Steve Hughes Discusses CTRM, ETRM & Commodity Market Data on FinTech Focus TV

Aspect Enterprise Solutions President and CEO Steve Hughes sits down with Toby Babb of Harrington Starr Group to discuss what he’s learned over the course of his 38 year career. Steve offers tips on how to run a successful start-up, the state of the industry, and what makes Aspect Enterprise Solutions different from other CTRM software providers. Get an inside look at how Steve helped Aspect Enterprise Solutions grow into the leading cloud CTRM company it is today.

Video Transcription

Toby: Welcome to FinTech Focus TV. I’m Toby Babb and I’m delighted to be joined today by Steve Hughes, Steve thanks for coming on.

Steve: No problem.

Toby: You well?

Steve: Yeah, I’m really well.

Toby: There’s a lot of exciting stuff going on for you at the moment so can you tell us a little bit about your background and all about the company?

Steve: Cool, and so for me I’ve been in the industry for 38 years, and I know that because I had to calculate it yesterday for somebody, and then during that time I’ve been in management positions for all but the first five, yeah so always in software companies typically working for American software companies which is a good segue into Aspect Enterprise Solutions. Yes so Aspect Enterprise Solutions is an American company. We were founded in 2000 as a company called OilSpace, but it got difficult to sell a product called OilWatch, for example, from a company called OilSpace to a metals trader so we changed the name some years ago but in essence we are a commodity trading and risk management solution company.We essentially have two products, AspectCTRM which is commodity trade and risk management and the other one is AspectDSC, standing for decision support system, which basically takes real-time market data from anywhere in the world and provides a platform for traders to make intelligent decisions about the trade and that then gets captured in the CTRM system and that manages it from cradle to grave right through the whole supply chain. Where we are difference is basically we are cloud and nobody else is. They will claim to be but they not. We just released a video called fake cloud for that reason and so we’re a true cloud company, we have been since day one we didn’t have some legacy asset that we had to move on to the cloud. We’ve been in the cloud since day one and what what has happened basically is the world is now caught up in what cloud means and what it can do and that’s really put us in a leadership position in our own space so you know we’re very pleased that the world’s caught up at last.

Toby: It’s been that adoption process isn’t it where people are waiting to harness the confidence as with many technology.

Steve: Well now my 85 year old mum knows what cloud is.

Toby: A Eureka moment for you…so it’s been an exciting journey for you and Aspect Enterprise Solutions and lots of change. I’ve been been there where you’ve won awards and picked up mass recognition, you’ve spoken to me about how many countries that you guys are operating and selling in at the moment. What’s been most satisfying moment for you in the evolution of the business?

Steve: Right that’s really difficult to say in a sense when I joined the business in 2005, sorry, yeah at that point it was five years old but it was set up to do something very different to what we actually do today. Long story short, our first proposition didn’t work very well and I was brought in at a time where the company was running at roughly six million dollars but we were losing nearly two million a year and I joined it because I’d never turned something around that was so clearly heading for a cliff so one of the very satisfying moments was when we got through the first two or three years of that we had a company that was now profitable cash flow positive no debt and to a point where we can actually start operating as a normal company and not worried about tomorrow’s payroll so that was an incredibly satisfying moment yeah and and we’ve been like that now for some some many many years. Today we’re way bigger than that we’ve got about a third less people than we had back then making triple the money and we’ve got two market leading products and we are known as a market leader so a tremendous transition and I guess the other leading to the second point of great great excitement was in the last two or three years we’ve won as you mentioned earlier many many awards that basically say we are where we are which is as a market leader and again that’s tremendously satisfying so I would put those two things as key. The other thing is during that transition and seeing a team that many of whom have stayed for all that time, transform themselves. We’ve got an amazing team at Aspect Enterprise Solutions it gets better every day and today we’ve got the best team we ever had so that’s another really key point for me in Aspect Enterprise Solutions’s history.

Toby: I love hearing about that stuff, leaders don’t talk enough about the whole pride in seeing people develop through a business. There’s no better thing than actually seeing someone there who struggled at certain stage come through and really improve and find that absolute flow of where they deserve to be so its lovely to hear. You mention the tougher times at the start, what sort of challenges have you been through within this whole journey as well?

Steve: Well I guess I’ve mentioned some of them so you know it was tough back in 2005 and it was even when we got through that it was tough kind of getting recognition and that’s just down to down to hard work particularly by our marketing team and but we’re now in that position. I guess the other thing is you know we do have clients in 87 countries yeah so that brings a challenge of you know can you actually do business against all those different cultures languages ways of thinking and so on and that’s been quite challenging. I think we now would consider ourselves experts. We really do know how to do business internationally and the other challenge has been on the people side when you go from a kind of young software company that’s got great potential but certainly haven’t reached it is coaching people through that process now I’m fortunate in that prior to Aspect Enterprise Solutions I was in a number of situations like this and when my children used to ask what are you good for living I just say I talk to people and I see my job not as chief executive officer I see my job as chief coach so and that can be both positive and negative we know with people but I always tell people I will tell them when they screwed up and we will talk about it there and then not in anger or in… under pressure we can talk about it to make sure that we can both improve and by the way that I do that 360 so I always say you can come in my office at any time and tell me where I’m going wrong I guarantee you won’t get fired. I won’t necessarily agree with you but we will discuss it and so it’s that whole process of bringing a team through that process to see how that’s evolved over time so that was quite a challenge but something I really enjoy. The other one was in 2016 we transitioned roughly sixty percent of our employees from Russia to India so we did develop are all of our product in Russia for many many years certainly all the time I’ve been there and last year we moved to to India we still got a Russian chain but smaller but we’ve got maybe fifty five people in Bengalaru in India and that was a hell of a challenge. We’re through that now.

Toby: So there’s some really interesting stuff going on in India and the quality out there… it had some bad press but actually if you get it right there’s a huge opportunity to get some access to great people and really grow and scale quickly with it as well.

Steve: Yeah and that’s it I think the thing on that one is India in a sense is no different to any where else. You can get bad quality development in this country or America  or you can get good good quality so we were incredibly diligent about the process of choosing the right arm you know in fact we chose a company called Avanade which is 50% owned by Accenture and fifty percent owned by Microsoft so the credentials are good but their processes are absolutely world class and that’s what we bought into.

Toby: Yeah that due diligence i think is often overlooked it’s not a cheap fix of going out there and let’s get out there for cheap costs as opposed to really looking at it.

Steve: Strangely cost was not on the list of drivers so we don’t spend any less than we did. We want better productivity and better quality than we had before for the same amount.

Toby: The proper drivers were a factor in your decision absolutely. So we talk about 2017 now and it’s a… for some people it’s a huge opportunity for something that’s a big rich when they’re not quite sure what’s going on with Brexit, what do you see happening in the market in 2017?

Steve: Well look I think Brexit is going to have… it obviously has had an immediate economic effect so in Aspects terms because we’re an American company it has made our UK payroll a lot cheaper so from that side it’s been a very positive thing and put that to one side I think economically things will balance out they always do it just takes time. I think Brexit was such a shock to everybody that nobody was prepared to do it or prepared for if it did happen. The difference with Aspect Enterprise Solutions is doing business in 87 countries and operating in the US dollar means we’re pretty well hedged against many of those kinds of political risks and what they might mean. I think it’s going to have tremendous social impact more than an economic impact in the long term and then time will tell how… what the result of that is.

Toby: And in the market in general what do you see happening taking Brexit out of it in I guess the the trading technology world?

Steve: Okay so in the training technology world I think and people often say what you know why we’ve been successful during great economic flux and you know a global downturn and there’s two drivers really one is when the price of a barrel of oil is very low and you really do have to look at margin and if you look at the largest trading companies in the world they’re operating on two three maybe four percent margin that’s a tightrope so the trick and traders hate me saying this, the trick is not to make a profit from a trade because it’s not that difficult to make a profit the trick is to make the optimal profit you can and with that you need systems. So I think as margins have got crushed and you can’t do that with spreadsheets so people are looking for solutions. Historically the two or three market leaders in this area, historic market leaders, would cost many millions of dollars and take many months if not years to implement and by the time they finish the market’s moved on. In our case we do it at a fraction of the cost of the competitors historically and we do it incredibly quickly so that means clients… we’re attracting a lot of people that never had a trading system before but the interesting thing right now is something is happening that we predicted would happen. Now when you take the world’s largest trading companies and I won’t mention who they are but if you take those guys and walking that tightrope has got has got more and more difficult now none of them are going to take what they’ve got you know wall-to-wall commodity trading and risk management such as OpenLink and Triple Point, nobody is going to take that and replace the whole thing but what we thought would happen is desk by desk economics would start having a play, the fact that you know compliance is a big thing so spreadsheets oh forget them and that’s played very much into our hands so what we found now is in 2016 and going on this year we’ve attracted four of the biggest trading companies in the world and we’re not replacing them wall-to-wall you know we are replacing this desk and that desk and that desk because again we do it over a matter of weeks and we do it as a fraction of the cost of other products in fact many people have justified buying Aspect Enterprise Solutions solution simply for the cost of maintenance of one of the established 800-pound gorillas in our market. So um 2017 for us is incredibly good as you know this week is IP week I just showed my diary to somebody at work who wanted to know how many appointments we have this week it’s phenomenal we are seeing dozens and dozens of people this week that are interested in this in this tech and many of whom couldn’t afford it before but now can many of whom could afford it for years and are looking for the next wave and we are very much the next wave.

Toby: It’s definitely a more fragmented market place isn’t it and traditionally a quality space as well so exciting opportunities for businesses to innovate and looking to provide different solutions which is great for you guys. You mentioned as well your experiences of 33 years in leadership…

Steve: 38.

Toby: In leadership.

Steve: Oh yes you’re right, sorry, carry on..

Toby: Which gives you a brilliant opportunity to help people with in the marketplace and that’s what we love doing as well giving people some advice to move their business and grow it better. If you’re in a tech startup position at the moment what sort of advice would you be able to pass down?

Steve: Right I guess this is probably my sixth project at this time and so I’ve been around this block a few times. I think the main thing when you establish is the word focus and you take Aspect Enterprise Solutions it did and it still does live in a tremendously opportunity rich market where we go tomorrow it is really exciting now as I say to all of our sales people when they wince about their quotas and the day you can touch the size of your universe is the day I’ll change your quota but actually we’ve got huge opportunity and that’s true for most startups you know the reason they start up the reason they get established is because they see an opportunity that maybe others didn’t so in that world the main thing to do is to focus and dominate one sector so stay focused on it yes all these other things are going to present themselves and go there’s another opportunity I promise you you spread that too thin you are almost certainly going to fail unless you’ve got this thing called lady luck with you nobody really has lady luck so the first thing i would say focus and the second thing is passion. I spoke to our chairman on Friday and I won’t tell you what the topic was but I quoted to him something Confucius said and he said find a job you love and you’ll never work another day in your life and I don’t work for a living I once put that up on a slide for staff and they all laughed we knew it was true and but no seriously the second thing is passion. Often start ups start because they are passionate about it. In a sense it’s easy to be passionate, it’s easy to fall in love it’s difficult to stay in love, you have to work at it and you have to make sure that that passion transmits not just to customers but to staff as well so you know ignoring the things like you will have a great idea that sees the market gap and so on I think those are the two key things that people need to look at then it becomes operational you know make sure your cash flows, it’s cash flow that kills companies not P&L so it’s all those usual things that you can read in any textbook. I think the softer things are way more important in a sense.

Toby: I 100% agree with you I think the focus piece is so often people looking for quick wins and so we could do this and we can do this and ruin their businesses because of the arrow hit is so far that started the business and passion is an interesting one for me because there are in our space and the FinTech space in general I guess there’s a lot of very passionate people and very passionate technologists and I think what they’ve got to do is make sure that their passion doesn’t overkill the rationale and the business plan behind it and so often we see people there who are trying to solve problems which don’t necessarily exist for a client or there there are no problems which really matter so I think that passion has to be aligned with something there which is that which has some real business and sales strategy behind it as well but it’s exciting it’s a very interesting climate where it comes through. In terms of challenges this year for start-up businesses what would you say that the challenges that people have in that startup world?

Steve: So I don’t think the challenges for a startup have essentially changed and I think it’s the same in 2017 as it was in 2007 and will be the same in 2027. I think the difference is the ideas that are going to make it today are different from the ideas that maybe 20 years ago only ideas that will make it in 20 years time and I think I guess where things are changing is and when you look at the number of ideas that are coming through and and the number of ideas you know I subscribe to a number of things that show me what’s coming along you know crowdfunding stuff and sometimes I’m very interested investing time and money in those things. I am wowed almost every day with the ideas that people come up with and the variety of those on the depth of them and I think one of the challenges for any startup going forward is it’s going to get tougher to come up with that one thing that spots a gap because almost everything you look at now and often somebody’s done it. A lot of people come to me because of my experience and lean on me for advice and market ideas maybe they come with them but I too often have to say well it’s a great idea maybe you should talk to these guys because they’re doing it already so I think for new entrepreneurs it’s getting tougher how do you find that new idea that’s truly new that does actually address a need and spot an opportunity so I think that’s getting tougher but I think the principles of how you operate a startup are still the same you know be passionate amount it don’t don’t ever forget why you did this and stay focused on on the goal.

Toby: You mentioned that actually about spending more, I read a tech article this morning about tech companies spending a lot more than they’re actually getting and I think there was one company mentioned who said they may never be profitable. What’s your take on that sort of thing as a man who’s very clearly P&L oriented?

Steve: That’s really interesting because that’s pretty alien from my background but it is it is true there’s a lot of private equity firms out there right now that focus specifically on pre-revenue and certainly pre-profit corporations and because you know some of those bright ideas cost a lot of capital to get them off the ground but they’re truly bright ideas so I’ve never operated in that space although I always operated in a space that goes we may not be making profit now we know how we will and we know how that may attract potential buyers or potential new investors but that’s a really interesting one, you know when you look at some of those things that started years ago like Snapchat, Facebook and gone there’s no revenue but now they’re worth many billions dollars do always bring a hope. It’s astonishing and that must be a hell of a pitch.

Toby: Yeah… something to work on. I’ll finish up with one with one last piece for you. So you’ve mentioned before that you’ve been involved with six of these sort of ventures in the past and they’ll be companies out there getting to the stage of when do they actually sell… there’s companies that sell at the wrong time then there’s company’s that absolutely sell at the right time. Do you know when the right time for a business to sell would be?

Steve: Right there’s a whole industry built around when’s the right time and to a large degree it is up to the company in that many people are in this but you know startup companies because they are passionate about it I guess the other thing I should say about passion is you’ve got to temper that with some common sense in that you can hold on to a business too long  if what you’re interested in is enterprise value and just like a good bottle wine you know, they peak and then you’re over the peak, and you know it’s not as good as it used to be and that’s true with any business so I think the day you found the company and the day you start that idea you should be thinking about how and when do we exit and what does exit mean because many companies go and exit means we find an investor to truly expand globally that’s one exit and they’re doing that because they want to grow it on global basis maybe. The other type of exit which is probably what I’m getting closer to is you know I’ve turned 60 last year so you know the type of eggs that I’ll be looking for in 10 years is one that really gets rid of the asset if you will so I would say plan for exit from day one and it doesn’t mean you’ve got to say in three years time we’ll do it but you’ve got to understand how you will get to an exit and what buyers are looking for to make you attractive and in fact Aspect Enterprise Solutions has worked extremely hard to make you know the company attractive to potential investors and the reason is we you know we want to go to the next the next level and and that that involves acquiring companies now we can’t do that from cash you need somebody else’s money so um you know we’ve spent a lot of time profiling ourselves to make sure that we’re an attractive proposition and I’m pleased to say that right now and we’ve always had interest from private firms in Q4 of 2016 and continuing now that interest is massive and that’s partly because of where we positioned ourselves and it’s partly because private equity firms have got a mountain of money and nowhere to place it in it so they’re looking for good homes so it’s about making your company a good home think about it all the time but don’t think you have to sell and if you are passionate you do the right things and you start to grain some traction people will notice you and people will come to you with ideas that doesn’t mean you sit back and wait for the investment I think it’s right to do both things I have a plan to do this but some of you may come in the interim if you’re looking really attractive.

Toby: So what would some of those things be to make yourself attractive to sell?

Steve: Right so um there’s two things really I think the main one is high revenue growth. Forget the profit for a while because again as with Aspect Enterprise Solutions and we are profitable but our profits of wafer thin and that’s deliberate and the reason it’s deliberate is we are plowing lots of sales and money as investment cash to grow the business on the top line so if you take our increase in bookings and we mention bookings only because we’re a cloud company so we amortized any software booking over the lifetime of that contract. If you’re a traditional firm… if it was a million dollars and we closed it on the thirty-first of December 2016 and it was a three-year contract for us in 2016 we would we would recognize I think its nine hundred and thirteen dollars because that’s one day’s worth of a million dollars over three years. If I was one of the traditional companies I would recognize a million dollars in one year so you can’t compare revenue growth with a traditional software country with a cloud company. What you can compare is our booking sort of contracts for software against a traditional company so I mention all that because in the last two years we’ve grown by roughly 70 to 100 percent each year in booking terms that’s only happened as a result of us cutting margins to as thin as we can get them while still looking at the cash flow you know we’re still cash flow very stable cash flow positive and we have to watch that, that’s the killer so we’ve invested all back in the business in sales and marketing and hence now we’ve grown so I think top-line growth is a big attraction and profit less so but if you are a mature business you do need a balance between the two and we are headed for a period in about three years time we’ll reach what I would call industry standard profitability measurements. Today we do care about profit in that we’ve got to pay the bills but we don’t care about it in terms of hey look how big our profit is and we’re putting all that straight back into the business and I think that’s what makes you kind of attractive to private equity funds and strategic buyers and along with the thing called market position you know how much noise are you making in the market right now and in the last year Aspect Enterprise Solutions’s reached a point where it is now a natural candidate… somebody looking for trading and risk system we would naturally be on the list of five. You probably could guess at the other four on but we never had that privilege before, that means the private equity firms and all the strategic buyers are incredibly interested in what we’re doing and why we’re doing it, why we’re receiving business from the competition, why we’re growing in markets that didn’t exist yesterday. It will look, they do exist, they’re called spreadsheets, and we’re replacing spreadsheets all the time now.

Toby: Well it was wonderful to hear the business is going so well and you can absolutely see why. Thanks so much for talking to us today and coming and sharing your wealth of knowledge and we’ll definitely look forward to catching you again soon.

Steve: No problem.

Toby: Thank you all for for watching, we’ll see you on the next episode of FinTech Focus TV.

Steve: Thank you.