Imagine that you are in the mood for a nice Italian dinner and based on your current locale, you are only close to Olive Garden. You would like to consider options beyond the standard endless breadstick offering but altering your course would entail effort associated with an extended drive time and fuel costs. This scenario presents three possible paths:
- Go to the closest restaurant where the buttery breadsticks are always abundant and Italian dishes adequate.
- Expend the energy and resources to travel a considerable distance to experience a more expansive culinary selection.
- Choose to make your own Italian meal at-home customized with in-house ingredients, and your relative skillset/expertise.
Not sure if this scenario is considered a dilemma, Hobson’s choice, or more appropriately Morton’s fork?
I liken this decision process to what many asset managers and asset owners are facing today with a shrinking technology vendor landscape. The broader vendor landscape is presenting fewer yet more predictable options which encourages some asset managers to consider specialty firms or in-house custom solutions.
Consolidation is typically indicative of a mature industry with tools in the late-stages of the product lifecycle, and this phase tends to exhibit price stabilization, less innovation, and greater commoditization. A marketplace with fewer vendors offers benefits such as more efficient search and selection processes, implementation and operational cost efficiencies, and more abundant and available resources to effectively deploy and leverage technology.
On the other hand, not all asset management firms are created equal and asset managers/owners of various sizes and complexities may require customization. Niche management firms looking for true expertise and customization will be hindered by a landscape with less selection as innovation will tend to become less frequent and reactive.
A shrinking vendor landscape may not provide adequate functionality and support, and some firms may feel pushed toward building a custom solution. The more varied landscape is a benefit to the buyer as more providers facilitate innovation, and the ability to choose amongst many vendors affords each firm an opportunity to find the best fit.
In my view, too few options make the marketplace stagnant with the potential for poorer service and less capability while too many options hinder the ability to make the best-fit choice and require available skillsets to operate. The marketplace and time will ultimately determine the goldilocks zone of porridge (or pasta) participants and in the end, each firm must assess their appetite amongst the various opportunities.
Having said all of this, my food analogy has increased my hunger and my thoughts turn to an al dente pasta and chianti. I know my path and I hope that your firm knows theirs.
