2 page Case Study - Posted 5/14/2008

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Milliman

Financial Services Firm Scales Fast-Growing Hedging Application on Low-Cost Cluster

Milliman, a global financial consulting firm, needed to expand the use of its highly successful variable annuity hedging model. The company deployed Windows Server® 2003 Compute Cluster Edition on 150 servers—expected to grow to 250 by the end of 2008—to reduce operating system licensing costs, retain the reliable Windows® platform, and avoid the technical risk associated with a move to a Linux-based environment.

Business Needs

Milliman serves business, financial, government, and union organizations with consulting in employee benefits, healthcare, life insurance, financial services, and property and casualty insurance. The Seattle, Washington–based company has 48 offices worldwide and employs more than 2,000 people.

Milliman runs a successful global financial risk management practice out of its Chicago, London, Tokyo, and Sydney offices, with 80 people managing hedging programs. Twenty-one of the top 25 variable annuity writers in the United States and insurance companies across the globe use Milliman hedging services to help them protect against potential losses in equity markets through the use of futures, swaps, and options contracts. Milliman has developed the MG-Hedge software program to run complex computational models that iterate through millions of policies, hundreds of stochastic scenarios, dozens of market scenarios, and many time projections to arrive at recommendations that affect 6 to 7 million people every day.

Milliman first developed hedging models in 1999, originally using Microsoft® Office Excel® spreadsheet software and the Microsoft Visual Basic® development system. The company got a big boost in performance by replacing Visual Basic code with code written using the Microsoft Visual C++® development system. By 2002, the solution had evolved into MG-Hedge, which Milliman moved first to a cluster of desktop computers running the Windows® XP operating system and later to a cluster of servers running the Windows Server® 2003 operating system.

As the popularity of variable annuity guarantees continued to rise, there was an enormous increase in demand for Milliman’s services. Milliman realized that it would need to expand its cluster to hundreds or thousands of computers, which would increase operating system licensing costs fivefold or more.

Solution

“We had developed our computational programs to run on any operating system, so we would have the freedom to use open source software if we needed to, to keep costs low. But we knew and loved Windows and didn’t want to leave it if we didn’t have to,” says James Brackett, Leader of the Financial Technology Practice at Milliman.

We had developed our computational programs to run on any operating system … to keep costs low. But we knew and loved Windows and didn’t want to leave it if we didn’t have to. James Brackett Leader of the Financial Technology Practice, Milliman

Milliman realized that Windows Server 2003 Compute Cluster Edition presented a compelling value proposition—a way to stay on the Windows platform at a very reasonable cost. The company deployed the operating system on 150 Sun Fire X4100 M2 server computers, each containing two dual-core AMD Opteron processors. Milliman expects to have as many as 250 servers with quad-core processors by the end of 2008, for even more computational power.

“Only 8 to 10 people submit work to these servers, but this represents work for 20 to 30 customers, each of which has hundreds of thousands of policies and billions of dollars riding on our recommendations,” Brackett says.

Benefits

By running its hedging cluster on Windows Server 2003 Compute Cluster Edition, Milliman has dramatically reduced its software licensing fees, which will allow the company to grow its hedging business with much lower overhead.

• Lower costs. “Our grids can grow an additional 12 percent with no additional costs, which will allow us to grow our business more cost-effectively,” Brackett says. “We also realize a cost avoidance from not having to move to Linux.”
  
  
• Business growth with a familiar platform. It’s a big advantage to Milliman to grow its business economically on the Windows operating system platform without moving to Linux. “The ability to retain Windows as our business platform of choice is huge,” Brackett says. “We don’t have to move to a new operating system, leave the programmer-friendly development tools for Windows, port our programs, retest our code, and put it through quality assurance. We would have had to abandon a lot of equity that we’ve built up in Windows.”
  
  “Windows matters a lot to our clients, too,” adds Dwight Rebers, IT Infrastructure Specialist at Milliman. “They run our software in Windows environments, and they, too, are struggling to keep up with rising computational loads. If they know they can use Windows Server 2003 Compute Cluster Edition to save on software licensing, it’s a cost-effective way for them to grow. We and our customers are relieved that we don’t have to make the switch to Linux.”
  
  
• Higher IT staff productivity. Server deployment is easier with Milliman’s new choice of operating system. “Prior to Windows Server 2003 Compute Cluster Edition and Windows Deployment Services, I spent about an hour on each new server deployment,” Rebers says. “Now, new server deployment takes 25 percent of the time it did—about 15 minutes per server. This will multiply to a huge amount of time saved as the number of our servers grows.”