The Market for new IT systems may be tough at the moment but that is not stopping a range of new suppliers coming to market.

Last week at Mortgage Business Expo in Olympia, Irish based BrokerCRM announced their intentions to launch into the UK market. At first glance this is a nice system with some good value adds. Its look is modern and its usability high. It has a useful market segmentation and propensity modelling piece – analysing client purchasing habits and then segmenting the client bank accordingly for all marketing activity. Currently however it is still clearly supporting the Irish Mortgage broker and needs a new set of integrations and some further localisation before it can be a real contender in the UK. This work is due to complete in February although I suspect this is a bold target.

BrokerCRM Lite screenshot

On the 30th of November another system will be launched. 2020 Adviser is a insurance based CRM system from the consultancy firm 2020 Management Limited. The key selling point for 2020 is the system is based on one of the biggest CRM systems on the planet – Salesforce.com. We have begun to see more and more IFAs use sales force for contact management and with 1.5 million users worldwide using it for exactly this purpose, is an IFA is simply looking for a place to keep client information salesforce is a great option. 2020 plan to further enhance Salesforce and build in the integrations that take Salesforce from a good CRM system to a good backoffice system. We will watch how this develops with interest.

This adds to a number of new entrants in the last year including Profida and Voyant. The market may be tough but it doesn’t seem to stop the entrepreneurial spirit from flourishing in the IFA software market.

Where you sit in the Financial Services supply chain will affect your perspective of whether you have the same, similar or different issues when looking at some of the key challenges set out in last week’s blog.

For the many Providers, in an increasingly global market, they would probably like to exploit synergies in product manufacturing and operations. Whether they could design a set of product ‘chassis’ may be debatable but parochial regional interests can get in the way even if it were possible. Many see the aspiration of a common, consistent technology infrastructure as a ‘pipe dream’ but Providers are going to have to re-examine what is possible and acceptable. Developing, maintaining and servicing products on legacy technology is expensive and time consuming. To compete in the future speed to market is going to be critical, as is the ability to adapt to the different needs of consumers along with the capability to change products and services based on customer feedback, along with emerging trends and opportunities.

In the past, many products have been too complex and so taken more development effort, time, money and ongoing service than was necessary for many of the customers. However, with little or no ‘experiential’ data or feedback, providers continued in blissful ignorance. Indeed, it could be argued (as the FSA would do so) that Providers used commission to ensure that they achieved sales of poor products. Many IT systems are a constraint to innovation and speed to market and whilst there is always a concern about what technology alternative to choose, a failure to act and not do so with knowledge and speed, is a certain recipe for future failure. Providers have wanted to ‘own’ their IT operations and so many have IT departments that are bigger than technology companies. Some have ‘outsourced’ their operations, but this is disguising rather than solving the problem. The world has moved on and more and more businesses are looking to adopt a SaaS strategy.

With the effect changing remuneration from ‘Provider determined’ commission payment outlined in the RDR, Providers are going to have to look very hard at the operational costs of their business. Products will have to be price and feature competitive, as well as being able to offer a quality service. How they choose to distribute products will also be a key issue. There is real a danger that the ‘commoditisation’ of products could leave many unable to compete in an Adviser (IFA) only route. Do they aim to be in a niche and if so which one? Do they operate a tied/multi-tied model or work on a ‘direct to consumer’ model. Each of these has different product, remuneration servicing implications. There is little doubt that the next few years will see some significant consolidation and it is likely to the strategically strong innovators that survive.

When looking at the analogy of car manufacturing, do Providers aim to have an entry level model such as the Tata Nano for one market segment and separate ‘luxury’ marque such as the Jaguar for the better off? Taking this analogy back to how Ford created their product development and we could see an underlying chassis and certain ‘parts’ such as on the Mondeo being used with the jaguar X-Type brand. Common architecture and component re-use should be sought and exploited where possible. A ‘Wrap’ or ‘offset’ concept may also be worth exploring; it may be a degree of ‘snob value’ but if all those who say they are going to concentrate on the ‘Wealth Management’ space, it will be very crowded and very competitive! The mass market can still be served profitably, it will require a different approach to product development and distribution. A simple, low cost product that can be easily understood and bought, may not meet the ‘ideal’ of some untopians (including FSA personnel), but if it is possible to ‘upgrade’ or ‘trade-up’ – perhaps with advice, the objective of getting from A to B may well be better served by a ‘Tata Nano’ than not getting from A to B at all.

In next week’s final instalment, I shall wrap-up with some distributor views.

This week we saw the announcement that Trigold and Crystal are to merge. Not a surprise in many ways, as both are among the market leaders for supplying mortgage technology solutions, but their respective technology solutions were focused on different functional niches – Crystal into mortgage point of sale solutions and Trigold in mortgage sourcing systems. By combining their solutions and expertise, they can become a mainstream technology supplier with considerable market muscle.

Importantly their respective business models and skill sets appear to complement each other – Crystal brings their technology platform and their ‘online’ enterprise solutions expertise, whilst Trigold provide great domain knowledge and a wide range of synergistic relationships with lenders and distributors, along with strongly recurring licenses from a client base that will help to shape and drive further profitability.

The overlap in functionality is small and because the two companies have partnered for years, their solutions are well integrated, so a sensible combined sale pitch is available from the start. The main failings would now appear to be outside of their core mortgage market as the combined company is yet to provide a fully competitive Financial Planning solution. They intend to address this later this year and their ability to deliver on that promise will be key if they are to secure their long-term goals.

One strange twist of fate is that Crystal’s offices are right next door to Mortgage Brain so Mortgage Brain and the new entity Trigold Crystal Ltd are now to be found on the same small business park at Bromsgrove in the Midlands.

It will be interesting to see what the knock-on effect within the industry is. Technology suppliers to the market have typically relied on detailed knowledge of Financial Services’ sales and compliance processes. As a result, the big IT companies like IBM and Oracle have often failed to penetrate the market, allowing lots of small specialist companies to serve this space. Someone recently told me that they evaluated 39 suppliers when looking for a sales system – in anyone’s definition that must be an oversupplied market.

From a selfish point of view, the oversupply creates opportunity for consultancy operations like AT8 to use their knowledge and selection methodologies to helps distributors choose the most appropriate solution for their needs from this wealth of suppliers. However, the number and size of these operations may not be sustainable or desirable and we believe further consolidation is inevitable and desirable.

Focus Solutions has long declared its intention to grow the business by acquisition, SSP are now owned by a Private Equity company that typically owns much larger organisations and will surely bankroll further acquisitions. Indeed, despite the current economic climate, rumours are rife in the industry as to who will buy whom.

The industry reshuffle will produce some substantial organisations but mergers don’t always produce the desired results. Technologies may not be compatible, personalities and cultures may clash, strategic stories may not align. Real danger lies in those mergers that happen because they have to happen to survive or to satisfy shareholders rather than the primary motive of creating a strategic competitive advantage. It will be fascinating to watch this space over the next 12 months and to see which companies rise out of the pack as the strategic winners.