Oct

2

Three Card Poker

Filed Under B2B, Blog, Education, Financial services, healthcare, Industry Analysis, internet, Publishing, Reed Elsevier, STM, Thomson, Uncategorized, Workflow | 3 Comments

In the last weeks and months I have written so much about data businesses, workflow strategies, data and software acquisitions and how major players are being reborn in the heat of all this that I should have expected the criticism. When it came, I was shocked. Me, losing sight of the big picture? After all those years of consultancy when clients told me that the big picture was all I had, and the operational reasons why the big picture was unlikely were beyond me? OK, now here is an unashamedly big picture piece.

In the big picture we can see the battalions of information services companies, having emerged from the publishing stage of their development, developing strategies around data – either as Big Data, mining and extraction players, or as workflow and process emulation players. These are all businesses driven by understanding how users work in a networked society, and they are all about the way in which content and software interact to create solutions for the bench researcher, the equities trading risk manager, the teacher and the learner, the patent attorney and his office, or the insurance risk assessor. And many others. And then, through longer workflows, solutioning at the job level begins to turn into solutioning at the industry level. Users, through shared APIs, create their own answers, and these become generalized and re-iterated by the information service vendors, and over time smaller competitors are excluded. This becomes a rich man’s game, and duopolies become the norm, as they already are in some verticals, and then duopolies give way to quasi-monopolies and invite regulatory attention (as they already are in some verticals). Competing with these giants is difficult and market entry based on re-originating workflow approaches built on the experience of countless users will be seen as difficult and pointless. So competition authorities will settle for price/margin controls and by restricting the number of verticals that one corporation can dominate.

While all this is going on the information service players of today are playing a three card game of risk. I hear this dialogue every day and it goes like this:

STAGE 1  “We now have good business in selling data into process – but the data is very commoditized and the value is in the software which holds it, searches it and provides the end-user access and workflow. We had that stuff written under contract because it was too risky to think of owning it or developing it in house – we have no experience of software or of managing it! And, looking at the contract we drew up with the supplier, we appear to own very little. So the time has come to invest in software, manage our own solutions and just hope that we can cope with the constant iteration of solutions. We will buy our supplier!”

STAGE 2 “This is more difficult than we thought. The innovation that we want is taking place outside of the range of the outfit we bought. If we are to continue to innovate in the face of rapidly developing user expectations (and that is the problem, not competition from our peers) we need to work with higher level suppliers in areas like semantic web, entity extraction etc. So lets do different deals: not sub-contracts and licensing this time, but Strategic Partnership, with exclusivities in certain areas and revenue and/or margin sharing. We will incentivize these people to greatness – but which one do we choose and what criteria do we use to select them?”

STAGE 3  “Well, the strategic relationships are working fine, but these software guys are eating our margins. And they say that all we have to do is update, while they have to re-invest, and 90% of the value in the package is software. And can they buy us? And their toolkit, honed on our clients to whom we did the selling, is now so valuable that IBM are trying to buy them …and maybe us as well. What do we do now, except grin all the way to the bank?”

There are three critical big picture issues that I take away from all of this:

* If the information services industry succeeds it will one day attract the attention of the major Enterprize software players. If this is so, we need to make our own luck and form relationships now. I see this taking place around Oracle in some sectors, and IBM in others.

* Most relationships between content houses and software houses begin with improvements to the data, content, internal workflow of the content player. But the content players end user/client is also vitally in need of systems for handling his content, and other third party content which he has already licensed, and in making it compatible with the workflow solution he is buying. There should be rich pickings here for both the content and the software players in terms of referrals and commissions. Somehow it isn’t happening, but if it did it would iron out some of the creases in those Strategic Alliances.

* Consultancy and customization are the keys to the solutioning marketplace. Trying to sell one-size fits all never quite does it in terms of repeat business. Yet most of the participants seem to dislike both of those elements, yet they are the best protection so far known to man for the defence of niche positions.

Next week, back to the coalface!

Sep

26

The Wound and the Bow

Filed Under B2B, Blog, Financial services, Industry Analysis, internet, news media, privacy, Publishing, Reed Elsevier, Thomson, Uncategorized, Workflow | Leave a Comment

Without getting unnecessarily weighed down in some very interesting Greek mythology, this title is meant to relate cause to effect. And the cause that comes to front of mind is highlighted in a recent Thomson Reuters survey (http://accelus.thomsonreuters.com/boardsurvey2011) on security and the boardroom. According to this the average board of directors creates almost 6000 pages of sensitive information a year, of which some 83% is exchanged over private email (e.g. Googlemail) at low or non-existent levels of security protection. Who needs phone hacking, one wonders, given the unprotected nature of much of our conversation by email! Having spent millions of dollars to ensure that no one penetrates the corporate IT bastion, we seem happy to allow lightly protected communications onto the public highway. So, if we are in the business of providing solutions for businesses looking at risk management in the round, this is the sort of factor we must bear in mind. And Thomson Reuters, with their BoardLink software within the Accelus Suite of compliance solutions are not going to let us forget.

And this in turn re-introduces us to the battle ground in business solutions software which is the liveliest part of the B2B scene at present. It is the only battle ground where Thomson Reuters, Wolters Kluwer, Bloomberg (more marginally for the moment) and Reed Elsevier do battle. And like Philoctetes and his poisoned arrows, the battle is now intense and those wounded in the last round are back on their feet and summoning fresh acquisition forces into the fray. Thus Thomson Reuters this week clear their decks by selling out of their position in trade risk management to Vista Equity Partners (http://wp.me/p17ayu-3e) in favour of concentrating their investments onto operational risk. Interestingly, the would-be purchasers here seem to have been mostly private equity players, happier with the medium term growth profile of the business Thomson Reuters were exiting and not necessarily needing, as the strategics would, a very immediate contribution today. This then was one of the few transactions of recent months that had a prerecession feel to it.

Which is not something that you could say about today’s news that Reed Elsevier are to buy Accuity (http://www.ft.com/cms/s/0/278a1d66-e80f-11e0-9fc7-00144feab49a.html#axzz1Z5nwd7oT). The deal, which sees Investcorp selling its position for £343 million (around 12 times Ebitda), creates a new global presence in banking solutions, where all the other players have strong interests and where Wolters Kluwer were wont to claim pre-eminence. Accuity Holdings is an interesting property, having been split out by its owner from Source Media, the old American Banker and Bondbuyer business. As one of those who worked on the then Thomson Corporation purchase of American Banker in the 1970s I feel the pull of history here. Later generations sold the business because it was regarded as a mainly print prospect. Now here are Reed buying the regenerative software arm of that once print business. No end then to our circularities!

Or our mysteries. The bit of Reed which bought Accuity was not Lexis Risk Management, where it had seemed that the resistance to Thomson Reuters bid to dominate operational risk management was centred. The actual buyer was RBI, now coming out from under the cloud of the later Crispin Davies years. The plan is to merge Accuity with Bankers Almanac, the venerable directory environment which transitioned into bank transfer coding and then into banking transactions and risk management. The guts to devise new things to sell to bankers at this juncture deserves an industry round of applause, and the risk is probably well – justified. However, Reed seem intent on building a new global business (the geographic fit here is a real value) founded on payment efficiency, risk reduction and regulatory compliance. Accuity is a data software business, with 14000 clients, a 95% renewal rate to its subscription base, and it claims all 25 top US banks as customers. Those banks, of course, are also clients of Thomson Reuters and Bloomberg. So battle is joined on a number of fronts. Reed’s shares went up 10p on the news, though one might have thought that they should have gone down an equal amount in the wake of losing BNA to Bloomberg, given that this acquisition lets Bloomberg into some interesting regulatory compliance areas, around government and also around areas like employment law BNA’s HR Advisor suite). Reading the analysts on Reed’s move, one senses the confusion: this is an immediately accretive buy that makes sense, but was performed by the part of the business that once seemed lost and now becomes the seed of growth.

So what is the strategy here now? The new grouping at RBI looks a bit like the old banking group (http://www.wolterskluwerfs.com/solutions/Market/Banking.html) at Wolters Kluwer (also run out of Chicago – Accuity was a neighbour of CCH in Skokie, Illinois). Are Reed pursuing a parallel train of thought to Thomson Reuters, but in narrow niches like banking (RBI) or insurance (Lexis Risk Management)? For Mark Kelsey and his colleagues at RBI, coming as it does immediately after the purchase of Ascend for their aviation division, this is a huge vote of confidence. For Lexis, coming on top of the loss of BNA, this seems like the opposite. Yet the strategic direction on all fronts is exactly the same: use data and software to create solutions that save the customer from the regulator, from the wrath of his customers and from himself. We are back to all those confidential documents on Googlemail.

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