SS&C’s acquisition of Advent Software is a significant change in the vendor landscape for investment management firms. On paper, the combination of Advent’s strong technology portfolio and SS&C’s increasing capabilities in providing services creates a very interesting and powerful supplier.
As with all these transactions, the challenge is in the integration and execution of the merger (although both firms have plenty of experience in this respect). I do, however, believe there are several cultural differences between the two firms and it will be interesting to see if the new organisation tries to retain the best of both brands, or whether SS&C Technologies will ultimately ‘consume’ Advent at the expense of losing some of its key strengths.
One area where Advent has always shown muscle is in its marketing and product discipline. Its products all have very clear market and functional domains; the crossover of solutions is minimal. SS&C now owns a large portfolio of products. There are many areas where these products are competitive and some cases where they are ageing. Will SS&C take the opportunity to move to a more strategic approach, with single strategic products for single markets? While this may seem an ideal opportunity to do so, to adopt this position without losing revenue impact will be a challenge. Firms on non-strategic products will be forced to review their options and may move elsewhere.
It is more likely that SS&C will use this acquisition to further strengthen its position as a service provider, increasingly blurring the lines between services and software. In my view this is a very stimulating opportunity and very much in keeping with an industry-wide trend. With the ‘removal’ of Advent, there are now only a small number of firms that are truly global technology vendors. The shrinking vendor market is worrying from a buyers’ point of view and the decline in competition is certainly not healthy if we want to see dynamic and innovative software development.
SS&C do now have a potentially dominant position in many areas of fund administration, particularly in the hedge fund sector. Here they either provide the services directly or, through Advent Geneva, are providing the technology used by other service providers. Geneva is the system of choice in key areas of the other suppliers’ businesses and it will be interesting to see how SS&C manage a strategic piece of technology, developed by a growing and ambitious competitor.
I also believe that many asset management firms are now in a situation where their exposure to SS&C is very significant, either directly as a buyer of software and services or indirectly through their service provider being reliant on Geneva and other SS&C technologies. They should as a matter of course now instigate enhanced oversight procedures to ensure that they are fully aware of their exposure and are mitigating it for the protection of investors.
I would expect the regulators to take a growing interest in this risk, as the vendor’s position of dominance in some sectors and individual firms does present a level of dependency that may raise concerns if it is not adequately addressed. With some commentators questioning the price of the acquisition, it will also be interesting to see how the overall financial position of SS&C is viewed. This may raise more questions for customers to answer as part of their ongoing vendor due diligence and management.
The demise of Advent marks the end of another provider whose value proposition is solely the provision of technology. For many parts of the value chain it is becoming increasingly difficult to grow and maintain global businesses that are independent traditional software houses. Firms buying software will need to consider this as part of any selection process, as in five years time the technology topography may look very different.
This is an absorbing time in the investment management software market and the newly enlarged SS&C will be fascinating to observe.
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