Research suggests that an apparently limited interest in changing order management systems (OMS) on buy-side trading desks has been overcome by OMS vendors at least partly by pitching their systems at a strategic level, rather than at a functional level.
As a result, they have continued to innovate, which may place them on the cusp of a wave of investment.
A new report by analyst firm Aité-Novarica has found that despite an apparent de-prioritisation of the need for new order management systems within the investment manager community, most vendors are delivering good growth rates.
“In its breadth of functionality an OMS is not really just an OMS, it is a much larger system and can do a lot more,” says Paul Sinthunont, strategic advisor at Aite-Novarica Group and author of report ‘Aite Matrix: Buy-Side OMS Market 2022’. That has been driven by two things, one is internal development, and the other is wider integration, allowing connectivity with other aspects such as risk management which has expanded what a portfolio manager can do within the OMS environment.”
In primary research last year, The DESK found that 87% of buy-side fixed income trading desks were not looking to replace their OMS, and earlier this year Aité-Novarica analysis found four barreirs to adoption: saturation and maturity of the marketplace; total cost of replacement; impact of the pandemic; and continued pressure on buy-side for better cost control.
To overcome some of these, vendors are rebuilding their platforms to be cloud-native where possible in order to offer easier, lower cost delivery of services. They are also providing multi-asset trading, something promised – but not deliver for a long time.
“Asset managers want to consolidate where possible,” says Sinthunont. “Vendors which were asset class specialists ten years ago, said they had become multi-asset four years ago, but were in reality sub-par outside of their specialisation. Now we’re seeing those multi-asset offerings become on par with the best of breed specialists in an asset class.”
Success at a higher level
According to analysis of the sector by Aité-Novarica, 94% of vendors in the space are profitable and 44% see an annual growth rate of 15% or more. Added to that over 56% spend invest more than 15% of revenues into research and development (R&D).
If OMS providers are only recently achieving the goals that trading desks have been requesting, it begs the question of how they have delivered the revenue growth and R&D investment to develop their platforms so effectively.
The answer is that by broadening their offering beyond simple order management they have been able to sell on a strategic basis at a board level, rather than pitching to the trading desk itself.
“In terms of the IT spend a lot is not determining by the trader or portfolio manager, especially at large firms, when it comes to technology it is looking at where they can consolidate systems and functions who they can consolidate, and that stems from costs. So they are interested in multi-asset capabilities becoming more important, cloud-based delivery and so on.”
The new report by Aité-Novarica, available here, evaluates the competitive position of 16 vendors; BlackRock, Bloomberg, Broadridge, Charles River Development, Enfusion, FIS, Indata, Limina, Linedata, Rebar Systems, Refinitiv, Ridgeline, S&P Global Market Intelligence, SimCorp, SS&C Advent Moxy, SS&C Eze, and TORA Trading.
It assesses them based upon vendor stability, client strength, product features, and client services, potentially helping asset managers to find the right fit with their own needs.
“Conducting detailed requirements analyses is very important before deciding on a vendor partner,” says Sinthunont. “It’s even more important to go through the requirements exercise every year to ensure that the goals of the firm align with the overall product roadmap of the OMS vendor partner. Since a single vendor cannot possibly provide everything that a client may need, buyers should look for vendors that have taken a more ecosystem approach to their overall development, ensuring added flexibility moving forward.”
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