Order Management Systems—the Next Legacy?

I was recently interviewed by a journalist about the current and future state of the OMS market. During this interview it struck me just how much this market has evolved over the last ten years. Has it now got to the point where we are reaching the end of the cycle of innovation and the incumbent vendors are seen as slow-moving organisations with large client bases and increasingly broad and lethargic applications? Certainly, they are gaining a reputation in some markets for being expensive to implement and often troublesome to upgrade.

In the early 1990s, it became increasingly clear that buy-side paper-based trading desks were no longer acceptable. As a result, a number of applications emerged to provide electronic order management systems, predominantly for equity desks. Over time more functionality was added, starting with integrated compliance and then other asset classes. Eventually, the vendors consolidated and the major players started to reach saturation in their target markets. At this point (in order to continue their growth aspirations) the vendors looked to expand their capabilities into other related areas.

Interestingly, this in many ways mirrors the development of back office technologies in the 1980s. As we saw then, this expansion ultimately led the firms to become larger, more conservative vendors, with less appetite and ability to innovate and take risks. Initially it was these vendors who had ambitions to automate the front office, but the market quite rightly saw the new, nimble technology firms as better and quicker providers in this space. Those back office providers have either acquired new products in an effort to compete or become legacy applications focused on maximising revenues from a declining client base.

It will be fascinating to watch this area and see if the incumbent vendors can continue to dominate - or will we see a new breed of suppliers attacking the emerging niches with more lithe applications?

Many factors point to the end of an era - unless the current suppliers have learnt from the failures of the previous generation.