There is nothing sad about ION Investment Group announcing on 22 March that it had, “Completed its acquisition of Openlink Financial, a global provider of trading and risk management solutions.” And that, “Openlink (now) provides complementary solutions that further expand ION’s footprint across energy companies, financial services institutions, and commodities-intensive corporates. ”
It is a stark business reality that the ION business model is more effective than the business model of many stand-alone TMS providers, e.g. Wall Street, Reval, IT/2. What ION does is acquire mature TMS businesses, maintain healthy cash flows by cutting back on marketing, streamlining customer service support and new product innovation, to enable them to pay back the original investment in a reasonable period of time. It’s an impressive business model, but what is its impact in the long-term?
Innovation stagnation in TMS market
Tom Leitch, COO at TreasuryXpress, believes that, “The acquisition of OpenLink sheds light on the growing problem of innovation stagnation in the treasury market.”
Leitch categorizes currently available treasury systems into three groups:
- Solutions that have been acquired and added to a holding portfolio of like-solutions. (e.g. ION) Technology in this category is no longer being innovated or actively sold to new clients. These solutions are simply being maintained operationally and have or will reach end-of-life.
- Solutions in this category are still independently owned and operated. These solutions are still actively and competitively sold. The technology still receives upgrades and updates; however, the pace of innovation is slow and the impact of any newly updated functionality is minimal. These solutions are reputationally strong but typically prioritize investment and resources in human capital and partnerships rather than technology. They rely on human-driven services either in-house or out-sourced to deliver experience changes rather that delivering technology advancements.
- Active Innovation
- Solutions in this category are characterized by flexible and fast technology and client experience. These solutions are either emerging or mature treasury providers that have invested in technology and development resources over human capital. Solution providers in this category are continually innovating and rely on modern, lean technology that can offer the most functionality, flexibility, scalability, and value.
Leitch clearly believes that TreasuryXpress is in the Active Innovators group.
Impact of TMS company takeovers
The impact of the TMS company takeovers, such as ION’s takeover of OpenLink , Leitch believes is that it opens up opportunities for Active Innovators, “From our point of view, modern and innovative entrants such as TreasuryXpress are really disrupting the stagnation in the market by focusing on the following areas:
- User Experience
- Flexible and technology-driven approach to implementation, client change-requests, user-interfaces, and product updates
- Regulatory Influence and Enablement
- Modern, innovative technology is built with and built to support now normal technology such as APIs. PSD2 for example, is top of mind to treasurers. They want to know how they will be impacted and how we can help them. The impact is that there are huge cost savings and ease of implementations that the more nimble Tech based companies can adapt to rather than huge conglomerates.
- Service and Support
- Actively innovative providers are continually incorporating more technology-driven advancements such as AI and machine learning to provide more timely, automated, and effective support to clients; thereby improving business continuity and client experience.”
Opportunities in the TMS market
Bob Stark at Kyriba believes that, although ION are taking over major TMS providers, “The opportunities for all other treasury and risk management systems are significant. The overall treasury system market is growing as more and more companies subscribe to new treasury and risk technology for the first time or replace aging technology packages that were built pre-cloud. In addition, the complexity of treasury requirements overall sees CFOs investing heavily in treasury teams and the depth of technology they now require - across cash, payments, risk, and working capital optimisation. It is a good time to be a TRM system provider that has the resources to invest in technology innovation.”
CTMfile take: The TMS market is hotting up. More than ever, it is important to understand what type company your TMS provider is and how they are likely to service your needs in future. Do they have the resources AND the inclination to invest in technology innovation.
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