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Top of the Class: SunGard's Winning Ways
October 17, 2007
It may come as no surprise that SunGard Data Systems was the leader in four categories of this year's Securities Technology Ranking: order management, execution management, portfolio management and transaction cost analytics. SunGard is, after all, the number-one provider of software and services to the capital markets industry. The company had revenues of $4.3 billion in 2006 and has over 25,000 customers in more than 50 countries, including the world's 50 largest financial services companies.
What is more surprising is how this eclectic collection of business units has dominated the securities technology space following its second leveraged buyout in March 2005. Many observers predicted that SunGard would shed businesses and reduce staff, but that has not occurred. Instead, the Wayne, Pa.-based company has remained acquisition-minded, and integration between product lines has improved along with sharing of resources.
Acquisitions completed this year include London-based performance-management software provider Aspiren in June, Paris-based technology consultancy GTI Consultants in July, and managed hosting provider VeriCenter of Houston in August.
SunGard has been trying to strike a balance between entrepreneurial spirit and organizational focus since it was formed in 1983 through a leveraged buyout from Sun Oil Co. Then known as Sun Guaranteed Access to Recovered Data, SunGard had an initial public offering on the New York Stock Exchange in 1986.
SunGard was taken private again in 2005 by a consortium led by Silver Lake Partners, in an $11.4 billion transaction. The big question after the buyout was, now that it no longer needed to please shareholders, how would SunGard address its many hard-to-manage fiefdoms, created through more than 100 acquisitions?
At the time, SunGard had a disparate set of businesses in its financial systems division (the other divisions are availability services, higher education and the public sector). "Before the LBO, SunGard was spending a significant amount of time and effort managing analyst relations and compliance with the Sarbanes-Oxley Act," says Larry Tabb, founder and CEO of research firm Tabb Group of Westborough, Mass. "Their strategy was to buy successful companies. The upside to this is that you wind up with a group [of companies] that really knows the product. The downside is that you can have multiple sister products sharing the same space."
"Because they have multiple solutions, the duplication of some functionality led to some confusion on the end-user side," adds Isabella Fonseca, an analyst in the international research division of Boston-based Celent.
Consequently, a key driver of SunGard's strategy has been the need to integrate product lines. "SunGard is the 800-pound gorilla in the financial technology space," says Sang Lee, managing partner of Boston-based consulting firm Aite Group. "They are pretty much in every market. Since the LBO, they have been trying to figure out how to better integrate their various solutions. They have been trying to come up with better ways to share resources and integrate different components, and find a common platform."
SunGard has done that with its Common Services Architecture (CSA), an open-source initiative that allows products to share parts. Lee views CSA "as a controlled open-source environment. It increases the communication that occurs among different groups." Fonseca notes that it "enables components to be plugged together to form configurable applications." One result, she says, is that "the perception of SunGard having many solutions is fading away."