CB Insights: Twilight of the Terminal

Another prognostication announcing the impending death of the Bloomberg terminal has arrived.

Research firm CB Insights have published a screen-shot laden report on the inevitable passing of the Bloomberg terminal. It's death has been reported many times. And yet it remains the 900-pound gorilla in the trading and analytics space.

The report is long on conjecture and thin on actual data bolstering many of the claims, and relies on tenuous assumptions about the ease with which:

1. Users are willing to migrate to a hodge-podge of start-ups and open-source apps, all while maintaining the same level of reliability and support that Bloomberg offers;
2. Insurgent content and application providers can profitably offer alternatives to Bloomberg. It's easy to point to a company like Bluegold Research and their natural gas shipments service. Are they reliable? Will they be gobbled up by a larger firm like Drilling Info, who will subsequently roll their service into a larger, more expensive service? 

Among the claims CB Insights makes.

Long Tail. The long tail of data has doomed Bloomberg's moat. The argument is that a typical subscriber uses only a tiny fraction of the data and functions available via Bloomberg. Niche providers are popping up every day that are peeling subscribers away, offering just what a user needs and no more. Slowly but surely, the Bloomberg installed base will whither away as users migrate to cheaper alternatives.  On the margin, this may be an issue, but for the bulk of Bloomberg's users, I can't see their use cases being so limited that Bloomberg could be "simply" replaced by upstart niche providers.

Chat. This has long been one of the stickier features of Bloomberg, which CB Insights rightly considers the world's first social network. It's hard to overstate the productivity that traders realize by using the same communication network.

News. News is a lousy busy with terrible margins that's selling a commodity product. This is true. Few firms have been able to paywall news and profit from it (FT, WSJ and NYT). But Bloomberg must subsidize this business to fulfill its mission of providing a one-stop shop via its terminal.

Research. CB Insights rightfully calls out Bloomberg's foray into the Clean Tech and Legal research space. These have been disasters. Bloomberg should consider selling these businesses which have been operated at massive losses for years.

SaaS (Cloud). The argument here is that a trader can cobble together an a la carte financial portal with just what he needs and a fraction of the cost of a Terminal. But this requires a lot of planning and administrative overhead - and reliability is always a question when you're aggregating data from a dozen or more providers. As with niche content providers, who needs that headache?

It's hard to overstate the piece of mind traders get from having a simple, highly reliable product with a standardized user experience. $24K a year sounds like a lot, but how much of that is just piece of mind? How much would people be willing to spend cobbling together alternatives to Bloomberg based on each user's specific use cases - and then managing all those vendors and services? And when user needs inevitably evolve and require additional services, reducing the amount you're saving versus Bloomberg? And managing all of that? Who the hell needs that headache -- especially for front office employees?

The time may well come when Bloomberg, like Microsoft, will have to pivot its business model and suffer significant reductions in its ROIC as it invests in a new way of delivering value to its customers. Like Microsoft, Bloomberg has immense resources at its disposal, and the power of market incumbency should not be underestimated. Culturally, however, one must wonder if Bloomberg has the agility to turn the battleship as successfully as Microsoft has.

My prediction: competition from Refinitiv and S&P will eventually lead Bloomberg to tier their terminal pricing. The one price take-it-or-leave-it model is terminal. The Terminal itself, however, is here to stay. For now.

- Kevan Huston

SEC: Market Data Fees are Too Damn High(?)

On October 16, 2018, the SEC took two actions with respect to the fees that exchanges such as the New York Stock Exchange and NASDAQ charge market participants like broker dealers. 

The SEC ruled that the exchanges failed to justify fee increases for market data, and set aside 400 contested fee increases.

The Commission also remanded over 400 other fee challenges for consideration by the exchanges before resubmitting the their fee increase requests. 

https://www.sec.gov/news/public-statement/statement-chairman-clayton-2018-10-16

Among other things: the ruling will likely make it harder for the exchanges to raise fees for their data and related charges for connectivity to their systems.

Exchanges have been battling trading firms over market-data fees in lawsuits dating back to 2009 and Tuesday’s decision is unlikely to end the wrangling. (Bloomberg)

My take: increased scrutiny of exchange fees is a welcome development. It's unsurprising that the appointment of former J.P. Morgan executive Brett Redfearn caused concern from the exchanges; Mr. Redfearn knows well the pricing power exchanges have and their ability to extract monopoly rents from market participants. Adding a little transparency to a traditionally overlooked and opaque corner of the industry can only be a good thing. And when you're a monopoly provider, you ought to justify the fees you're charging. It's not like customers can get your product from another provider.

As Max Bowie at Waters put it (subscription required):

"Both sides know market data is essential, but differ on its inherent worth. The SEC’s new processes will force exchanges to justify that worth—which, by the way, doesn’t automatically assume that current prices are inflated or that we’ll see lower prices; it just means that the price will have to be carefully justified, using the costs and investments behind it."

Hard to find any fault in that.

At the end of the day, it seems likely that the exchanges, as they diversify their revenue streams into analytics, AI and indexes, will end up offering basic exchange data for free. But in the meantime, we should expect them to fight tooth and nail to get full value for their listings data. This battle is just beginning.

Press Round-up:

SEC rules NYSE and Nasdaq did not justify data fee increases (FT)

SEC sends Nasdaq, NYSE fees back for more justification (P&I)

Wall Street Fractures Over Stock Exchanges’ Data Sales (WSJ)

The Exchange Data Fee Debate: Trick or Treat? (Waters)

- Kevan Huston

Stakeholder Initiated Negotiations Can be a Disaster - Here's How to Avoid Them

As your firm grows, you're going to find it increasingly challenging to coordinate and manage who communicates what with your suppliers. Vendors have highly sophisticated CRM systems and aggressive outbound marketing processes: it's very easy for a vendor to find leads within your org. Those leads - stakeholders to you - may very well have legitimate content needs. But they can make your life more difficult depending upon how and when they liaise with vendors.

One of the more troubling scenarios occurs when a stakeholder interested in a product begins negotiating pricing and licensing with a vendor. This can be a disaster and completely undermine your negotiating position with the supplier:

• The vendor knows someone in the firm really, really wants their product. This gives them lots of leverage. It effectively eliminates your leverage on price. 
• The vendor will anchor the negotiations with a completely unreasonable first offer, as they know they're dealing with a stakeholder who doesn't negotiate professionally and understand how to handle a complicated multi-faceted negotiation with multiple stakeholders.
• The vendor will have potentially an inaccurate assessment of the breadth and depth of the use cases in your company. Stakeholder-led negotiations tend to result in incomplete business requirements as they are focused only their own silo or area of operation. 

Even in a firm with a robust and well-organized procurement and VMO function, from time to time a stakeholder will take the initiative and reach out to a vendor and begin negotiating terms. It's unavoidable. What should you do when a stakeholder-led negotiation eventually comes across your desk?

• Get the scoop from your stakeholder. Stay calm! Find out everything that's been discussed. Gather their business requirements. Find out if they have collected requirements from other stakeholders who might benefit from the service. Typically, a stakeholder will actually be more than happy to have you take the work of negotiating a deal off their hands. Most people hate negotiating and haggling over price. It's not a job everyone can do and maintain healthy blood pressure. 
• With the vendor, your number one goal is to try and re-establish some negotiating leverage. Immediately dial back expectations for a quick and easy win. Without embarrassing or calling out your stakeholder, explain that they aren't authorized to conduct negotiations, let alone commit dollars to a new service. I often will say to vendors: "at the CFO's behest we have recently initiated a number of new policies around procurement, so we will need to take a step back and assess this interest against our budget for this service". 
• Begin vetting the purchase as you would any other -- run it through your established procurement processes: gather user requirements, assess the value and ROI of the service, check your budget. It may very well be that the service isn't something your firm can subscribe to at all - despite the wishes of your eager stakeholder. 

Ideally, of course, this situation won't arise. It can't be prevented completely, but there's a number of steps you can take to minimize stakeholder-led negotiations:

• Have a formal VMO in place. Your firm needs to have a formal vendor management office in place that handles all third party negotiations. Not only will you realize hard-dollar savings, but you will increase the ROI of your purchases because you can coordinate interest and use-cases across multiple stakeholders. And you'll reduce legal and compliance risk as well. 
• Have a VMO with teeth. You need to have executive sponsorship for the VMO. Employees need to understand that senior leadership backs a centralized purchasing process for your firm. Ideally a C-level executive will write a memo outlining the VMO and its responsibilities, at least once a year. Adding sourcing and procurement policy language to your employee Handbook doesn't hurt either.
• Market your VMO to end users. What good does it do your firm if people don't know you exist? It's not enough to rely on an annual communique from management and a page on the corporate Intranet. Make sure you're communicating regularly with stakeholders about what the VMO offers and what, if any, freedom end-users have to negotiate with vendors.

Scaling your firm's growth can be a challenge when it comes to third-party purchasing and indirect spend. A well-organized and well-marketed VMO can help reduce stakeholder-led negotiations. When these occur, assert your authority over the dealmaking process, and slow down the negotiation to re-establish the leverage you need to get a good deal. 

- Kevan Huston

Week in Review 10/27/2018

M&A

Oracle buys DataFox, a provider of so-called predictive intelligence. Oracle intends to integrate DataFox's company-level data into its existing portfolio of business planning services like ERP, CX, HCM and SCM.

No word on whether the Oracle buy validates the claimed quality of DataFox's private company information - because it doesn't. AI and human-power intelligence-gathering can only take you so far without audited financial data. Beware claims of "more accurate" private company data - such claims cannot be independently verified. Smoke, mirrors, clever marketing and aggressive sales strategies don't make private company data any more reliable than it's ever been. Terms not disclosed. 10/22/2018.

Thomson Reuters to acquire Integration Point, a global trade management provider. With  the completion of Thomson's sale of it's Finance and Risk businesses to Blackstone, the Canadian media conglomerate can turn its attention to building out its legal, tax and regulatory businesses.

Integration Point will compliment Thomson's Onesource product. Terms were not disclosed. 10/23/2018.

Product

DTCC Launches Equity Kinetics for US Equities. The product will provide institutional investors with a comprehensive depth of market view of activity across all U.S. equity trading venues. 10/22/2018.

Nice Actimize launches AI Powered insight platform. X-Sight, an advanced machine-learning based Platform-as-a-Service designed to power the industry's first financial crime risk management marketplace. 10/17/2018.

MarketWatch.com bows first print publication. In a nod to 1998 (or something), MarketWatch has launched a print publication to compliment its flagship website. 10/17/2018.

Partnerships

S&P and Wolters Kluwer partner on CECL product called OneSumX CECL.

Waters: "The OneSumX CECL product integrates Wolter Kluwer’s finance, risk and reporting platform for data governance and management, credit risk models, credit loss calculations, and accounting and disclosures, with S&P’s credit scorecards, analytics, and the accompanying benchmark data to aid with CECL compliance." 10/26/2018.

Analysis

The New Oil Rush: An Examination of the Alternative Data Market. Waters. 10/25/2018.

"Banks are looking to cash in on the alternative data boom, but an in-depth investigation of the alternative data market shows that they may be in for an uphill battle to claim territory."

Startup Central

RumorHound
- Data on M&A rumors delivered in real-time and tagged with credibility scores.

PatSnap
- Data on intellectual property with specialized products in biologicals and chemicals. Founded in 2007; 445 employees.

- Kevan Huston

Top 10 Excel Operations Every Manager Should Know.

I am a firm believer in the maxim that "God helps them that helps themselves." This applies in spades to corporate managers.

A middle manager in banking, consulting, law and the like should have basic competence with a number of common applications including Project, OneNote, Word, and a data visualization tool like Tableau. A basic understanding of these tools will help you execute deliverables for senior management, set expectations for what your employees can accomplish, and allow you to more effectively issue spot your employees' work.

And don't forget Excel. Much maligned, Excel remains a stalwart and indispensable tool in corporate America.

I use Excel more than any other application except Outlook. I use it for lists, for budgeting, for brainstorming, for tracking employee attendance, for user inventory analysis and product usage, and much more.

Here are ten must-use operations in Excel every manager should know:

1. Remove Duplicates. When you have a list of, say, Employee IDs, quickly remove duplicates so you can perform subsequent calculations or analysis using a set of unique IDs. Time to Learn: 10 minutes.
2. Conditional Formatting. When you have a large set of data you want to analyse, Excel has some great basic visualization operations - no need to master Tableau! If you want to see all days in the year each employee handled more than 10 requests, conditional formatting will quickly highlight this for you. Time to Learn: 30 minutes.
3. Pivot Tables. These appear daunting, but they are worth spending some time getting fluent with pivot tables. You can quickly extract and run calculations on large datasets based on the facets you want to limit by. A must! Time to Learn: 2 hours.
4. Filtering. This is a super simple but powerful feature. Use filtering to hone in on specific values in a large data set. Save tons of time. Time to Learn: 15 minutes.
5. Annotation. If you're collaborating on a spreadsheet, take advantage of the opportunity to add comments to cells to help provide context to cell values. Time to Learn: 10 minutes.
6. Charting and Graphing. Don't worry about mastering Tableau - Excel has plenty of native charting capabilities that will make your analysis richer and more impactful. Time to Learn: 2 hours.
7. COUNTIF: I love COUNTIF. This function allows you to quickly tabulate how many times a string appears in a column of data. You'll find it useful to combine this with Remove Duplicates mentioned above. Time to Learn: 30 minutes.
8. SUMIF: The numeric cousin to COUNTIF. Quickly add up numbers for a given reference string. Ideal for summarizing totals from large sets of data. Time to Learn: 30 minutes.
9. VLOOKUP: Use this when you need to find things in a table or a range by row. Once you've started using VLOOKUP you won't know how you lived without it. Time to Learn: 1 hour.
10. Control + Z: This is your do-over. When whatever crazy formula you've created breaks or you have no idea how that one damn' cell got formatted that way, just Control + Z and start again. I use this more than any other operation in Excel! Time to Learn: 2 minutes.

I highly recommend managers become fluent in Excel. It's probably the best bang for your productivity buck. It's really the Swiss Army Knife of office productivity tools. When you have a spare moment, add another operation to your knowledge bank. You won't regret it!

- Kevan Huston

Week in Review - 10/20/2018

Notable M&A, product releases and people moves for the week ending 10/20/2018:

M&A

Argus, a commodities price reporting agency, bought Integer Research, a provider of market intelligence to the chemicals and fertilizer industry. The acquisition adds to Argus's presence in the fertilizer sector, having purchased FMB Consultants in 2011. Terms were not disclosed. 10/18/2018.

Dodge, the construction market research firm, purchased Integrated Marketing Systems, a provider of data and intelligence on public sector construction opportunities. Terms weren't released. 10/17/2018.

Newsweek Media Group completed its bifurcation into two separate entities, Newsweek and IBT Media. IBT Media will consist of the International Business Times, Player.One, Latin Times, Fashion Times and Medical Daily. Newsweek will consist of the eponymous magazine as well as its overseas editions. 10/10/2018.

Product

Financial Times is moving to gamify news by launching "Knowledge Builder"  This is a product of the FT's partnership with  :CRUX to enhance the personalization experience for FT readers. The product should provide improved content recommendations for users and increase engagement - leading to higher revenues for the FT.

FT's James Webb: "If we can get disengaged users to visit one extra time every 90 days and read just one extra article on a topic they are already engaged on, this could be worth up to £1.5 million a year."

The FT enterprise model is based on the concept of "core" readers, typically defined as a user who views 9 or more articles in a given month over the contract year. The Knowledge Builder recommendation engine will increase usage and thereby increase the number of "core" readers - and thus licensing fees. 10/17/2018.

IHS Markit announced a portal that consolidates data for market participants in the syndicated loan market. The portal offers consolidated data on position reconciliation, asset servicing and loan referencing. It is said to be the first and only service in the loan market to integrate data from multiple agent technology systems to deliver a unified view of positions and servicing activity to lenders. 10/10/2018.

Partnerships & Channels

Refinitiv have announced its data will be integrated with Microsoft applications and services.  Refinitiv's financial and markets data and news will be integrated in Microsoft applications and services, including Microsoft Excel, MSN Money, and Bing. 10/16/2018.

Establishing a User Base When Using SSO or IP Authentication

For some widely held services it makes sense to migrate from a password-based access program to a single sign-on (SSO) or IP Authentication program:

• The administrative overhead can be lower: depending on the vendor, you may waste a lot of time getting accurate and current user inventory counts;
• Better access controls as you can immediately deactivate user access without relying on the vendor to cancel user accounts;
• Improved compliance from reduced or eliminated password sharing;
• Improved visibility into who is using what services.

But it's important to ensure you have a plan for establishing an accurate user base in the absence of vendor supplied user lists. Don't simply implement a new access program for a resource without also knowing who is accessing the service, and how often. 

Accurate user and usage data is an absolute must, for several reasons: 

• You can't determine the value of a service if you don't know who is using it, and how often;
• You can't negotiate effectively with the vendor if you don't know how many users are using the service;
• You can't offer training and remediation to users who aren't using a service but who should be.

So how do you do this without usage data from the vendor? 

Many SSO utilities will give you data on who is accessing a website or application, but it may not be as granular as you need, or capture all the metadata you want. And with IP Authentication the situation is even more dire: for the most part you're still stuck with using vendor supplied data. 

Instead, I recommend installing a usage monitoring token on your proxy server. Firms that offer these services include Lucidea, OneLog, ResearchMonitor and H&H. With a usage monitoring service you will have detailed information on who you users are and how they are using the service. When combined with a SSO access program, you're not really compromising anything with respect to establishing a user footprint for such services.

No matter what access program (or programs) you use, it's imperative that you have accurate and reliable user and usage data. Don't switch from vendor-managed access control (passwords) to SSO or IP Authentication without having a plan in place to capture this valuable information.

- Kevan Huston

The Ethics of Negotiating with Multiple Vendors for the Same Business

Should you concurrently negotiate, including redlining contracts, with two different vendors for the same business, knowing that only one will be selected?

Of course, you say. What a brilliant way to arbitrage competing bids and drive down the price. Why wouldn't you do this?

Well, what are the costs of doing so? And what, if any, ethical considerations should attend to this scenario?

It's rare that you will have a vendor offering service that's substantially similar to another vendor's service such that you could simply swap one for the other. It's common in highly concentrated sectors with two or three main suppliers. Banking analytics platforms, ratings agencies, and media measurement vendors are supplier segments where products are substantially similar for general business purposes. There are differences on the margin, but on the whole the services are comparable, if not completely fungible.

(Before you protest: yes, I am aware there may be material differences in what, say, Moody's, Fitch and S&P. I am speaking of general use cases you'd find in consulting firms, law firms, and advisory banking).

Let's take online media measurement. There are two main players: comScore and Nielsen. You are interested in subscribing to a service that track internet traffic in the US, Canada and UK. Both vendors can offer you this, with minor variances in price and features. Your marketing department desperately needs an online measurement service by June so they can start buying for the Christmas shopping season.

What are the advantages of a concurrent negotiations?

1. Timing. Often times you are under the gun to get a deal closed, either to meet a budget deadline or to meet user demand. The service is desperately needed to support a new business unit, and you can ill afford to wait for negotiations with one vendor to fall through and then start up with the other. You have a clear preference, but should it fall through, you can quickly pivot to the competing vendor. 
2. Price Arbitrage. In this scenario, you're actually telling each bidder you are negotiating with the other. You're creating a competitive scenario throughout the acquisition process. This is similar to an RFP, but the difference is that you're not selecting a vendor until just before you sign on the dotted line. 
3. Non-commercial Terms. As with price, keeping two vendors bidding for business gives you maximum leverage in achieving concessions such as licensing and content redistribution rights. 

Right, but what about the disadvantages?

1. Hard dollar Costs.  There are hard dollar expenditures associated with procurement (regardless of how much operating leverage you've built into your process, this is unavoidable!). Mostly this is legal fees with outside counsel, and potentially some IT costs associated with a pilot / proof of concept and the build out of a test environment. 
2. Opportunity Costs. What else could you be doing with your time? How about your staff? Surely you have other things you could be doing instead of negotiating with a vendor you have no intention of retaining. Right? 
3. Ethical Considerations.  Do you want to waste a vendor's time when you almost certainly won't retain them? From a completely ruthless standpoint, you shouldn't care - this is just a cost of doing business for them - not your problem. But remember: companies (even vendors) are filled with people like you who are working hard. Is it fair to waste their time? My advice - be honest with yourself about the actual likelihood you will retain them. Don't string them along if there's no chance you'll close with them. 

I am a fierce advocate for negotiating hard to get the best deal possible. But always operate in good faith. The world is a small place, and your industry is even smaller. You don't want to develop a reputation for operating in bad faith. In paints you - and your company - in a bad light. The Golden Rule applies to negotiations as it does in every other part of life. Follow His lead!

- Kevan Huston

Don't Neglect Your Operations in Favor of Sexy Projects

One of the key challenges of any management position is balancing the demands of your current business mandate with the initiatives you are undertaking to improve or expand your operations.

I typically divide my responsibilities into two broad categories: Operations and Projects.  This seems simple but it's worth defining what I mean here.

Operations generally refers to the administration of existing business functions you're charged with overseeing.  You want your ops to run as smoothly and efficiently as possible, and you need to create scalable and reliable processes to execute your day to day operations. You've designed your workflows carefully, you've got measurement and quality controls in place to make sure everything is running properly - and when there's an issue it can be identified and rectified.

Projects refers to a discrete deliverable designed to significantly enhance or expand the operations of your business.  You may need to add an offshore component to your team. Perhaps a new software system needs to be installed. Or you've been tasked with taking on a new business currently managed by another org.  All of these are projects. And taking them on can come at a cost to your current remit.

It can be tempting to devote your time to project work at the expense of overseeing your ongoing operations - projects are exciting, capital intensive, highly visible and politically potent. Pull off a seven figure expansion and you'll be the talk of the firm!

But be careful you don't neglect your current operations that require due care and attention. Of course, senior management doesn't care that your plate is already full when they "volunteer" you for a big project! So how do you manage?

It can be tricky. Some recommendations:

1. Ensure your existing operations are scrupulously documented! I can't recommend this enough: you need to ensure your staff have documented all your operations and that you have reviewed the documentation for any errors, gaps or inconsistencies. 
2. Communicate early and often - make sure management already has a keen awareness of what you're already doing. Look, it's likely that since you've been tasked with a new project, they already think highly of you! But make sure management is well versed in the ops you're already running and the resources required to do so. They'll be more amendable to providing you with additional staff (FTEs or contingent) to execute the new project. 
3. Delegate - before it's too late. Take careful inventory of your daily tasks. Are there duties that you're holding on to that could be delegated to a trusted line manager? Don't delay in addressing - you may be called upon to take on new responsibilities at any time. 
4. Value benchmarking - everyone wants to grow their business, and with it your stature and influence in the firm. This is natural, but be honest with yourself: are their operations you're engaged in that could be wound down? A big project in the wings could be the opportunity you need to shutter a low-value operation and reallocate resources to a new initiative. 
5. Make it hurt - I don't recommend this approach unless all other avenues have been explored. But sometimes, you need to push back and show management what the cost is to taking on a new project. Unless you communicate this effectively, management will assume all costs are sunk! You need to show, not tell, how the new responsibilities will impact current operations unless you get more resources (people or money). 

You should always be open to taking on new projects or assuming responsibility for new businesses, but be mindful of how this affects your current responsibilities. Have your operations and your people primed for potential disruption if your attention is required elsewhere. 

- Kevan Huston

Refinitiv: A New Day Dawns for Thomson Reuters

This week Blackstone unveiled Refinitiv, the Thomson Reuters Finance & Risk business division it agreed to invest in last March.

This move was long overdue. TR F&R has been a lumbering giant in the space with a lot of unlocked value.

Blackstone's professional management and execution discipline should yield immediate benefits to the business. The ability to focus on data and analytics as a stand-alone business, without diluting spending and strategy on publishing and news will, I anticipate, improve go to market for Refinitiv's data products, primarily Elektron. The cash from Blackstone will enable further investment in analytics and AI capabilities, and - hope and against hope - modernize legacy businesses and processes. 

And Refinitiv desperately need to improve the Eikon terminal to compete with Bloomberg, FactSet and Cap IQ. I have used all of these services in one form or another for decades and Eikon is not a realistic alternative to these other services - at least in banking.

A press round-up on what we should expect:

FT: 

Costs will have to be cut, and its junk debt load will need to be confronted -

"Its debt size has led to speculation Refinitiv could spin off some of its prized trading assets such as FXall, the forex venue, or Tradeweb, which transacts more than $500bn a day in bond, derivative and exchange traded funds deals. Corporate bankers have estimated Tradeweb’s value at $4bn, and Refinitiv owns a 56 per cent share."

https://www.ft.com/content/ed3bc55e-c490-11e8-8670-c5353379f7c2

City.AM: 

The move will challenge Bloomberg, as Blackstone buys one of the world's largest financial markets data providers with more than 40,000 institutional customers in 190 countries.

http://www.cityam.com/264375/blackstone-challenges-bloomberg-deal-20bn-thomson-reuters

- Kevan Huston

Go Global or Stay Local?

One of the challenges in managing a multi-national book of indirect spend is whether to consolidate local contracts under a single contract out of one office, typically the corporate headquarters.

There's pros and cons to centralization:

Benefits

1. Lower administrative overhead
2. Improved coordination of the vendor relationship
3. Simplified cost management process
4. Enhanced visibility into spending patterns

Disadvantages

1. Less responsiveness to local user needs
2. No term "arbitrage" - non-US offices can often get lower unit costs than US businesses. I have managed contracts for users in all major geographies, and almost without fail, unit costs
3. Less flexibility in responding to regional business and/or macroeconomic conditions. 

My advice: see if you can split the baby and get the administrative benefits of centralization combined with the flexibility of local responsiveness. 

To have it both ways, you need to have a superb communication process in place between the central Vendor Management Office (VMO) and the regional office that's managing the contract on a daily basis. You also need to have local people you can trust to execute their responsibilities - particularly relationships with end-users. Key vendor management processes like commercial due diligence, management reporting, signing authority and legal review of terms & conditions can be set by the central office. Entitlements management, user training and needs assessment, and interfacing with vendor account managers can be done locally.  

One of the biggest pitfalls of this hybrid approach is inventory expense management. Users may be swapped or added to a contract locally and the central VMO isn't informed, leading to outdated and inaccurate data for reporting purposes. 

Further, contracts may be renewed locally and the VMO doesn't capture the most recent data. Budgeting and expense reporting accuracy begins to suffer, and your credibility with senior management goes out the door: they can't trust your numbers and lose confidence that you can effectively manage your book of business. Not a good look.

Key takeaways: have a robust, formalized vendor management program in place that clearly delineates the responsibilities of both the local and central offices. Require that contracts over a certain amount be vetted and signed by the central VMO. And implement an inventory and expense management utility like FITS or MDM, with local admins, to ensure maximum transparency. 

With a good communication plan and well-governed vendor management program you can take advantage of both central and local contract administration.

 - Kevan Huston