Open Letter to Geoff Beattle, Tom Glocer and Bob Daleo

With the dramatic changes at Thomson Reuters and a long time former employee who still has a soft spot (must be my Canadian ties), I thought I'd offer my advice to the senior executive as they assess what to do next with the firm.  I'm not going to name people here or offer my opinion on who is best for which roles, but simply to offer a possible organizational structure for the new Financial Professionals and Marketplaces group.  As always, comments are welcome - enjoy!
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Gentlemen,
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.

1.  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.
2. 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.
3. 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.
4. 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.
5. 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
6. 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.
7. 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.

 The result of these changes would be an organization along these business lines:

• 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

As well, you will need a horizontal group addressing the various functional needs from a desktop/workflow solution stand point.  Within that horizontal, have the following 'capabilities':

• 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

The result is a simplified business with clear focus; capabilities become 'shared services' to be leveraged by each business unit; central management of the strategy sits firmly within the unit, yet flexibility to address unique regional needs exists; clear accountability for business growth or capability development is set; focus on alliances - both content and technology - to hasten time to market, improve acquisition returns and meet customer needs.

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.

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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.

2011 - Check In on Predictions

August 1 - can it be the summer is nearly gone and the year over half way gone?  It is true and as a result, I thought I'd take a look back on my 5 fearless predictions for 2011  and see how I've done.

Prediction 1 - Organizational Shake up at Thomson Reuters.  I guess I got this one right.  After one minor adjustment in February, the much needed shake happened just a couple of weeks ago.  More changes are sure to follow as the Woodbridge team look deep into the organization.  Whether the changes turn around lack-luster performance in some of the units remains to be seen.  We'll weigh in once more becomes available.

Prediction 2 - Factset expands into Investment Banking with more gusto.   Ok, I guess Factset hasn't done much here.  In reading through their quarterly releases, sell-side business has been 18% of new revenues since early 2010.  They remain arguably the choice desktop for portfolio managers and researchers and continue to make in-roads within M&A functions.  However, if they did more to tie the buy and sell-side together through research and advisory tools and collaboration, they could hit 20 to 25% growth.  For now, this is a miss, but to reach a billion dollar company, diversification of their portfolio of products is needed and Banking makes the most sense.

Prediction 3 - InfoGroup enters into financial services.  This might be a 2012 actuality as opposed to 2011, but signs are there.  The company, under Clare Hart, has sold off a couple assets and Gemma Postlethwaite has brought on board ex-Thomson Reuters I&A content strategist Christian Ward, who's work in the financial data space is well known.  With the pending changes at TR, I would expect Ms. Postlethwaite and Mr. Ward to poach a few former colleagues for InfoGroup to set the stage for an aggressive 2012.


Prediction 4 - Market data accelerates to the cloud.  Well, this one was true, and as expected it wasnt a named vendor but an exchange that set the bar.  NYSE Euronext made a couple announcements the first part of the year which showed the exchanges commitment to the cloud as a technology solution for the industry.  In particular, their announcement of a "Community Platform" in cooperation with VMWare and EMC.  As I noted in this research report in partnership with Saugatuck Technology, this move has tremendous upside for customers and NYSE.  Will more exchanges follow NYSE's lead?  It remains to be seen.  As for vendors, they seem to be lagging well behind.

Prediction 5 - Apple acquires Salesforce.com.  This one hasn't happened (yet) but it still remains appealing.  As noted by Business Insider, Apple has over $76 billion in cash on its books, more than the US government at the time of this post.  Saleforce.com market cap is only $19 billion.  Apple hardware and Salesforce.com software/platform make an ideal combination for the enterprise.  Salesforce.com's annual conference is scheduled for August 30 to September 2 and each Dreamforce they have a major announcement.  What will this year's be?

Of the 5, 2 have been correct, 1 is leading to be correct and the other two are still out - not bad.  With another 5 months to go, here's hoping I go 5 for 5.

Predictions for 2011

Happy New Year dear readers and I hope 2011 is filled with success for you all.  With the New Year come resolutions and predictions and I've read more than a few.  So staying with the theme, I thought I'd venture a few predictions of my own on the information and cloud industries just for fun.

Prediction 1 - Organizational shake up at Thomson Reuters Markets.  Although the A-Team group's Andrew Delaney has been on this since mid-last year, I think this year is where changes finally occur.  An influx of external talent into the Enterprise and Sales & Trading organizations, a major sales re-org kicked off this year and poor performance by some of the Investment & Advisory segments leads me to think some shuffling is due.  Sources also tell me of a general hiring freeze through Q1 of 2011 which also has preceded organizational changes in the past, seems to indicate some shifting of the deck-chairs.

Prediction 2 - Factset finally expands into Investment Banking with more gusto.  Reading through the recent Factset filings indicate they have been steadily investing into their stable of content assets with high value into the IB space.  Enhancements to the ex-TF Worldscope data (now called Factset Fundamentals), new issues, M&A data as well as other PE/VC data sets, seem to indicate they are ready to go after the junior banker/knowledge worker space.  They might not have all the necessary assets for the senior banker but their partnership with Dow Jones supports that sub-segment.

Prediction 3 - InfoGroup enters the financial services space.  Clare Hart, CEO of InfoGroup, is too smart and too experienced not to.  Add to it her recent hire Gemma Postlethwaite from Thomson Reuters to run products and content, tells me they are shifting from serving only the sales and marketing segments.  Ms. Postlethwaite has significant experience in the Investment Banking space and built the latest Thomson Reuters Banking desktop product.  As well, her experience in managing the data alliances for the Investment & Advisory division of Thomson Reuters more recently, gives her insight into the other competitors and their relative content strengths.  Its a good hire and indicates to me Infogroup to make a push into financial services, specifically in Investment Banking before year end.

Prediction 4 - Market data accelerates into the cloud - and not through big name vendors. As I've mentioned before, smaller cloud-based 'data vendors' are starting to appear to support off-trade floor uses of market data.  This is the year one or two make their presence known.  While the name vendors - Thomson Reuters and IDC mainly - invest in a 'market data cloud' themselves, I expect firms of all sizes look to other providers.  Firms are already realizing the 'standardized' data product of the vendors is limiting and in often interferes with their data strategies.  Access to raw, "as prepared" data directly from sources, rather than the packaged data through data vendors, will become increasingly in demand and impact on big-box vendors adversely.  A couple firms will start to break-through and will start to erode large vendor revenues for off-trade floor data needs.

Prediction 5 - Apple acquires Salesforce.com.  With Mr. Jobs health in question, Apple will need a strong voice and leader to support if not replace Mr. Jobs for the overall good of the company.  As Microsoft has shown, putting a good operations guy in the number 1 seat doesn't lead to maintaining a leadership position and innovation.  These company traits start at the top and Mr. Benioff's resume is solid enough to replace Mr. Jobs.  As I said in a prior post, back in June of last year, the tie-up of Apple and SFDC complete both firms and puts them as the sole competitor to Microsoft, outside of search and gaming.  SFDC sees the iPad and Apple technology platforms as the clear winner and placed a firm-wide bet on the Apple products.  However, should Mr, Jobs condition be debilitating, and we hope it is not for nothing else than for him and his family's sake, Apple will need to find a new head as the firm faces increased competition on its core businesses and seeks to expand into the enterprise market.  That search for a new CEO should start and end with Mr. Benioff.

There you have it, 5 fearless predictions for 2011.  Appreciate comments on any or all of them, but we will see in 12 months time if any are actually accurate.  If anyone has any predictions of their own, love to hear them.

Until next time....

Data Clouds - Part 2

So, what was my proposal?  To refresh your memory from my last post, I was fortunate to explore the capabilities of the Salesforce.com cloud and what it could offer data vendors.  As an application platform, although there are some limitations, there are real possibilities specifically in the off-trade floor businesses such as investment banking and wealth management among others.  As a distribution platform to enable customers easier access and integration of information sources into existing and new Force.com apps, the platform offers real promise.  But there was a third area I explored which I saw as a game changer.

One issue today is accessing clean and accurate data, not to mention the on-going support and maintenance of that data.  This includes not only customer and financial data sourced from inside the firm but externally sourced information which a firm depends on.  For larger financial institutions, this is getting to be a business onto itself.  Firms spend millions of dollars and thousands of person-hours addressing the issue of data and data quality.  The cost doesn't include data center space, servers and other infrastructure to support the number of applications needing the data stored therein.  In addition, much of this work is duplicated across firms.

Vendors generally offer datafeeds or APIs to push information out to customers who then store and replicate the data across their enterprise - highly inefficient.  While looking at Salesforce.com and a firm they acquired, Jigsaw, I saw an opportunity.  For vendors, much of what they do is data collection and data quality - why not move this 'business', this function into the cloud?  Why not run a cloud-based data management business for customers?  Why not do for data management what the cloud did for infrastructure management?

This was my proposal - for TR to get out of providing data collection and management services for one customer (effectively, TR) and provide the same service in the cloud - starting with customer data on Salesforce.com - and go from there.

The response was simply this - TR doesn't run a data management service.  Yes, that's right, according to a couple of my former colleagues - one of the world's largest information providers doesn't operate a data management service.  Now to me, data management is the core of what TR does (not to mention what Bloomberg or Factset or S&P and others do); the applications and other 'products' each offers are an off-shoot of this core business. 


So here's the opportunity for a vendor - go back to your first principles, start offering a data management service for customers.  Start moving to where customers store and want their data (and other data) to be located.  Use the years of experience in building data management systems to build and run your customer's data systems.  Accenture and other consulting firms do it, why can't you?  You are all fighting over the same pie, create a new market and expand what you do, don't limit yourselves.  What you can't do is try and offer a 'product'.  Don't look to sell another software solution or another 'configurable' data platform - its not what people want.

If you can't figure out the difference, well good luck to you.....

Data Clouds - Part 1

While at Thomson Financial/Thomson Reuters, I was given the opportunity to explore the capabilities of the Salesforce.com platform initially as a proof of concept for integrating Thomson data into the Force.com cloud.  During this period, I saw the future of the information industry and a new paradigm of how ‘information products’ are delivered; one which I hoped to see Thomson grab and change the industry.  Alas, it was not meant to be but nonetheless, recent events and discussions further enforce my belief that the time is near where there will be a change in how information is delivered to customers.

After I completed the proof of concept, thanks to some smart folks at Okere/Fujitsu in executing my requirements, the future appeared.  What I saw was a future where an information vendor, like Thomson, could fundamentally shift its operating model, expand into new markets and leverage Salesforce.com not only as a CRM tool but as an application platform, a distribution network and more importantly, a model whereby they can shift out of siloed mainframe databases and complex delivery systems they have now and open up their content to the mobile/cloud-based world we live in today.

The Salesforce.com platform itself is very flexible and easy to build out some complex functionality and workflow.  With the introduction of Java, this likely will result in more impressive visual tools and better usability.  Although some functionality needed for financial services might be out of range as this time, I suspect as the platform grows, many of the tools now available through vendor applications, will be available – specifically those within the “off-trade floor” disciplines such as Investment Banking, Investment Management and Wealth Management. 

There are some ‘restrictions’ currently in the platform, but they are more a function of how the firm sees itself as a CRM player and can be worked around.  Nonetheless, as an application platform, there is the possibility to rewrite many of the solutions vendors offer for those segments mentioned above with added functionality and at a reduced cost. 

As a distribution network, Salesforce.com allows for easy integration of bundled services into a firm’s “Org” (or Salesforce.com instance in the multi-tenet environment), which means a customer on the platform using the CRM tools, for example, can be ‘entitled’ for a subset of data from a vendor very easily and with a great deal of confidence of the security.  In fact, due to the tiered nature of the platform, different user profiles can be permissioned for different data sets and even data fields.  Further, an information vendor can ‘lock down’ their content ensuring the data isn’t changed or altered by the customer (or can be depending on the controls in place).  Finally, due to packaging controls offered through the platform, information providers can easily see who is accessing their information and how and offer new commercial models instead of the pure monthly subscription rate.

Using the platform tools would allow an information vendor to offer ‘packages’ of information, tailored for each customer with extensive protection and tracking capability while reducing cost of delivery for both themselves and customers.  In effect, once the data source is ‘plugged’ into the platform, any one of the nearly 2 million users on the platform can access the data while being tracked for that use.  

Using this model, ISVs wishing to serve a market, but require specific information can also access these data packages and either license directly for the data and pass on the cost to their customers or the information vendor can sell directly to the ISV’s customer for the data.

Effectively, Salesforce.com’s platform can become the “iTunes of data” by information providers leveraging the tools and building the delivery model I pioneered while at Thomson. 

Add to it, the cross-platform integration Salesforce.com has natively built and information from a provider can be accessed through Facebook, Linked In, Google, AWS and other cloud platforms.

There is an even more compelling opportunity which I explored, one that was deemed pretty controversial and shifted the definition of what an information vendor did for customers.  I’ll explore that next time….

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I would be remiss in thanking those of you who offered their congratulations for my inclusion in the Forrester Research book “Empowered”.  The experience and being included in the book is very humbling and one I would do again.  Thank you again to those at Thomson that were supportive of both my effort that lead to the mention as well as my being included in the final book, I greatly appreciate it.

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......

...Of Trojan Horses

Thank you for those that took the time to read my initial post - I appreciate it.

In my first post, I indicated that traditional information vendors Bloomberg and Dow Jones have taken a lead position in expanding their footprint through mobile computing. I also noted that both are breaking down the walls they have built up around their content, they have opened the doors to expanding their user base. However, I also noted there is a catch - a Trojan horse - in mobile computing. I'll explain:

If information vendors continue to focus on delivery at the edge to mobile devices, they will run into issues with the following: a) the device manufacturers and their unique standards and demands; b) the pace of innovation at the user/device level to increasingly devote limited resources into mobile computing solutions and away from core competencies; c) address the the ever-increasing combinations of browser, operating systems and devices by diverting even more resources into mobile computing solutions.

The net result is a firm either becomes 'locked in' to a mobile device ecosystem, and effectively cuts itself off from the others or they become trapped in an money pit of development, testing and QA to maintain a strong presence on each device/browser combination.

It could be argued that by adopting standards, a firm can play the field and rely on standards and user tastes to dictate the direction of what devices to invest in. As we've seen with Apple, many device manufacturers and mobile OS providers aren't necessarily interested in standards - other than their own - unless of course it strengthens their grip on the device market (more on Apple another time).

With Microsoft now making a serious play into the mobile market, you have at least 3 or 4 dominate operating systems and device platforms, plus an equal amount of browsers to contend with. So singular adoption of a leading manufacturer and platform isn't going to happen any time soon (plus I doubt the EC and DOJ will allow a single player without stepping in anyway, but that's another discussion too).

One escape for information vendors might be to build devices themselves - not a bad proposition, but unlikely. By building devices, they would by building another walled garden and perpetuate their exiting business model. Also, they would run into adoption risks due to the fact their existing user base has already adopted Apple or Blackberry or other mobile devices, and getting these users to switch to an unknown commodity would be near impossible. I wouldn't put it by at least one to try this strategy. Who knows, it might work - but I doubt it.

Most so far have chosen to build applications serving each mobile platform and ecosystem. The result is either a nice app but not one that generates any revenue, or one that replicates to some degree the desktop experience which is a fee service or bundled with their desktop service.

It will be seen how long they can sustain this approach, especially as users require more and more capability/functionality at the device level but have become accustomed to getting their 'app' for free. I've always questioned the value of the free services by companies like Bloomberg and Thomson Reuters. Free isn't a model they are familiar with and in my experience, they've shown a tendency with their pay products to put more and more content and functionality without corresponding fee increases. My suspicion is they will follow their same tendency and put more content into their free apps to maintain a presence.

This is the true trap of the mobile Trojan Horse. Unless there is a sound commercial strategy behind the freemium model, they will feel the pinch on their fee-based services. Customers will start to ask - why am I paying for something which I can get for free. Once this happens, that will spell the end of their walled gardens and they will need to figure out how to get those pesky Greeks out of Troy.....

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One final note - I think Bloomberg might understand this trap and has demonstrated such through a partnership with Major League Baseball.

They've created a Fantasy Baseball service through MLB.com which leverages some of the Bloomberg analytics to baseball stats to help Rotisserie players better manage their teams - a brilliant use of existing capabilities. Given a good percentage of traders - Bloomberg's core customers - play Rotisserie baseball, they've secured another way to keep their customers happy and attached to the Bloomberg brand. This is a fee-based service, and clearly they are showing value of their analytics outside of financial data - which strengthens their financial information desktops and differentiates it from their free services. Good move all around.

More on the implications of this another time.....