The Wheel Keeps on Turning

I've interviewed a fair amount of people on the financial technology vendor side this week, as part of our coverage of the Waters Rankings. Outside of London's extraordinary heat, a few key threads have emerged from those discussions, which I think bear further discussion.

The Landscape is Improving
2009-2012 is held with something akin to faint terror when you talk to vendor CEOs about the business landscape. One person at a well-known back-office software provider said it was so quiet that you could hear a pin drop, while another at a global front-office software provider, speaking so far off the record we may as well have been talking about his family, summed it up as "one of the tensest, most fraught periods of sustained commercial bullshit I've ever lived through." The point is that nobody had any money then, and vendors suffered for it, just as everyone else did. But now, they say, people are winning mandates again, and they have the capital to reinvest in their systems. All good signs for an uptick, then, even if it's been forced in a lot of ways through compliance.

It's Not Just Compliance, but Compliance and Security
The big driver of cost for the past few years has undoubtedly been compliance with regulatory mandates. Every year, you'd hear the same thing when it came to cost centers ─ regulation, regulation, regulation. Now, though, I'm hearing compliance lumped with security as a cost center and as a key client concern from vendors. There's been a lot of focus around cybersecurity of late, and it's good to see that the industry is taking it seriously. Less so for the vendors, one of whom said that during a recent negotiation with a hedge fund, they were asked more details about their operational intricacies than a full audit from the Securities and Exchange Commission would entail.

It's Getting More Competitive
When it comes to non-specific interviews with vendors, one of the biggest weapons in the journalist arsenal is: "what do you have coming up for the next year?"

It gives the interviewee a chance to talk about their company in a positive way, and it gives us the chance to get some actual news out of interviews that can often be conducted by people so well media trained that they might as well be reading a press release. This year was a little different though, with more than a few CEOs declining to answer the question, citing the fact that they were in a tight market competition-wise, and they didn't want anyone stealing the jump from them. Interesting.

2009-2012 is held with something akin to faint terror when you talk to vendor CEOs about the business landscape. One person at a well-known back-office software provider said it was so quiet that you could hear a pin drop.

All in all, then, it seems to be positive for the vendor space. There's been some M&A activity of late outside of the big boys, a little consolidation, some strategic alliances that are almost certainly leading down defined roads a few years in the future, and a growth in business. Is the sector over the effects of 2008? No, perhaps not. But there are green shoots in the desert, it seems.