Vendors change their product roadmap over time. Sometimes the changes are abrupt but other times, they are boiling frogs. From the time of product selection, the priorities for the vendor can change considerably, leading to under-investment in features that are priorities for a subset of existing clients.
Vendors that are subject to M&A activity change their strategic direction. Sometimes the merger with another software firm can lead to improvements in the solution, the result of a product extension, or the integration of specialist market or technology expertise. Other occasions lead to under-investment in key features of the product clients purchased before the M&A activity.
Vendors pay attention to the competitive landscape, but not always in the pursuit of sales. Some vendors seek only to retain a minimum viable product to maintain their existing user base. This steady state strategy may be unacceptable for clients that have critical operations that are subject to changes in financial products, exchanges, settlements, accounting standards, regulations and more.
- How far into the future does the product roadmap extend?
- Which features have been added in recent years, and which features are on the horizon?
- When a new feature is required, how quickly is that feature made available?
- Does the vendor only develop a feature when they can find a client willing to pay for its development?
- When features are released, do they conform to market standards or is it clear the vendor is learning on-the-job?
- The product roadmap extends for one year. All organizations, in reality, have a plan that extends beyond one year. If your vendor shared a plan that extends for only one year, they are concealing their longer-term plans. They plan to either invest nothing in your segment of the market or they plan to pivot away from your market and invest elsewhere. Either is a clear indicator of trouble for your business.
- The post-2008 financial crisis changes were implemented late, awkwardly or not at all. Pay attention to handling of regulatory reporting (including regional requirements), cleared OTC derivatives, initial margin, integration with electronic trading platforms, collateral management and xVA risk reporting.
- Collateral management has changed a lot since 2008. There are specialist vendors that handle collateral for bilateral, cleared and listed derivatives as well as repo and security lending. There are new requirements for initial margin and variation margin. Initial margin calculations continue to evolve. The operational anxieties are evident to teams because of increasing strain on pools of high quality collateral and disputes over derivative valuations and IM calculations. This is no room in the market for a vendor that metaphorically dips its toe in the water.
- More OTC derivatives have been subject to mandatory clearing in recent years. As instruments are cleared, trading migrated to electronic platforms. The vendor supports very few electronic trading platforms. When they support a platform, it is difficult to install, it supports limited asset classes, additional asset classes take months or years to support and support for additional asset classes is only offered when a client is willing to pay the vendor to enhance the product. There are a lot of bugs in the product when it is released.
What to Do
We have seen examples of vendors acting in each of these ways in recent years. If any of these symptoms sound familiar, contact us.
We can put you in contact with other organizations who may be able to corroborate the anecdotal evidence and develop a fuller, more accurate picture.
We may be able to offer advice on specific incidents that arise with a vendor to stabilize problems as they arise.
And continuing this series, in future papers we will describe a pattern to follow that will increase the agility of your operations, reset the balance in the vendor relationship and simplify support by using more popular applications