As a long-time former employee of Thomson Reuters (over 14 years), I took little pleasure in seeing the changes announced last week. It has been a difficult period following the acquisition of Reuters by the Thomson Corporation and it has not been made any easier by upheaval in the world's financial markets and economies. However, change to the organization was necessary to meet the changes in Thomson Reuters customers and the marketplace since April 2008. I have no skin in the game, as it were, and speak only as someone who hopes to see Thomson Reuters continue to grow as an organization and reach the potential we all saw in the days following the acquisition announcement. With that in mind, I humbly propose the following changes and formal structure for the new Financial Professionals & Marketplaces group.
- Create a unit focused on top global investment, multi-service banks. Banks have grown increasingly complex and as a service provider, Thomson Reuters needs to dedicate focus to them. Institutions like Goldman Sachs or UBS are not only global, but have investment banking, asset management, wealth management, prime brokerage and prop trading groups. Trying to serve them with a Chinese menu of services from a number of sales and business unit groups makes no sense. Address it.
- Unify the Research portfolio. Research is a transactional business now. Sell-side, buy-side and independent providers need better end to end management of the research services they offer and consume. New issues of compliance and readership liability need to be addressed for this market. Further, a more sophisticated retail class is looking for more insight and an opportunity to invest in thought leadership, based on editorial excellent exists. Merge the Investment Banking and Investment Research groups dealing with research and address it in one capability. Having it fractured creates chaos and competing motives.
- Hedge Funds are unique - treat them as such. A good move was enabling the Enterprise group and Sales & Trading to work together to deliver a hedge funds trading service. Put the quantitative capabilities from Investment Management (including Starmine) and from S&T to create a group focused on Hedge Funds. Follow that by moving out all direct customer datafeed services into the new Enterprise group.
- Mutual Funds are a big enough business to stand on their own. At the end of 2010, approximately $16 trillion dollars according to ICI sat in global mutual funds. Consolidating your view of mutual funds allows you to both deliver into the US market as well as address international opportunities (Islamic Finance funds, BRIC funds), and be flexible enough to look at strict asset-class and multi-asset class funds holistically. As well, consolidating allows you to integrate front and back office much more effectively leveraging assets within existing Sales & Trading, Investment Management and Wealth Management groups.
- Merge the M&A and Deals activities into the Professional group. M&A is not a financial activity - it is a legal activity. Underwriting and lending are legal activities. Move the unit to the legal businesses, specifically the newly formed US Law and/or Business of Law units. The Financial unit competes with Lexis Nexis, OneSource and other nascent legal competitive offerings, so move the entire business to compete more aggressively
- Don't Sell Risk Business - Sell Corporate Services. At a time with management of risk is becoming the key issue thanks to Dodd-Frank, you want to sell the business? Ask yourself this - are the businesses of corporate investor website hosting, web-casting, corporate communication services and business intelligence services really businesses you ought to be in? Your better served leveraging your data through the Enterprise division than trying to build tools and services outside your main business.
- Get serious about your alliances business. Third party data distribution constitutes about 10% of the ex-Investment & Advisory business. The business is high-margin, low cost and high retention - why not focus on it? Its not the threat to your desktop business as many insiders would let you believe. Ask the customers - they love this business and would want you to do more here. Carve a separate unit to show dedication. Your customers will respond positively - and your competitors will hate you.
- Global Financial Customers - global multi-service banks
- Hedge Fund Customers - hedge funds and fund of funds
- Investment Management Customers - asset management firms and mutual fund companies
- Research & Advisory Customers - wealth advisories, private equity and venture capital firms
- Strategic Alliances - in-bound and out-bound content and technology partnerships for the desktop and support market transparency
- Transaction Solutions - delivering order management, trading and market execution capabilities across all asset-classes
- Risk and Compliance Solutions - delivering the next gen of risk and compliance solutions for the front office while supporting back-office needs thus unifying the two groups
- Analytics and Tools - delivering next gen analytics and tools including visualization and quant tools for hedge funds, traders, as well as performance valuation tools for asset/portfolio managers,
- Mobile Solutions - encompassing the next gen of applications and services for non-tethered users
- Collaboration Solutions - providing next gen collaboration tools for buy and sell-side collaboration, intra-company communications and collaboration including research access, control and distribution across all sources and consumers
With these changes, the existing business lines are broken down and reformed in clear vertical stacks, allowing sales and the business unit to be aligned on customer types. Further, instead of separating front and back office in some customer groups (as today's hedge funds are for example) the business can take a unified view on delivering end-to-end solutions.
Enterprise Solutions can focus on its core competency - data management and distribution - and can seamlessly fit with the new desktop alignment for all customer types. Further, by centralizing the alliance business within the new desktop group, commercial and alliance strategy can be meshed with each desktop unit, thus addressing potential channel and revenue conflicts. Enterprise can continue to focus on data management, distribution alliances to further build out their core capabilities.
These changes will mean selling off the Corporate Services business. The web casting and corporate communications business would have a number of potential buyers (Cisco & PRNewswire come to mind) and the investor website hosting and IR desktop business would draw interest from exchanges as well as number of niche web site providers
The business intelligence portion of the Corporate Services business, is in a highly competitive market. Competitors such as InfoGroup, Jigsaw (backed by Salesforce.com), Dun & Bradstreet/Hoovers and ZoomInfo on the information side and Business Objects, Cognos/IBM and Informatica from the technology and tools side, not to mention the hundreds of niche players, create a very crowded market for Thomson Reuters to operate. A better strategy would be through building content-based alliances to fill gaps in coverage by the other information players or fuel the advanced tools the technology companies offer, rather than trying to deliver packaged application solutions.
Another change would be to break the current Sales & trading structure to merge into these new business units. With a more focused horizontal capability group delivering transactions and connectivity solutions, each segment can easily incorporate those tools as best serving their customers.
The final change, would be moving the support of solutions for mergers, acquisitions and underwriting (deals) to the legal business. Although not trivial, the expertise of the Legal business in addressing this unique workflow will allow for new solutions around deals (such as virtual deal and clean rooms) to be incorporated into a law firm's overall business.
This is my view based on the current state of the Market group's customers. As we've seen, events can lead to significant changes to how customers operate and are structured. Thomson Reuters remains a strong brand with valuable assets, but aligning those assets are key to success. I believe my proposed changes to help further that alignment.
One final personal note - two former colleagues of mine passed away over the weekend. One, Peter Jackson, died suddenly on August 5. The other, John McHugh, suffered a massive stroke a couple weeks ago and passed away Saturday afternoon.
Both were gentlemen in every sense, never speaking harshly of anyone and always offering to help a colleague. Both had a willingness to learn and expand their knowledge. I had the pleasure of working with John for a number of years and I'm glad I did. Peter, was a mentor, helping me with my first blogging attempt while still at Thomson Reuters, challenging me to push boundaries. I am a better person for knowing them both.
Join me in keeping our thoughts and prayers with both men and their families as they cope with their tragic losses.