After 'anxiety' rises, Advent Software calls off plans to seek a buyer

Brooke,

Appears good for investors, maybe not so good for Advent’s product development. Having the luxury of developing under the cover of being a private company instead of being driven by the street would have been a great advantage.

If you just consider the message coming from Advent via marketing and press Geneva seems to be the major influencer of product management focus. Geneva services a very lucrative but different enterprise environment from that of the advisory world. Perhaps I am wrong but it seems as though the message has changed significantly from a year ago when agile development and all things cloud were in the offing. Then things started to change as the year progressed even as early as the Advent conference n Vegas.

Time will tell if the advisor market, where sales and support costs can be as significant as Geneva except spread across a much larger set of software units. While it is OK to allow enterprise client requests to drive functionality to a point, it cannot drive your overall product strategy when you have a large number of products and client types.

Unfulfilled expectations that a mass exodus of Axys clients to BlackDiamond may put BDR in the position of internal outlier being one of the few true SaaS platforms Advent has, putting increased pressure on the unit perform. Advent has announced numerous integrations with BDR internally such as their ALT platform, ACD, etc., which are certainly high value.

While Advent has had its bumps in the road with acquisitions (like any other company that acquires other technology to scale) thankfully it hasn’t become a CA or AOL which killed more companies than they fostered to success.

For me the question is what impact will all this publicity have on Advent, its aging product base and how its’ competition will leverage the real or percieved confusion. Even more than ever I think the next 12-18 months will be interesting times at Advent and for the advisory industry.

Pete

Pete,

I have to admit that for all that I follow Advent that I know little about Geneva. I’m presuming that from what you write that it’s not cloud-based and that Geneva’s advances can’t be leveraged by RIAs? Why does Advent have such a clear and dominant position in Geneva that differs from its success with Axys?

And you don’t hear much criticism of Black Diamond as a technology so what could be holding it back from enjoying even greater success?

(I don’t expect you to know everything!)

Brooke

Geneva is a multi-currency platform targeted at fund administrators, alternative asset managers, etc., enterprises that are used to paying a lot for the top-tier and are used to getting what they ask for when they want it wrt features and enhancements.

It is not an issue of whether other Advent products can benefit from Geneva, there is always something to leverage. The issue therein lies with the type of client and how requests are translated into new products.

If you’re product team is catering to the upper echelon of users who are willing to pay big money for the privilege concierge service that will not translate well into a market that is driven more on volume and license surface.

Put another way, it would be like a general asking all his infantrymen for opinions versus asking his direct reports. Too many ideas, too many requests, too much to service even though there may be some value. It’s a matter of what is practical.

On the BlackDiamond front it has been two years since they released PR on Blue Sky – a long time to go without announcing something significant regarding since its big splash. In addition BDR announced its intent to go into the rebalancing business. (Disclosure: I am a co-founder of a rebalancing software platform so I may be biased).

Then there are the nagging issues of the cost of moving Axys clients to APX or BDR and the upscale cost to acquire those services. This runs counter to that market culture. The original figures I heard in the rumor mill for transitioning Axys to BDR were in the realms of the unbelievable for 2011 alone. According to an article you wrote previously this certainly did not reach any semblance of reality.

Having it all under one roof makes sense, what with all that Advent technology at its’ beck and call. However I think BDR would have been better served to work on other things core to its business and provide better integration with rebalancing and trading platform partners.

As you will recall Advent promised that BDR would be poster child for its new and pervasive Cloud strategy. It got off with a PR bang and it looked as though Advent had seen the way to revamping its product management and marketing strategy with a promising new deal for the advisory and asset management world.

While BDR started out as a service provider I see signs of it being managed as yet another product. This is why I am concerned about Advent’s Cloud strategy becoming muddled. It is a difficult thing for a company of size used to selling conventional software and change itself into a service oriented organization. It affects everything from accounting to sales and all the stuff in between.

Perhaps part of the issue is that the contest that was driving BDR is gone now that Advent snatched them up. There certainly are many other challengers out there and they are growing more formidable each day. Constantly changing technology, improvements in technology, innovations in the use of technology – all of this driving, driving, driving…

The industry landscape has changed significantly in the past 5 years. Where there was the adamant demand to own everything on one’s desktop, now you’re so yesterday if you don’t have some sort of Cloud or mobile app. Just look at who doesn’t have an iPad or a smartphone – almost no one. This holds just as true for vendors servicing this industry. Just look at Junxure’s efforts to become a SaaS platform.

Another indicator is the rate at which Orion is bringing on new clients and the level at which advisors and large consolidators are willing to “give up control” to platforms similar to Orion. Specialty providers such as Blaze Portfolio and others are also enjoying an upswing in sales as this industry does a rethink on its desire to control everything.

I think perhaps the perception of BDR being the first big Cloud success opened up a Pandora’s Box of competition for itself. I say perceived because clearly they were not the first success Cloud platform but they were acquired for north of $70MM by Advent.

That’s my take on it.

Pete

Peter Giza | Managing Partner | Spitbrook LLC

Peter,

There are lots of great ponderables here and they are ones that could really only come from someone ensconced in the industry. It would welcome if someone on the BDP side offered some clarity here.

For instance, it’s a nuanced but perhaps critical point you raise about something being a service versus a product and where Black Diamond is on that curve right now.

It’s also an elephant in the room whether Black Diamond can find the same fire in the belly as a non-underdog.

And, yes, it has been a while since we’ve heard much about Blue Sky enhancements. It would be interesting to hear what is up with that.

thanks for making us think about some of these issues,

Brooke

Brooke,

Thank you. As a long time progenitor of advisory products, Advent is a company of age and size which demands a watchful eye. Observing how it manuevers in these changing times is fascinating and educating. Equally fascinating and perhaps even more important is the reaction of its’ customers, the markets, its’ competitors and the significant cottage industry surrounding it.

I am sure we will hear from Advent either directly or via its’ actions in the coming months. Some would say this is just silicon valley doing its’ thing but I don’t think that is the case for Advent.

As far as BDR’s fire is concerned I think its’ competition will reignite it. New and disruptive offerings on the horizon will challenge them. Advances in processing capabilities, open API’s and the ever growing adoption of Cloud technology is pushing on us constantly. Never before has public trending had so much effect on this industry as it does today. Just look at the way Mint has changed the way advisors think and operate.

Pete

Pete Giza | Managing Partner | Spitbrook LLC

Huh?! So the principals had made a business decision that they assumed was optimal for them to leave the business — but now they’re not?

We do a lot of M&A. Once the owners have decided to leave – it’s over. That personal, emotional, psychological, family decision doesn’t get reversed.

Sounds like the decision has been made but implementation just delayed. Always best to make a quick exit – limit your unknowns and uncertainty. Limping along just hurts everyone and erodes value.

Did they oversell themselves on the value?

This highlights another problem with advisor tech – outside firms “owning” the advior’s and client’s data. Oh oh. Counter-parties are always a risk.

Advent is a company to admired and watched for sure. They are major player in the RIA space with Axys\APX and Black Diamond. They are also a major player in the domestic mid-tier asset management space with Axys\APX and they own the Hedge Fund Admin space with Geneva.

As they reach full penetration in each of these markets and as new competition comes on, Advent has the difficult task of finding where the next major waves of growth will come from. Financial Service is still a difficult market and is going through major transformations.

Advent might not have the best technology in each of these categories, but it was more than good enough and more importantly they have had great execution, especially sales execution.

As Advent is seeking to retool for the next wave of technology and growth I’m sure they would not have minded doing this as a private company (a al Dell). Whatever the future holds for Advent I am sure in the long run it will lead to high growth and great success .

Mr. Rich,

Please educate us on the process as I am sure your M&A activity with companies with market caps exceeding $1B is extensive. Saying “it’s over” at Advent is like saying the sun isn’t going to rise tomorrow. Danger: Trolls approacheth.

JLL

Our comments follow the simple principal that when the owners have decided to leave, and announce it publicly it accurately represents the interest of those owners. Perhaps the facts have changed since their public announcement – likely not.

“Whatever the future holds for Advent I am sure in the long run it will lead to high growth and great success .” Advisor’s and clients financial well being are at stake – is there evidence to support this statement? Please share.

Finally, personal attacks, ad hominem comments and name calling are wholly inappropriate for a professional forum – but predictable.

Their success speaks for itself. They dominate a number of different verticals. This doesn’t happen by accident. Advent has a strong market position and strong leadership. They have some major changes to go through in terms of both technology and business changes, but they will be fine and the RIA marketplace will be better for it.

Mr. Rich,

Snarky perhaps, an ad hominem response would have required an emotional response to an intellectual dialog. I’m dead therefore no emotion is possible. Platitudinous conjecture begets the appropriate response.

As Mark concisely points out Advent is a dominant player and isn’t left without a plan or leadership. Many pleasant dreams.

JLL

Mark,

Getting back to the original conversation, it is certainly no accident with regard to Advent’s success. A global company spanning three decades is what many entrepreneurs’ dreams are made of. I think this is something a lot of people overlook. Building a global company doesn’t happen in a short-cycle startup push. It takes a lot to build a company that commands the respect that Advent receives.

They changes and challenges to meet but the industry, as you say, will be better for it. These challenges open doors of opportunity for other innovators which will benefit the entire industry. After all what is more inspiring than taking on an 800 pound gorilla of your industry:) That is where it gets interesting; to see what they will do and how it will inspire new and existing competition all to the betterment of our industry.

Pete

Pete Giza | Managing Partner | Spitbrook LLC

All,

Advent has established an enviable leadership position by doing a ton of very small things correctly. The level of commitment, great decision making and “roll up your sleaves” can do attitude over a 30+ year period is rarely replicated. This DNA is very much intact and innovation will happen at Advent just as it has in the past.

Pete G’s comments are most relevent to this discussion. Which innovators will improve the industry, do the little things that delight customers and carve out a niche that allows them to thrive. I am of the opinion that we are entering (are already in) a once in a decade technology transformation that allows new entrants to level the playing field. Advent did this to Shaw Data way back when the PC was just getting its legs in the late 80s. Forward thinking investment advisors accept that this shift will be disruptive and will get educated on what’s in it for them and their clients.

Steve Lewczyk
Cofounder
Nirvana Solutions

Ok, if they are so successful: – Why did the owners decide to sell? Then not sell. Does it sound impulsive to anyone else? – What are the implications for continuity of service for advisors and clients

We have a lot of platitudes and apple polishing but not much analysis and thinking.

Elmer,

I don’t recall there ever being a question as to Advent’s success. I am sure you will agree that a market valuation approaching 1.5 billion dollars represents a certain measure of success. As far as continuity of service is concerned; its not like they announced they are in danger of imminent demise. If that had been the case it is quite unlikely they would have announced a fire sale.

Equating comments regarding Advent’s success as “apple polishing” is a bit harsh. They have done a good job in sustaining their position with the possible exception in the RIA market and this according to their own comments. This conversation started with a discussion of challenges they face not with apple polishing.

If you feel this discussion lacks an analytic approach please lead the way.

Pete,

Pete Giza | Managing Partner | Spitbrook LLC

Looking backwards is not the problem clients and investors now face. Here we have a key and critical counter-party in advisors business and client’s portfolio where the senior management has publicly signaled they are ready to leave the firm. Then that reverses suddenly.

Is that a cause for concern or not? Complementing the firm deflects from a serious concern – maybe many.

If you go back to the first two responses I made to Brooke I don’t think you will find any “apple polishing”.

Pete

Pete GIza | Managing Partner | Spitbrook LLC

I repeat I think there is denial in play about a possibly serious disruption in the advisor systems landscape.

Elmer,

Ok great please expound so the rest of use can chime in.

Pete Giza | Managing Partner | Spitbrook LLC
Pete

Note prior comments. The senior leaders of, perhaps, the major technology supplier to advisors publicly declared they want to exit the business. That does not seem to be a bullish sign for either Advent, the advisory business nor advisory tech matters.

Let’s assume this decision, to sell, was made with a great deal of analysis and deliberation.

Then, suddenly, they aren’t selling. This decision does not appear to have taken the same amount of time. To the contrary, it appears impulsive.

So what do you advise advisor clients about the future health and viability of Advent as a business and their solutions? Caution would seem the minimal response.

No one really has engaged in an open discussion of the implications for advisors and clients. Mainly it has been avoided by standard defensive reactions: praise for Advent and a personal attack. This raises suspicions as well.

We have very little information but an open discussion would seem prudent and needed.

Elmer,

Perhaps you mistaking the recital of Advent’s 30 years of success as a defense. I think it is only fair that they receive that don’t you?

As far as advisor industry’s concern over their longevity I think nail biting at this stage is a bit premature. Do you or does anyone else believe that they are on the ropes at this point? Having problems understanding where your current and future product horizons is one thing and it could affect your longevity. However it is a very different issue to be in trouble.

If you want to discuss concerns let’s choose a platform: Axys, APX, Moxy, BlackDiamond. All products in heavy use in the advisory and asset allocation field.

Axys is ancient technology with a significant customer base. Even the rumor ( some 5 years ago I believe) that Advent would drop Axys for APX resulted in revolt. Fast forward to 2012 and we can see that many firms are stalwart to move from Axys to BlackDiamond or any other platform either due to cost, performance, sweetheart deals and the sheer pain of making a major application move.

Does that represent a concern of advisors? Sure it does but they are not just going to jump and Advent isn’t going to toss the baby out with the bathwater because it cannot decide whether or not to remain a public company.

Moxy is another old product that I believe will start to be challenged significantly in the near future. External pressure could move Advent to develop a new platform in its stead, but how is that bad for the industry? They are trying to leverage what they have in BDR and rightly so since they have so much inhouse technology and data. Again where is the imminent risk to advisors.

As an advisor I would look at the on/off announcement of Advent’s sale as an opportunity to reassess where they are in the progression of their businesses. Then decide what if any changes they feel they need to make if there is any trepidation with their investment in Advent.

Reality is that many firms have 5, 10, 15, even 20 years invested in Axys and these firms have management teams well into their 50’s and 60’s. The investment isn’t just data, it is training, expertise, etc. That is stickiness if I have ever seen stickiness. These firms are not going to stir the pot unless they are trying to scale up or are totally fed up.

I’ll sum up my thoughts and put my contribution to this thread to an end this way:

Advent seems to be doing some soul-searching internally with regard to its’ product management and marketing and its committment to Cloud technologies. It needs to address how it will bring Axys and Moxy clients into the 21st century.

As an outsider looking in there doesn’t seem to have a clear direction of its’ market and product horizons specifically in the advisory market. The muddling of the message between Advent’s Asset Management and BlackDiamond business units leaves one wondering who is the driving force. This adds more questions about its’ committment to Cloud and SaaS and I am not speaking to pure hosting or Citrix.

These issues are a challenge to Advent but I believe an opportunity for product competitors like FinFolio, service providers like Orion Advisor, for specialty SaaS providers like BlazePortfolio and many others that are too numerous to mention.

As was stated previously this is a great time for firms to really sit down and evaluate what they are doing with technology. As Spencer Segal commonly remarks, very few advisors take time to do a real analysis. If you are not willing to do so then you will miss out on some great opportunities.

This industry has changed immensely in the past 5 years alone and with all the new technology we have at our disposal it is a highly important and disruptive influence that one cannot ignore unless they are headed into succession. To advisors and technology providers I say: occupare locum.

Pete

Pete Giza | Managing Partner | Spitbrook LLC

This is long and good for you. Here’s our perspective. It’s all about counter-parties. The meltdown proved three things:

- Counter-party business health is critical

- Counter-party weaknesses and threats are usually hidden. Often they are obscured by “happy-talk” PR. Fair enough. That’s sales and PR’s job.

- Counter-party weaknesses can be instantly destructive – systemically. Instantly.

“The future is unknowlable.” So we can only look at behavior now, and probably should discount what is said. Do you care more what your client says or does?

I believe in the “Golden Rule” – Those that have the “gold” – set the rules. We don’t need to do granular, product-level tea leave reading to see that the ones with the “gold” at Advent want(ed) out.

What kind of signal is that to Advent’s customers and “counter-parties?” You tell me. The rest seems pretty hypothetical.

Elmer,

Sorry but I cannot hold my tongue. I am glad to be a technologist blissfully ignorant of impending disaster caused by principals that may desire to cash out after a long hard day. If M&A is all gloom and doom why do you do it?-)

Pete

Pete Giza | Managing Partner | Spitbrook LLC

Let’s set emotions aside and ask the simple question of reliability of a company where the owners have decided to move on – whether they execute it now or later.

The best tech in the world will be useless if it does not have a solid organization – including senior leadership – behind it.

Elmer,

An emotional response would require emotional investment in the subject matter at hand. What has transpired in this thread runs more along the lines of conjectured opinion with a smattering of analysis.

I will agree with you on your “best tech in the world” Statement. I am sad to say I have witnessed the death of several very good technologies due to poor leadership.

This has been a fun thread TTFN.

Pete

Pete Giza | Managing Partner | Spitbrook LLC

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