(R)Evolution is in the Clouds....

As I stated several weeks ago, there is a certainty for fin serv customers to move to the cloud for most of their mid and back-office operations data needs as well as move as much of their non-trading applications.  Mobility and cloud platforms/technologies are maturing at a rate that is much faster than incumbent application and information vendors can deliver new solutions on their closed, proprietary technologies.

Further, as exchanges and other information creators begin to realize the power of the cloud, it will become imperative for information vendors to react and stay ahead of the trend and differentiate themselves by something other than simply being an information 'aggregator'.  New paradigms are emerging that will apply pressure to entrenched companies and disrupt their businesses. 

Recently, NASDAQ has released a tick-on-demand service through Xignite, which offers simplified access to NASDAQ tick data through a standards-based API.  Xignite, for those who do not know them, are what I consider one of the 'next-gen' information service providers.  The addition of NASDAQ brings the total number up to 33 exchanges or exchange groups, covering Asia, North America and Europe.  In addition, they have connected to other data sources such as Morningstar, Dow Jones, Cantor, Tullett and others to offer a very robust list of information assets.

Unlike traditional vendors, Xignite specializes in 'plug-and-play' data access.  Whereas traditional vendors like Thomson Reuters or Bloomberg have built a desktop business and allowed data access through APIs to be an off-shoot of their core business, Xignite has come without the baggage of a desktop interface.  Preferring to be the plumbing for non-latency sensitive data, Xiginte (and their emerging competitor Flexisphere), have subversively gained traction where the incumbents aren't - data solutions for off-trade floor and corporate web solutions.

This model very much is in line with where the world is moving for non-latency sensitive applications.  Now, an application builder for an iPad has only to connect to the Xignite data cloud and deliver a wide range of content into a highly functional application.  Further, since the incumbents are directly focused on a ground war within the application space, Xignite, through continuing to build an extensive inventory of data assets, could easily become a data-arms dealer to the off-trade floor market, which is approximately a $10 billion business by my estimates.  This does not include other markets where financial data is important and widely used, such as the legal, business/corporate intelligence, etc. and other services such as public and private websites.

The lesson for the incumbents is this - your days are numbered unless you take a swift and painful change of strategy.

In the 80s and 90s you were the only games in town.  You had the technology advantage and you had the scalability to allow niche providers to plug into you and 'advertise' their content under your commercial terms and sometimes draconian restrictions which always favoured you.  Now, technology is cheap and those same, small, niche content owners, (like other industries such as advertising, music and a lesser degree televised programming), now have other means and channels to get to their customers and can interface more directly with them through things like social media.  Cloud-based technologies and services like Amazon or Xignite allow these firms to grant easier access to their information without an intermediary.

Now, to be fair, do I expect the incumbents to disappear overnight or at all - of course not.  They are all multi-billion dollar companies with some very viable businesses.  But there are cracks in each and some markets they serve are changing dramatically right out from under them.  But like Microsoft and Oracle when Salesforce.com finally proved the SaaS/Cloud model, the large vendors will need to pivot and alter their strategy to stay relevant. 

The key point is that for these desktop providers, they need to stop being the very thing they are - a product provider - and become a service provider.

While doable, it also is a great threat to their current economics and revenue.  The question for these providers is: do you have the right people to rebuild and revolutionize your business?  Microsoft had to re-think their very strategy and bring in several new people to redefine what Microsoft was for its customers and its future.  Some stayed, some left but they did change.

Next move is yours gentlemen.....

Poisoned Apple?

Sitting here in Times Square between meetings, gazing at the ad on the Nasdaq board for their new iPad app a thought occurred to me - if AT&T has introduced a new 2-tier data plan (which I predicted 6 months ago to my ex-colleagues at Thomson Reuters), won't this have an impact on the usage (and value) of this app?

In looking at the new AT&T models, it appears most users will stay under their $25/month plan - but those numbers are not with devices running multiple apps simultaneously, something only recently can mobile devices do on the AT&T network. The usage described in their press release is very single-threaded and does not factor streaming updates to devices (if it does I missed it) which begs the question I asked my ex-colleagues - if the wireless carriers govern last-mile delivery of information, who holds the power for mobile computing?

Add to it the proposed alliance of over 20 of the largest carriers to build an app platform themselves, have information firms offering apps on the Apple devices jumped the gun? Have they now boxed themselves and have those who have yet to move into mobile computing have an advantage?

Have, as I suggested to my ex-colleagues, info providers made a error in jumping on the Apple bandwagon, only to be hung out by carriers themselves?

I'm sure many will say, no, Apple rules, but Apple has a terrible habit of imploding at their height. I'd argue they are on the verge of doing it again. For example:

- they aggressively push a closed, proprietary platform which they offer at a premium over their competitors

- they aggressively sue competitors or competitor's partners to defend their near-monopoly position

- their strength rests on the harmony of hardware and software

- their products follow a linear path and are not significantly different then their flagship product

Looking at Apple today and Apple of 20+ yrs ago, I see a similar company behaving the same way. Will history repeat? We'll know in 5 years......