay CEO Meg Whitman chose Matthew Bannick to run PayPal after the $1.5 billion merger. The 39-year-old Bannick, a former State Department diplomat and McKinsey & Co. consultant, had previously headed EBay's international side, which accounts for roughly one third of EBay's net transaction revenues ($633 million in the fourth quarter) but is growing at more than double its U.S. rate (96 percent versus 38 percent). Bannick sees no reason why Mountain View, California­based PayPal, which mainly clears payments among individuals and small businesses, can't control 80 to 90 percent of the EBay world. "Historically, trade across countries and currencies has only happened from one big company to another, because those folks were the only ones who could handle currency, customs and shipping," Bannick explains. "But with EBay and PayPal combined, we can finally enable global commerce for the little guy."

21 Michael Baldwin


Not ranked last year

"Operating internally in English makes it relatively easy to fully leverage our capabilities in emerging markets."

By now just about every major corporation is outsourcing -- or offshoring, as it's increasingly known. But only Frankfurt, Germany­based Deutsche Bank has Michael Baldwin's intellectual firepower. Global markets group CIO Baldwin has written a scholarly article on the subject -- "More Than Offshoring: SmartSourcing," which appeared last fall in the Capco Institute Journal. And as the title implies, he's no mere cost-slasher. "We found that we have gained very important additional capabilities, such as the ability to scale up or scale down more quickly around a given function, and to raise quality in the process," explains the 41-year-old, who joined Deutsche in 2000 after 16 years with J.P. Morgan Chase & Co. To be sure, the cost advantages are substantial. Labor costs in Bangalore, India, and Moscow, where about 10 percent of information technology jobs have migrated, are one fourth of those in London or New York. Still, the majority of Baldwin's 3,000 employees remain in Frankfurt, London and New York. To bridge cultural divides, Baldwin requires his senior managers to spend time in India. "That has been an eye-opener," he says. "People are very risk-averse and consistently underestimate what can be done and the speed at which it can be done."

22 Satish Nandapurkar

CEO,Eurex US

Not ranked last year

"Eurex's front- and back-end efficiencies give us lots of opportunities to lower costs for our customers."

Before opening on February 8, the Chicago subsidiary of international electronic derivatives exchange Eurex first had to survive a grueling regulatory review by the Commodity Futures Trading Commission and withering attacks from the less-automated incumbents whose business it threatened -- the Chicago Board of Trade and Chicago Mercantile Exchange. So there was no little irony in Eurex's mid-January hiring of a senior CME executive, Satish Nandapurkar, as CEO of Eurex US. The 40-year-old Nandapurkar had spent four years as the Merc's head of products and services and e-business initiatives. But Rudolf Ferscha, CEO of Frankfurt, Germany­based Eurex, said Nandapurkar's appeal stemmed at least as much from his earlier experience as a customer of exchanges at Swiss Bank Corp. (where he was global head of exotic options), Deutsche Bank (head of equity derivatives trading) and Bank of America Corp. (global head of foreign exchange options). "We are running on fast, reliable technology that Eurex has already proven it can deliver," asserts Nandapurkar. Indeed, the introduction of Eurex's low-cost trading platform set off a price war with the CBOT and CME. Competition from Eurex "has been stressful" for the established exchanges, notes Colleen Mitchell, president of a R.J. O'Brien & Associates futures commission merchant and CME founding member. "But it will force the exchanges to be more competitive and efficient, so we'll all win."

23 Anil Arora


Last year's rank: 10

"The size of the potential market is very much larger than what we had contemplated."

Prototypical category-killer Yodlee dominates financial aggregation technology with a blue-chip customer base led by Bank of America Corp., Citibank, Fidelity Investments, Merrill Lynch & Co. and Wachovia Corp. But the category -- software that collects and collates an individual client's financial data from multiple institutions -- has turned out to be a moving target. Thus Anil Arora, the former executive of computer maker Gateway who has headed Yodlee for four years, has shifted gears. No longer trying to sell aggregation as a stand-alone data-gathering tool or as a business-to-business Web service, the 43-year-old CEO wants to embed his technology in the financial industry's most promising online initiatives, including electronic bill payment and wealth management. "Using aggregation as an enabling technology, we'll end up having a bigger percentage of the pie," Arora predicts. Last fall, for example, Redwood City, California­based Yodlee introduced BillDirect for streamlining consumers' invoices and payments, and it announced an agreement to combine aggregation with Emerging Information Systems' widely deployed NaviPlan software for financial advisers. As it is, Yodlee reaches 4.3 million individual users, up from 3 million a year ago; that's equal to 12 percent of the U.S. online banking population of 35 million. As the e-banking market grows, Arora sees Yodlee's penetration rising to 20 percent this year and to between 40 and 50 percent within three years.

24 Hal Hinkle

CEO,Icap Electronic Broking

Not ranked last year

"I'm not sure the public at large realizes how integral we are to the U.S. capital markets."

Icap, the London-based firm formerly known as Garban-Intercapital, spent two years pursuing Jersey City, New Jersey, electronic fixed-income brokerage BrokerTec Global. When it finally received regulatory approval and completed the acquisition last May, Icap solidified its position as the largest interdealer brokerage, handling $550 billion daily. With nearly half of that volume electronic, Icap convinced former Goldman, Sachs & Co. trader Hal Hinkle, who launched BrokerTec in 2000 and served as its CEO, to stay on as head of the online unit. Reporting to Icap CEO Michael Spencer rather than the consortium of Wall Street banks that owned BrokerTec, the 51-year-old Hinkle still focuses on technology needs, including the hot button of disaster recovery. "We have extensive backup, but it's always being improved upon," says Hinkle. One difference: Icap is both a voice and electronic brokerage, in contrast with U.S. Treasuries archrival Cantor Fitzgerald, which went all-electronic on the ESpeed platform after its World Trade Center offices were destroyed on September 11, 2001. "It's one liquidity pool," explains Hinkle. "We give traders two ways to enter and exit." Icap and ESpeed don't just fight over business models; ESpeed has a patent-infringement lawsuit pending against Icap. Argues Hinkle: "The marketplace clearly wants competition. Which means that there is plenty of room for both of us to compete aggressively."

25 Frank Petrilli

CEO,TD Waterhouse USA

Last year's rank: 18

"We are very successful competing against full-commission brokerage firms."

Late last year, Frank Petrilli's ninth as head of TD Waterhouse USA, he was on the verge of more than doubling its size. The New York­based brokerage's parent, Canada's TD Bank Financial Group, was negotiating a merger deal that would have brought Waterhouse's 2.2 million clients together with E*Trade Financial Corp.'s 3.5 million. The talks broke off in January over what TD Bank described as "governance issues," but Petrilli never broke stride. A guerrilla marketer, he lures business away from the major full-service brokerages with a combination of online services, access to 150 branches and straight-shooting advertising, which, if anything, has gotten more aggressive. "We have taken the gloves off," says the 53-year-old CEO, referring to TV commercials in which actor Sam Waterston sells the firm as "the alternative to higher-priced brokers like Merrill Lynch and Schwab." Since TD Bank took it private two years ago, Waterhouse hasn't disclosed U.S. volume statistics, but Petrilli notes that they're moving in the right direction: Trades per day were up 83 percent in January from a year earlier, and client assets rose 44 percent.

26 James Hale III and Robert Huret


Last year's rank: 25

Hale:"Buyers have put on their expansion hats again."

Huret:"We described 2002 as sailing into the wind. In 2003 we saw things really start to improve."

For the first time since 1999, James Hale, 52, and Robert Huret, 59, are enjoying what they call "forward visibility" -- favorable trends in the revenue and valuation of financial technology companies. For the former Montgomery Securities bankers who in 1998 co-founded FTVentures, the world's largest stand-alone venture capital firm focused on e-finance, that's a clear signal to pick up the deal-making pace. In 2003 the San Francisco­based firm made four first-time investments and several follow-ons. "What we're seeing in the pipeline -- and what our team is capable of handling -- could put us near or even ahead of our totals last year," Hale says. (The firm's second, $423 million fund, which closed in January 2002, is 25 percent invested.) Among recent recipients of funding from FTVentures and the 38 major financial institutions that are its limited partners: transaction-monitoring-software company Actimize Corp., e-mail archiver KVS and mortgage compliance software provider Mavent. The companies are benefiting as buyers of financial technology loosen their purse strings after three years of tightening them. "We see [tech] companies that are more realistically valued, with good products to sell and, now, the ability to sell," says Huret. "There is cause to believe that the forward momentum will continue for some time."

27 Sunil Hirani


Last year's rank: 23

"The proliferation of credit default indexes has increased the efficiency of this market."

Even as corporate creditworthiness recovers, credit default swaps continue to attract investor interest, and New York­based trading and market-data platform Creditex remains at the center of the action. That's a testament to the vision of co-founders Sunil Hirani and John McEvoy, former OTC derivatives colleagues at Deutsche Bank, who raised capital from Deutsche, Bank of America Corp. and several other banks to start Creditex in 1999. But Hirani -- the sole CEO since McEvoy withdrew from day-to-day management last May -- has had to hustle to keep pace with the $3 trillion market. The most far-reaching change: indexes, which "allow one to take a very efficient view on credit because you can go long and short very efficiently," explains the 37-year-old Hirani. "This presents a very interesting opportunity for us." While Creditex continues to focus on its interdealer brokerage role for single-name credit default swaps, in February it introduced an electronic trading platform to support all current index products including IBoxx and Trac-X. "No one else has an integrated front-end platform for the credit derivatives market," Hirani boasts.

28 Amit Yoran

DIRECTOR,National Cyber Security Division

U.S. Department of Homeland Security

Not ranked last year

"We are at risk."

From online stock trading to global computer networks, no industry has made more effective, cost-reducing use of the Internet than financial services. But that makes financial firms all the more vulnerable to the high-tech threats that pop up on the radar screen of Amit Yoran at the U.S. Department of Homeland Security in Washington. Since he became the nation's cybersecurity czar in September, Yoran, 37, has introduced one high-profile initiative -- a national alert system to guard against viruses, worms and other potentially devastating attacks -- while speaking out against complacency throughout corporate America. Yoran says that compared with other critical industries, finance "has the best risk practices." But still, he adds, "it is at significant risk" -- particularly when it comes to transactions flowing over public networks. Yoran's harsh message isn't one that audiences are eager to hear. But as a former executive of Internet security company Symantec Corp. and director of the Pentagon's Computer Emergency Response Team, Yoran commands respect in the private sector. "Amit's obviously a top talent, so getting him into that role is an excellent opportunity," says Rhonda MacLean, director of corporate information security at Bank of America Corp. in Charlotte, North Carolina, and chairwoman of the Financial Services Sector Coordinating Council, the industry's official liaison with the government on cybersecurity.

29 Douglas Lebda


Last year's rank: 32

"In 2004 the mortgage market will be cut about in half. That will be good for lending exchanges."

Douglas Lebda never wanted to be just another online banker. His models for consumer finance were and EBay -- portals for shopping at competitive prices. In 1998 he opened LendingTree, where borrowers have since obtained $68 billion in credit from hundreds of banks that bid against one another for the accounts. In the first half of last year, the Charlotte, North Carolina, company increased revenues 84 percent, to $84 million, and earned $13 million. In August media mogul Barry Diller's IAC/InterActiveCorp acquired LendingTree for $734 million. (Lebda got $45 million in IAC stock for his 2.1 million LendingTree shares.) Now LendingTree is part of a portfolio of portals that includes and, for travel, and, for dating. Lebda, 34, says it's a luxury to be part of a larger enterprise -- "we don't need to spend as much time on shareholder relations and can be 100 percent focused on the business" -- and capital is plentiful. In December, LendingTree bought two portals of its own -- Providian Financial Corp.'s GetSmart and Primedia's "We think we would have made the acquisitions even without the added capital," says Lebda. "But we wouldn't have had as much margin for error."

30 Richard McVey

CEO,MarketAxess Holdings

Last year's rank: 33

"Price discovery has gone fully electronic, significantly improving efficiency for credit market participants."

Among the dozens of electronic fixed-income marketplaces that sprouted up during the dot-com boom, New York­based MarketAxess was different in one crucial respect: It never bit off more than it could chew. From its inception in 2000 as a spin-off of J.P. Morgan Chase & Co.'s LabMorgan, founder and CEO Richard McVey kept MarketAxess focused on U.S. and European high-grade corporate and emerging-market bonds. According to McVey, "Credit markets are different, and solutions have to be very specifically tailored." His network's average volume, at nearly $1 billion a day, pales next to the $85 billion of its more diversified online rival, TradeWeb (see James Toffey, No. 18), but MarketAxess is triumphing in a different respect: On February 11 it made a preliminary filing with the Securities and Exchange Commission to raise up to $150 million in an IPO. McVey declined to be interviewed because of the pending IPO. But he told Institutional Investor late last year, "It's all about building the right community." That includes 19 dealers, accounting for 98 percent of U.S. corporate bond underwriting, and 575 buy-side institutions, all with access to MarketAxess' BondTicker market-data service, which McVey believes has significantly enhanced price transparency.

31 Stuart Townsend

PRESIDENT,Townsend Analytics

Not ranked last year

"Recent trends in market structure have gone against the interests of the business-as-usual people, but they've been good for the things we do."

The Internet combined with stock market reforms to bring on the electronic trading revolution of the mid-1990s. Credit the work begun by Stuart Townsend a decade earlier for providing a spark. In 1985, Townsend and his wife, MarrGwen, founded a pioneering software shop in Chicago that was incorporated two years later as Townsend Analytics. The 200-employee firm initially worked on market-data and pricing-analysis systems for derivatives; soon it was under contract to Deutsche Termin Börse (a predecessor of Eurex) and Austria's OTOB options market. As day trading took off in the 1990s, Townsend's RealTick was one of the few systems available to support it -- and there are elements of the technology in many of today's quantitative-trading and direct-access-brokerage programs. To promote its vision of fully electronic markets, Townsend developed and partly owns the Archipelago Exchange; Stuart Townsend is its chief technology officer. "Clearly, there are some people who'd like to turn the clock back, but that looks increasingly less likely," says Stuart, 58, who got so caught up in his business that he never completed his Ph.D. in economics at the University of Chicago. Still, notes MarrGwen, another lapsed Ph.D. candidate, "Townsend Analytics and ArcaEx are both born of the University of Chicago themes of openness and free competition."

32 Chris Larsen


Last year's rank: 31

"Online companies won't survive very long unless they embrace transparency for the consumer."

Chris Larsen didn't just survive the Internet crash. The CEO of online lender E-Loan -- which doubled its net income last year, to $22.6 million, on $153 million in revenue -- has emerged as a leading consumer privacy advocate. Larsen, 42, helped finance, and fronted for, Californians for Privacy Now, which promoted one of the nation's strictest privacy and identity protection proposals. (It passed the state legislature last year but was subsequently preempted by a federal law.) "The market has failed to recognize consumers' fundamental right to control their personal financial information. We're radically pro-consumer," says Larsen of E-Loan, the Dublin, California, company he co-founded eight years ago. "Many other lenders want you to call them and negotiate a price, and they keep you in the dark, because if they can sell at a higher rate, they make higher commissions. We are the opposite. We want consumers to get as much information as possible, which puts them in control." Borrowers seem to buy in. While increasing revenue 48 percent last year, E-Loan reduced its dependence on the cyclical home-refinancing market. Revenue from diversified products (home-purchase, home-equity and auto loans) rose 83 percent, to $80 million, in 2003, and this year Larsen expects $107 million out of total revenue of $142 million to come from sources other than refinancing.

33 Philip Weisberg


Last year's rank: 34

"We finished the early adopter phase in 2003. Now we're in mainstream adoption."

When FXall, the leading multibank foreign exchange trading platform, turned its first profit in 2003's second quarter, it lifted a big weight off CEO Philip Weisberg's shoulders. "Up to that point I was in a survival mind-set," says Weisberg, 36, who incubated FXall at J.P. Morgan Chase & Co.'s LabMorgan development unit and has been the company's CEO since its launch four years ago. "Now the thought process is to try and capitalize on our leadership position." FXall has attained the critical mass that is any trading venue's most daunting challenge: The New York­based network has 47 liquidity-supplying banks and 700 buy-side participants. However, its daily volume of $13 billion barely scratches the surface of the $1 trillion­plus forex market. And it trails State Street Corp.'s FX Connect online marketplace (see Stanley Shelton, No. 16). But Weisberg naturally asserts that FXall has just begun to tap its potential. In September, FXall moved into the burgeoning hedge fund industry with a trading and settlement service geared for prime brokerages. And Weisberg is anticipating "a wave of growth" from corporations that, as part of their Sarbanes-Oxley Act compliance, will want to trade in secure, auditable, demonstrably efficient marketplaces.

34 Dirk Pruis


Last year's rank: 35

"Being a global platform is important for us."

Liquidity begets liquidity. "Every new client has a ripple effect across the system -- it's an uptick for all the other users," says Dirk Pruis, CEO of New York­based securities lending marketplace EquiLend Holdings. "Some of our members say they've doubled their business flow and have fewer people working on it," adds the 43-year-old Goldman, Sachs & Co. veteran who spearheaded the network's development in 2001 and opened it for trading in July 2002. Founded by ten major banks that wanted to automate the extremely complex documentation accompanying securities loans, EquiLend has facilitated more than $800 billion in transactions. It reported a 57 percent jump in trading volume in the 12 months through November, and last year it added its first foreign partners: Japan's Nomura Group and the U.K.'s Abbey National Group. Nomura is especially significant, says Pruis, because "a connection with the Asian markets has been a priority for us from the start." Underscoring its international ambitions, EquiLend in January hired former SunGard Securities Finance and Reuters executive Sharon Walker to head its new London subsidiary, EquiLend Europe.

35 Steve Bennett


Last year's rank: 28

"We focus on businesses where we have a durable competitive advantage."

Intuit may have been the first company to use the term e-finance, a label it applied to the Quicken financial management software released in 1984. But the Mountain View, California­based company today looks very different from the one co-founded by Quicken inventor Scott Cook, who remains Intuit's executive committee chairman. Steve Bennett, the General Electric Co. veteran named CEO in 2000, is less focused on the aging, low-margin Quicken line -- despite its loyal, upscale customer base exceeding 15 million -- than with more profitable "growth engines" including QuickBooks business software, TurboTax for tax preparation and professional accounting products. "Our goal is to create new platforms to drive faster, profitable growth," says Bennett, 48. That thinking has led, for example, to "different flavors" of software for specific industries such as construction or real estate, and to the 2002 acquisition of Blue Ocean Software for managing businesses' technology assets. One effort went awry last year: Intuit pulled the plug on a joint offering with New York discount brokerage Muriel Siebert & Co. "because our customers didn't place a priority on an online brokerage service," says Bennett. "The impact was minimal." Intuit improved its bottom line 145 percent, to $343 million, in the fiscal year ended July, on revenues of $1.65 billion, up 26 percent.

36 Charles Almond


Last year's rank: 37

"There are a lot of improvements yet to be made in fixed-income processes."

Amid the stock market boom of the late 1990s, which spawned electronic communications networks and other automated-trading alternatives, former Morgan Stanley Dean Witter broker Charles Almond toiled in obscurity on a fixed-income ECN. Almond's Mill Valley, California, start-up, then called BondExchange, began operations in 1997 after two years in development. But it didn't come into its own until 2000, when stocks slid, bonds surged and 15 firms -- ranging from Bear Stearns & Co. and Goldman, Sachs & Co. to TD Waterhouse and Wachovia Corp. -- invested in the renamed BondDesk. Today more than 70 broker-dealers contribute to BondDesk's primarily retail order flow. Almond estimates that daily transactions are running 60 percent ahead of last year, and the company is reinvesting profits in a continual effort to attract more liquidity. "Our new-business pipeline has never been bigger," boasts Almond, 43, who works alongside co-founder and chief information officer Joseph Nirta and shares management responsibility with New York­based COO Bradley Wendt, a Goldman alumnus. "Interest rates at some point will go back up," Almond concedes. But, he adds, "we'll still grow by getting new clients. There are plenty more out there."

37 Thomas Ricketts


Last year's rank: 38

"We didn't get any breaks in '03."

Market conditions last year turned against Incapital, Thomas Ricketts's network for delivering new corporate bond issues via brokerages to retail investors. But even as investor demand flagged, the volume of Incapital's InterNotes held steady in 2003, at $11 billion -- a clear sign that electronic delivery is gaining acceptance. Ricketts, 38, introduced the online distribution concept in ABN Amro Bank's SmartNotes program before striking out on his own three years ago. Preparing for the next increase in interest rates and inflation, Chicago-based Incapital worked with Bank of America Corp. to create a new structure for inflation-linked corporate bonds aimed at making them more tax-friendly than other inflation-protected issues. Household Finance Corp. last year used Incapital to issue $400 million of Inflation-Protected InterNotes. Ricketts's firm also plowed through a thicket of cross-border legal and operational complications to launch a pan-European platform for underwriting InterNotes. Toward its long-term goal of assembling a global distribution network for retail bond issuance, Incapital expects to add a few hundred European brokerages to the 375 it has worked with in the U.S. Says Ricketts, "In two years there won't be a single dealer in the world that won't have some kind of relationship with us."

38 Jonathan Meeks and Kenneth Schiciano,

TA Associates

Not ranked last year

Meeks:"Financial technology companies are opening up markets that used to be closed except for only the very largest participants."

Schiciano:"We're looking for ways to play the growth of fixed-income and related derivative products."

Fresh from home-run investments in Datek Online Holdings Corp. and Island ECN -- which were acquired by Ameritrade Holding Corp. and Instinet Group, respectively, in 2002 -- venture capital firm TA Associates continues to place sizable bets in financial services. One of them, a $110 million investment two years ago in $6 billion hedge fund Clinton Group, looks shaky in view of the New York fund's recent troubles with an asset-backed securities portfolio. But elsewhere optimism reigns. Jonathan Meeks, a principal of Boston-based TA, which has a $5 billion portfolio, in October placed $82 million in GlobeOp Financial Services, which supplies back- and middle-office systems for hedge funds. He also shelled out $60 million in November for a majority interest in the Center for Financial Research & Analysis, a pioneer in independent financial research. Along with other e-finance plays, including New York­based trade automation innovator Lava Trading (TA led a $30 million round in April 2002), GlobeOp and CFRA promote "transparency, independence, neutrality and the democratization of the financial markets," declares Meeks, 31. Keenly aware that these forces are eroding the profit margins on equity trading, Meeks and his financial-technology teammate, managing director Kenneth Schiciano, are exploring other asset classes. "We're looking for technology and service companies in fixed income" as well as derivatives, says Schiciano, 41, a 16-year TA veteran.

39 Jerry Rao


Not ranked last year

"A confluence of developments in technology makes global virtual processing possible."

In 1998, after more than two decades in increasingly senior technology and consumer banking jobs at Citibank, Jerry Rao decided to catch the Indian outsourcing wave. The company he started, Mphasis BFL Group, sells business process outsourcing and software services with a simple guarantee: Costs will come in at least 30 percent below what a client would spend on in-house operations, with quality improvements on top of that. "That's a minimum," says Rao, 51. "If we cannot do that, we shouldn't be around." The customer list attests to Rao's success: It includes ABN Amro Bank, BNP Paribas, Citigroup, J.P. Morgan Chase & Co. and Reuters Group. Mphasis has headquarters in Bangalore, India. Most of the company's 6,000 employees are in India, but Rao regards it as a virtual enterprise, with offices in New York and several other key cities. He is especially confident of a new software-development model known as virtual processing, and is considering options for a new outpost in Eastern Europe, which will increase capacity and make it easier for work to go on around the clock. Says Rao, "We've stumbled on the secret of how to globally leverage time and effort."

40 Bill Kapner


Not ranked last year

"We'd like to develop services for the buy side that don't compete with what our customers are selling."

Its name seems a relic of the Internet bubble, but financial industry database has gotten serious traction. "The institutional capital markets have embraced us," says Bill Kapner, a former journalist and asset manager who founded privately held Bigdough's predecessor company, Investment Data Corp., in 1994. Since 1998, when Kapner began packaging his investment community directories and research as an Internet service, annual revenue has climbed from $534,000 to $15 million. The core of the 105-employee, Bethesda, Maryland­based operation is its database, which includes 45,000 buy-siders (portfolio managers and analysts) and 12,000 sell-side analysts. The database is standard equipment for institutional brokerages such as Credit Suisse First Boston and Merrill Lynch & Co. as well as many corporate investor relations departments. Bigdough has strengthened its hold on sell-side customers with its Enterprise sales management software, which logs all contacts and correspondence with clients and prospects. "The big firms are finding Enterprise to be an effective, relatively inexpensive way to manage their sales and research distribution," explains the 45-year-old Kapner. He's now looking to boost revenue by providing services to the same buy-side professionals that Bigdough tracks for the sell side. "We own the most powerful platform in the world for connecting with institutional investors," he says, "and we have yet to take advantage of it ourselves."