For the buy and sell sides alike, COVID-19 has only accelerated the need for a more modern technology strategy. The pandemic has wreaked havoc in both the markets and the wider world, putting a spotlight on the need for more nimble, scalable solutions that allow their businesses to pivot quickly in a crisis situation. Home office setups and remote business operations may be here to stay for a while and will certainly change the paradigm of what is commonly referred to as BCP: business continuity planning.
Having said that, at LiquidityBook we respond to a very common question almost daily: “Are you a cloud-based solution?” Of course, our response is yes, but what firms should really be asking is whether we are a multitenant cloud-based solution. The lack of understanding of the importance of multitenancy has led to major misconceptions about the trading technology space as it exists today.
First, we need to define our terms. Multitenancy is a software architecture in which a single instance of the software provides a service for multiple customers, or “tenants.” As such, the concept of upgrades, version management and time- and materials-based revenue billing does not exist. In the case of LiquidityBook, we are a cloud-based, multitenant SaaS solution.
On the other side of the coin, there has been a proliferation of legacy platforms that have been repackaged and labeled as “cloud-hosted.” In reality, these providers are using the same old product with the same code base, which is simply lifted and shoehorned onto any hosted facility that makes it accessible remotely. These “cloud-hosted” systems transport the current state of the version to a hosting provider — so, each install is still unique to a particular client based on its install version, patch, stored procedures, et cetera. Over time, the numerous versions, localized customizations and patch releases get in the way of progress. The market rightly regards SaaS and the cloud to be important concepts, but now legacy players are using those terms to promote themselves without addressing the underlying issues that multitenant cloud deployments alleviate. Look past the jargon and you will find these legacy systems are still incredibly inefficient, especially in this environment. The issues of managing an individual install do not necessarily go away, they simply change location.
In the case of simple “cloud hosting,” the benefits of a true multitenant architecture are never achieved. Sure, it’s easier to get through your upgrades, but each instance that is hosted is still a managed version of your current software, with localized patches, workarounds and stored procedures. In the current world of social and business isolation, this might make it easier for certain vendors to continue to manage their upgrades, but it doesn’t change the underlying product offering. The vendor certainly benefits — they can continue with the much-needed revenue stream they depend on for time- and materials-based work — but it adds another project layer in front of the client that only serves to extend the old business model while offering very little benefit.
At LiquidityBook, we continuously deploy new features and updates on a daily basis and all clients are on the same version of our product. Of course, we still work closely with clients to create innovative features that meet their specific needs. The difference is that they immediately become available to our entire client base, creating an ecosystem of good ideas. There is no need to “upgrade” – we just need to flip the proverbial switch. Not only do clients immediately have access to any and all functionalities we build, but we eliminate the need for scheduling on-premises upgrades or going onsite for any servicing of the client.
By design, LiquidityBook does not rely on professional services fees to grow business. We see this as an inherent business risk, both for us and for existing and potential clients. This risk was apparent on recent Wall Street investor earnings calls, where a number of software providers in our space announced that they have had to adjust their earnings projections thanks to their curtailed ability to service their customers – and with so much uncertainty, it seems this could be a moment of reckoning for a flawed model. Meanwhile, from the client perspective, there are many cases in which they cannot afford to wait for the next release to react to the opportunities presented by the market.
As this pandemic continues, our model is proving its worth. There is no need to do anything onsite, all LiquidityBook employees are set up to work remotely and most do so on a regular basis. Before the stay-at-home orders went into effect, we received many requests from clients to review our BCP from a service point of view, and they were and continue to be comforted by the fact that there have been virtually no changes to the way we provide client service.
This is paramount not only because our clients are doing much of their work remotely, but also because of market conditions. Volatility is through the roof, and firms need to move quickly; some of our clients are even spinning up new vehicles and putting capital to work in ways they haven’t explored before. Even in the midst of significant challenges, people see investment opportunities, and the last thing we as a business would want is for our service model to slow their pursuit in any way. As a centrally managed system, we allow our clients to move as quickly as they need to.
Chipping away at legacy market share is always a lengthy process, but we’ve seen a lot of momentum over the past year and especially in recent weeks. Amid so much turmoil, you might think that firms would be reluctant to begin new engagements with technology providers, yet we had three clients go live in March and April alone along with three more new clients signed on to begin deployment. We anticipate several more contracts to be signed before the quarter is through. More and more people are realizing how much easier our model is, and while they might wish they had made the switch sooner, there is no time like the present.
At the end of the day, our message has not changed, but circumstances certainly have. As the buy and sell sides continue to deal with the stresses of this brave new world, more and more firms will come to the realization that outmoded legacy systems are one headache they can avoid. Perhaps understanding the definition of terms vis-a-vis what needs to be achieved is a good start.