In an episode of Conversations with Leaders in CTRM by ComTech Advisory, Mr. Steve Hughes, President & CEO of Aspect Enterprise Solutions, provides an update on the company’s recent market and product developments and the growing market acceptance of cloud-based CTRM solutions.
AspectCTRM is used by a wide range of companies from small trading, supply and end user organizations to the world’s largest global enterprises. As companies grow and requirements become more complex, the cloud-based solution easily expands to meet those demands without the costs and hassles associated with software installations and replacements.
Contact us today to request your free trial!
Dr. Gary Vasey, Managing Partner – ComTech Advisory: “Hello and welcome to Leaders in CTRM Technology from ComTech Advisory. I’m Gary Vasey, and today I’m here in London interviewing Mr. Steve Hughes, whose CEO of Aspect Enterprise Solutions. Steve, hello.”
Steve Hughes, President and CEO of Aspect: “Hello, how are you?”
Dr. Gary Vasey: “Good, good, good. It’s been a couple years since I was last here talking to you on videos so perhaps we’ll start by just covering some of the highlights of Aspects progress over last six months to a year.”
Steve Hughes: “OK, so let me start with the product side, so some significant changes there. What one of the key ones is we continue to enhance what we call aesthetics, that’s the environment that allows our engineers to implement and configure the system very quickly and, in fact, make fundamental changes with the turning of a few switches. So generally I liken that to our engineers don’t go in, have a circuit board, soldering iron, resistors, and transistors and put them all into the board, rather our engineers have a set of dials and sliders that they used to configure the system according to the client’s needs. So we’ve enhanced that system further to accommodate all sorts of things across, all the functionality across the supply chain to make that yet more flexible. I guess the other key thing we’ve done in Aspect Enterprise Solutions CTRM is added a new product called Aspect Enterprise Solutions STP, which as you might expect stands for straight through processing, so that connects the various exchanges around the world directly into Aspects CTRM, so no more reeking of trades to enter them, capture them into the system, those come directly from the exchange and eliminate all the errors and all those things that you might imagine. Because it does it that way, again it appeals to people doing pretty high volumes, and so initially we install that as a beta test into actually a broker because again if you can do it in a brokerage environment, doing it in an individual customers is going to be a lot simple, so we proved it that is working extremely well. So that’s one of the the key developments in the last kind of six months that’s been picked up extremely well by clients, and one of the reasons is its price entry point is orders of magnitude less than the established technologies that do, do integration between exchanges and trading and risk and other systems. This is extremely quick to implement, it’s very low cost, maybe $10,000 a year to make this happen and that’s a fraction of the cost of one person to verify it, and even if they do verify the data, and they’re going to get it wrong. So that’s proven extremely well. On the AspectDSC side, the real-time market data side, the main things there have been on ensuring that we move from Java applets on the browser to new HTML5. Java’s giving, increasingly giving issues and is being phased out in the industry so we have to move forward. The other big thing we did last year was we used to have a direct connection with each of the exchanges we serve and present data for, all of those that changes change the way you communicate with them regularly and that causes a huge maintenance overhead, so what we did last year’s is we did quite a lot of re-engineering to use Morningstar and that means they have the headache of making sure all the exchanges and they’re up to date with all the exchanges, we have a one-to-one relationship with them so we have now one interface, cut out all the maintenance, makes it much more efficient for clients and a much lower cost for us on there for clients in terms of pricing. The other key thing that underlies both of those concerns scalability. We are always projecting where our user base is going and what that will mean in terms of load on our multi-tenanted environment so we’re nowhere near the limits right now but we predict that, you know, downstream we will be, so we’re doing work right now to make sure that this thing can scale infinitely and one of the things that we are doing is something called archiving. Now archiving generally isn’t important for most CTRM companies, it is for us because we hold all the trades in memory that’s what gives us the real-time PnL, real-time risk calculations within the system. So we’re looking at for example archiving closed trades but it’s never as simple as that because some companies want to keep those closed trades available and online and part of what they evaluate, however maybe, you know, those longer than two years can be taken out the system but again that would be through a set of new dials and sliders that either the client can use or we can use to configure it for them. So those have been kind of the key areas in the recent times.”
Dr. Gary Vasey: “And in terms of how the business has gone?”
Steve Hughes: “The business itself is going very well. I think we certainly said to investors, I don’t know whether we said it publicly, but our new contracts last year for Aspect Enterprise Solutions CTRM, they grew by 71 percent last year and that doesn’t necessarily translate to revenue because again as a cloud company we amortize the value of that software over the term of the contract. So if we want to deal on the 31 of December of any one year we would recognize in that year one day’s worth of revenue everything else gets deferred into subsequent years, but we’re already seeing that 71 percent growth in contracts last year’s already translated to a 22 percent, 23 percent growth in Aspect Enterprise Solutions CTRM in the first quarter of 2016, so from that standpoint is going extremely well. I think the other key thing is both the value of the deals at the size of them, in terms of numbers of users, the size of the organizations that are picking us up and the length of those contracts are headed north in both cases so we are in a very good position right now.”
Dr. Gary Vasey: “Very good, because Aspect Enterprise Solutions was the innovator of CTRM in the cloud and it must be very gratifying to see a lot of activity in the cloud for CTRM in general even in some of the larger companies. What do you think is driving that?”
Steve Hughes: “Right, I think part of it is cost and, you know, the economic situation the low price of commodities hits every company and so even the largest, you know, most wealthy companies are looking to save costs and you know there are no exceptions there and cloud is seen as one of the ways that they could resolve business problems very quickly so I think that’s the first thing. I think the other thing is unlike 16 years ago when we started, in fact, the word cloud didn’t exist it was application service provision, hence the name Aspect Enterprise Solutions and but 16 years ago nobody really got what we were trying to say. Roll the clock forward now, my mom knows what cloud is and she’s 85 years old so there’s a much greater acceptance, in terms of the business and in terms of, you know, the humanities as a whole understands what cloud do. I still think there’s a lot of misconception about cloud, you know, taking an app that you’ve had for 20 years on your own servers and moving it to Microsoft Azure, a cloud system, does not make it a cloud app and I think there’s a lot of confusion around that. Our app is built for the cloud, was from day one so and it’s two multi-tenanted so that makes the difference.”
Dr. Gary Vasey: “Absolutely and, you know, part of the cloud argument is cost. Is it
entry cost, exit cost, total cost of ownership? What’s the killer sales pitch here?”
Steve Hughes: “Right, that’s interesting because I think it’s all three. I think total cost of ownership still matters and that’s something we focus on very, very hard and that’s the very reason we produce the aesthetics environment, to shorten and deskill the process of implementing what are very complex systems. Now the reason we did that was to make the time to entry and the cost of entry very, very low as low as it could be. Because again, when you look at the traditional big players in this market, 55 percent and north of their revenues is consulting. What that says to a buyer of those systems is for every dollar I spend on a license, which is expensive enough, I’m going to spend at least a dollar with people coming into my business to help this thing keep running and changing to match my business requirements. When you compare that with Aspect Enterprise Solutions, only 12 percent of our revenues in 2015, 12 percent, was consulting revenue and again that’s because we do it so very quickly. So total cost of ownership still matters and it also matters because nobody wants to write a CAPEX request. CAPEX requests go through far too many gate guardians for them to come out the other end and you be successful, but operational expenses normally granted on an annual basis so I can spend my budget. So we can often keep the cost of what we do under the radar, which makes a big difference to how people look at it. So that’s total cost of ownership, total cost of entry again is very interesting because although it might cost me a million dollars over five years, I can get in and get this thing running in the first three months say for a fraction of that amount of money and then pay as time goes on so that makes a big difference. You mentioned cost of exit, that was never raised by our clients historically. In the last 12 months, it’s raised a lot and the reason it’s raised a lot is there’s a lot better understanding of the cloud. There’s a lot better acceptance of cloud so now they’re thinking ‘OK, we put it in the cloud, in somebody else’s servers, etc, they manage it. What happens when I want to move away?’ So now the question of exit, how do I get out of it, is becoming more prevalent and, in fact, we’re about to put the standard clause in our contract to talk about exit costs. For us it’s very simple, it’s a standard statement of work, in fact. Very small amount of work where we will take all the data, extract in a format but suitable to the client’s requirements and do that work for them but we actually commit, contractually are obliged to do that work if they request it. They can do it themselves but now this kind of cost of exit is becoming a point because, you know, it’s their data, they don’t want to spend a fortune having to move somewhere else.”
Dr. Gary Vasey: “Right, and of course, maybe just in a couple sentences, one of the big issues remains probably due to lack of understanding, is data security in the cloud. What do you have to say about that?”
Steve Hughes: “OK, so the first thing I would say is, I was on a webinar yesterday and they asked about what’s the biggest concern and that still came up as the biggest, it’s smaller than it used to be but it still came up to the biggest so it’s interesting you should ask that. Again, still think there’s a lot of misconception, there is this misconception that if the data is in my four walls it’s more secure than in your four walls and that’s not necessarily true and is often untrue, because cloud companies particularly those holding mission-critical data, that’s carrying their reputation so often their security is actually enhanced above a typical user security. If you’re talking about smaller companies, it’s definitely more secure. If you’re talking about the large companies, I would suggest it’s at least secure. The other thing is, Aspect Enterprise Solutions has just adopted ISO 27001 information security standard. We just, we were certified for that in January but of course that standard like many others is an ongoing process, so we meet monthly, in fact, to talk about the security, any other risks, anything’s changed to improve that level of security all the time but that’s becoming an increasing demand particularly from larger customers and they want to see that certificate on ours and any data centers we use. The third thing is, this is peculiar to Aspect Enterprise Solutions, I guess, because we employ an in-memory database, much of the data that’s held in memory is actually calculated. It never exists in stored form, in persistent form. So I could literally give you a stick right now with one of our clients dates wrong, you would look at it and see it looked like a Swiss cheese. It would be a solid mass with lots and lots of holes in and you have no idea what’s in the holes. The only way you know how to fill the holes is load it in our app, so we’re very confident with that, an encryption and all the things that other people use and this unique thing about it being calculated in memory means it’s extra, extra secure, so that’s what I would say.”
Dr. Gary Vasey: “That makes sense. And just as a sort of final question, what’s your outlook in terms of CTRM market in general? What’s going on, and how can you leverage it?”
Steve Hughes: “OK, if we look at the top tier of customers in the market and there I’m talking about the large integrated majors, the larger trading companies mainly the national energy companies of typically developing geographies, so that’s what we turn tier 1. What’s happening there is those wars were fought and lost a long time ago and we won a few and the competition won a lot because they were around a lot longer than us. But go back to what I said earlier, 55 percent of our competitor’s revenues was historically consulting so these were huge projects that cost a lot of money just to put in, they cost a lot of money to upgrade. Those systems are now stable so all that money is not around anymore, the licenses are still around but the consulting and the aftermarket consulting that they would apply to make changes is drying up, people can’t afford it, so that’s causing a great shake-up in leaders, software leaders in our industry and, in fact, Aspect Enterprise Solutions sees itself as one of the company’s that’s going to take that business and we are actively doing that right now. In Q1 alone, we’ve secured some extremely big names in the industry, I’ll include one. So BP, obviously a tier 1 company, has now adopted Aspect Enterprise Solutions in Brazil, Colombia, and North America, and we expect all the geographies to roll over as time goes on. They’re doing that for cost reasons. They’ve already obviously got CTRM systems but they’re too costly to apply to those smaller operations, it just doesn’t make economic sense, so that’s causing a huge shake-up of the vendor side. Whilst that’s happening we see bad results posted by others, we’re very pleased to report again we’ve had another record quarter, we’re already at over 75 percent of our annual targets already secured, for consulting services a 100 percent of it is already secured, we have an extremely healthy pipeline with some great names that I can’t wait to tell you about when they secure.”
Dr. Gary Vasey: “Sounds good. I can’t wait either, however, that’s all we’ve got time for I think today. Steve Hughes, thank you very much.”
Steve Hughes: “Thank you, Gary. Good to see you again.”