Mr. Steve Hughes – Aspect Enterprise Solutions Enterprise Solutions

ComTech Advisory visits with Mr. Steve Hughes, president and CEO of Aspect Enterprise Solutions Enterprise Solutions. Mr. Hughes discusses his company results and the outlook for further adoption of Cloud delivered CTRM solutions.

Video Transcription

Gary Vasey, Managing Director – ComTech Advisory: “Hello, Gary Vasey with ComTech Advisory with another video interview here in London, England and today we have with us Mr. Steve Hughes, whose CEO of Aspect Enterprise Solutions Enterprise. Hello, Steve.”

Steve Hughes, President and CEO of Aspect Enterprise Solutions Enterprise Solutions: “Hello, how are you?”

Gary Vasey: “Very good thank you, and I thought that perhaps what we do is we’d start today since it’s almost the end of another financial year and ask you to, you know, give us an idea what kind of year it’s been for Aspect Enterprise Solutions Enterprise.”

Steve Hughes: “OK, again it’s been a good year for us, likely to be another record year, which will be in our kind of sixth or seventh in succession. Looking a little below that as you know we have three revenue lines. One for Aspect Enterprise Solutions CTRM, the trading and risk product, one for AspectDSC, which is our market product, and the third line is consulting, and the consulting is wholly associated with the trading and risk area. So if you look at those three individuals individually we’ve seen continued good growth in the trading and risk area. Market data has remained pretty flat, maybe three or four points growth which we see year-on-year, again that area doesn’t grow very much and we don’t kind of expect it to but it’s important to us strategically. From a consulting standpoint, the revenues year-on-year have made a smaller and smaller contribution to the overall revenues but that’s not because there isn’t essentially demand for those services, it’s essentially because we’ve reduced the days needed to implement our product. So although overall revenues are growing, in fact, the contribution from consulting is headed south but that’s a deliberate act, and today it’s somewhere under 20 percent of our revenues. When you compare that with our competitors they’re somewhere between 45 and 55 percent is consulting and that kind of indicates a trend for us. So it’s been overall a good year and we’re heading on plan, and the only thing that we are kind of up on plan is profits, although profits compared to last year are down but that’s a planned reduction. And the reason is we’re investing in basically our sales and marketing capability, so you’ll notice in 2013 we greatly expanded the team in North America and that’s going to continue there and they’re established, winning their first contracts and that’s going to continue. So we deliberately this year diluted profit performance to make sure we started to scale the business and set the path for next year and years to come.”

Gary Vasey: “OK, as you know right now we’re conducting some research into CTRM in the cloud and Aspect Enterprise Solutions, of course, is one the early leaders I would probably say in delivery CTRM in the cloud environment. How do you find the industry accepting that particular model, and what kind of pros and cons do you experience in the sales process?”

Steve Hughes: “OK, well, first of all, let me say that our company is now 13 years old and we’ve operated in the cloud for 13 of those years. We’ve always been in the cloud, we were built for the Internet economy so we didn’t have to take some technology and transfer it to cloud technology, we’ve always been there, and that gives, in itself, gives us a great advantage above others that are moving into the cloud. In terms of the advantages, it’s all the usual things you expect with cloud applications. Clients do not need any hardware, more importantly, any people to look after that hardware or select it or maintain it, and there’s no software to install. So naturally what that means is costs are vastly reduced and we do quite careful comparisons when our clients ask for a cost in the cloud versus not in the cloud and over a three-year period and if an installation say costs in the cloud $400,000, it will cost in excessive $500,000 by not doing it in the cloud, so there’s clearly a cost advantage and total cost of ownership is one of the best that can be achieved. The other main thing is most of our clients are in the mid-market. Their job is trading, they do not have IT support and they certainly don’t have large IT teams, so we allow them to concentrate on that while we concentrate on keeping that cloud floating even when it’s changing. So to illustrate that, if you take the last time we had an outage that clients noticed was around six years ago and it was down for a few hours and we moved over to our DR site. Has it been down since then? Yes. Declines? No, no and that’s because our ability to recover is as good as it could be and that’s because we’re specialists in that so even if you employ in-house, it’s unlikely your technicians and capabilities will be up to the standard we have because that’s our reputation at stake. And I can give you three illustrations of that, in that we believe cloud is the way to go but it’s not a religion at Aspect Enterprise Solutions so if clients really want to go another way, we’re happy to do that and all the shades of grey between fully on-premise stuff and everything in between. Now we have three clients that are not in our cloud, all three are not in the cloud for policy reasons not set by traders, not set by business users, but set by some other part of the organization. In those cases, one client looks after it entirely themselves and frankly admits openly to me that they wish they hadn’t. They left it in the cloud. The other two actually pay us extra money to look after their cloud if you will, to make sure that we’re applying the same disciplines that we do to our own, which is not possible internally, again we are experts in it. So I think those are the key advantages. What that means to a client is low cost of ownership and massively quicker implementation, and again our implementation we typically quote is between four and six weeks from ink to go live, and that’s not based on hope, that’s based on project experience of 30, 40, 50 projects.”

Gary Vasey: “OK, when we talk about the cloud, perhaps maybe just ask a quick question regarding whether you mean that everybody’s data is shared in one location and it’s partitioned in some way, or whether we’re talking about simply hosting each individual client on a separate server, can you address that?”

Steve Hughes: “Right, those two things the worlds apart and, in fact, many people used what you’re describing as a managed service as the FUD, the fear, uncertainty, and doubt, that makes the cloud cloudy, and so those things are very different because all you’ve got is somebody else managing the headache, but you’re not gonna get the scaling. Our application is truly multi-tentative, meaning if you will, it’s one hotel with many rooms and you can have as many rooms as you’d like and we keep extending it that way, but it’s all the same stuff and we maintain that remotely. The other thing is, just on the same topic not quite answering your question but slightly off, is this notion that if it is in the cloud everybody gets the same thing, it’s not quite true. Everybody gets the same benefits but what you have turned on and don’t turned on, and what differences you want to have and integration to other systems is entirely up to that client, so you kind of get the best of both worlds. But managed service is a world apart because you’re still incurring all those costs I mentioned earlier. It’s just, it’s in somebody else’s house. So there is a very big distinction between those two things. One of the examples is, one of the great additional benefits is this, we actually change our software 26 times a year. Now some of those are minor releases, some of them are pretty big releases, 3 or 4 times a year they’re major releases. We do that on the weekend, nobody notices the difference, well hopefully they do notice the difference in the new facilities but we’re basically updating the software all the time. So when you ask for a new widget and we make that new widget you get it now, not in six months or 12 months time when the next major release of the software comes out and it gets installed on your site and all those things you have to do. So there are significant differences and advantages in cloud versus managed service. Managed service is often used to confuse buyers.”

Gary Vasey: “Very good and thank you for that explanation because I think that is one area of cloudiness when you talk about CTRM and cloud. Just one last quick question, as you know, we’re seeing, we’re predicting quite phenomenal growth for CTRM and the cloud, what kind of year are you expecting next year?”

Steve Hughes: “For next year, we are mid-planning but let me give you some insight. We do expect double-digit growth and I know the figures that you’re kind of expecting for next year. As people, more and more uptake, cloud applications rather than traditional deployments, but we’re looking at figures in excess of that so we would hope 20 to 30 percent growth in CTRM, again that doesn’t, won’t be reflecting on overall revenues because it got two other revenue streams. We expect consulting to make less and less of a contribution as we go forward, to the point, we’ll never get to zero, but it will get lower and lower.”

Gary Vasey: “OK, well that’s all we’ve got time for today. Thank you very much, Steve. Very nice to see you again, very nice to visit with you here in London. Thank you.”

Steve Hughes: “You’re very welcome, thank you.”