The Last Man Standing Has Just Fallen

The Waters view on Charles River's acquisition by State Street.

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Those are the words of a long-serving portfolio manager at a large, traditional London-based asset manager, referring to his experience of living with and using Charles River’s Investment Management Solution, the platform responsible for delivering the Burlington, Mass.-based firm’s success over the last quarter-century. And let’s be clear here: The name Charles River (formerly Charles River Development) is synonymous with success more so than just about any other technology vendor, especially when it comes to the buy side.

That success is reflected in its astonishing run of form in the best buy-side order management system (OMS) category in the annual Buy-Side Technology Awards, which it won for the first time in the inaugural awards back in 2007. Since then it has hardly been out of the winners’ circle, regularly taking home the OMS category and on a number of occasions the best front-office platform and best overall technology provider to the buy side categories, too.

But Charles River, the last privately owned, independent OMS specialist operating across the buy side, is now no longer independent, given its recent acquisition by State Street. It joins other leading OMS lights—LatentZero, Macgregor, Eze Castle Software and Advent Software—to have succumbed to the inexorable march of what one might call “progress” and consolidation across the technology vendor landscape. That’s not necessarily a good or a bad thing—it’s just a fact of life.

In all likelihood, Charles River, as part of the State Street stable, will become more of a potent force across the buy side with its wealth of OMS, execution management, compliance, investment book of record and enterprise data management functionality. But a personal plea to the State Street brains trust: Please don’t rebrand the platform. Not just yet. Call me nostalgic or a Luddite, but I (and many others in this industry) have grown accustomed to the name, and it would be a shame to see it disappear.

Charles River is, by its own admission, “reassuringly expensive.” This has been confirmed by just about everyone I have ever spoken to about the platform, although clearly its price tag hasn’t impinged on its pervasive appeal, not only in the US and UK markets, but globally too. And surely in excess of 400 buy-side firms can’t be wrong. The platform has also earned a reputation for landing IT heads with complex, laborious implementations and overruns, but even that hasn’t dented its success.

I remember speaking to Peter Kelso, managing director and CIO of Deutsche Asset Management (now DWS Group), at least a decade ago at a SunGard event on the shores of Lake Como, and he confirmed to me that Deutsche had decided to roll out Charles River globally and that it was a no-brainer. Yes, it would be a challenge, he said, referring to what was likely to be a lengthy implementation, but it was also the logical choice, given its outstanding breadth of coverage and functionality.

Another conversation I remember was with Tom Driscoll, global managing director at Charles River, who has been with the firm for the best part of 25 years. This was back in about 2004 or 2005, and Tom and I met for lunch in London. I asked him when Charles River would be developing and launching an application service provider (ASP) version of the platform, given that the ASP model was fairly mature across the industry and that a number of competitors had already started moving in that direction. He answered that there was currently no demand for a hosted version of the platform from the firm’s existing clients, and that in all likelihood there wouldn’t be an ASP version anytime soon. Naturally, I was surprised by his answer, although I was even more surprised when just a year or 18 months later Charles River announced that it was ready to go to market with a software-as-a-service version of the IMS. Old dogs and new tricks, hey?

So what do I make of these recent developments? Needless to say, we have been here before and we know how this is likely to end. The head honchos at Charles River will pledge their allegiance to State Street and confirm that they are in it for the long haul, although everyone in the industry really knows that they will be gone in a year or 18 months, and with them the je ne sais quoi that helped make Charles River one of the finest and most successful third-party technology providers serving the buy side. And whichever way you look at it, that’s sad.

But what about the people who really matter: Charles River’s clients? Well, I have no doubt that they will be the net beneficiaries of this latest marriage, enjoying a combination of the reach and financial clout of the beast that is State Street with the functionality and performance of an uber-competent front-office platform. And that can only be a good thing.

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