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Advent Direct is groundbreaking and breathtaking in its ambidexterity but is it enough to stop the feeding frenzy by Tamarac, Orion and other cloud natives
May 29, 2014 — 2:34 AM UTC by Kelly O'Mara
Brooke’s Note: When Advent Software bought Black Diamond it solved two major problems for the company — its lack of a true cloud-based product for RIAs and its lack of a warm and fuzzy cultural connection to RIAs. But as it turns out, there remains a third and thornier problem that still needs to be addressed — getting existing APX and Axys users into the cloud, and one that Advent can collect a toll to float on. Many Axys users still choose to leave Advent when they make the cloud move. Or they choose to stay hunkered down with the old Axys technology. See: How Black Diamond is working out — or not — as Advent’s agent of deliberate cannibalization. Advent chief executive Pete Hess had this to say about the matter in his conversation with Wall Street analysts earlier this year: “We believe the slowing of migrations is a temporary consequence of exciting new cloud delivered offerings that will drive growth once launched in the second half of the year. Until then we expect continued softness in the Axys to APX and Black Diamond migrations portion of our bookings portfolio. Keep in mind now our ultimate goal is to grow the long term recurring revenue of the company.” In other words, the acceptance of Advent Direct, the middleware-like system being inserted between cloud and earth by RIAs is a matter of importance to Advent’s greater health and prosperity. As one person close to the firm told me — perhaps a tad dramatically — this project is a “bet-the-company” proposition. Advent Direct certainly is more complex than I realized before working with Kelly O’Mara on this article.
After two years in the works, Advent Direct — Advent Software’s bid to have its cloud cake and its desktop, too — is edging close to rollout.
The new cloud-based software, which will somewhat ingeniously draw from and feed to the San Francisco company’s existing portfolio management and accounting systems, will burst to life some time between July 1 and Sept. 30.
Advent executives concede that, aside from smoothing out technical glitches, that they are still working out how much to charge for the product. Critics, meanwhile, says that Advent’s attempt to move to the cloud without giving up the desktop is rife with challenges that have discouraged other software firms from pursuing such an ambidextrous course of action. See: Peter Hess throws a Black Diamond lifeline to stubborn Advent Axys users, but will the price be right?.
The big concern experts raise relates to issues with the company’s disparate decades-old accounting systems, which operate on different databases that don’t communicate with each other.
Tech tower of Babel
With such deeply embedded challenges, a modernizing extreme solution demands a more complete overhaul, says Joel Bruckenstein, who runs the Technology Tools for Today conferences.
“It’s kind of like putting a band-aid on a major wound that needs stitches.”
But the band-aid analogy is not apt when the broader issues are considered, according to Dave Welling, general manager of Black Diamond
Advent Direct actually solves the problem of immediate Internet accessibility for clients in a way that a multi-year overhaul of all of Advent’s databases wouldn’t, he says. And for clients that want to move to a fully cloud-based-and-born system, Advent offers the Blue Sky product of its Black Diamond subsidiary, he adds.
And Black Diamond is no slouch. Total assets administered by its Blue Sky software increased 64% for the year ended Dec. 31 to more than $220 billion and the number of clients increased 29%, including many large advisory firms like Chicago-based McGladrey LLP and Essex Financial Services, headquartered in Essex, Conn. See: Black Diamond blows the lid off asset growth in Dave Welling’s first year in charge.
“Looking at the long-term picture, we agree that cloud solutions will dominate and that most, if not all of our clients, will eventually move to cloud-based systems. Our goal is to make that process as simple, easy and seamless for them as possible, which is what Advent Direct is all about,” Welling says. “Our strategy is about creating options for our clients that fit with their budgets, timelines and needs.”
More importantly, say executives of the company, Advent Direct is not simply a defensive strategy. Ultimately, the goal for the platform is that it can bring cloud benefits any desktop-bound portfolio management system — Advent’s or a competitor’s — which gives the company an in with an entirely new market of technologically isolated clients. Most RIAs, large and small, continue to exist on the desktop including several thousand firms that use core products like Morningstar Office, Schwab PortfolioCenter .
“We’re de-coupling our growth from [proprietary] accounting systems,” says Anthony Sperling, executive vice president at Advent Software.
Big picture plans
While Advent Direct was initially conceived as a lifeline to legacy Advent users, it’s evolved into a plan for a system that can serve as both a platform on top of any desktop system and as a kind of cloud-based app store. See: What one big RIA has to say about its switch from Advent Axys to Advent Portfolio Exchange.
The system will first roll out to work with Advent products: APX, Axys, and the hedge fund accounting system Geneva, along with a number of other Advent systems.
Ultimately, however, the goal is for it to be able to sit on top of other desktop portfolio accounting systems, like Morningstar or its competitors. See: Advent envisions a cloud-based world under stormy Las Vegas skies at the software giant’s annual confab.
Users would then simply add Advent Direct on top of their desktop-based system, giving them the benefit of mobile and cloud-based apps and all the hottest buzzwords, without actually having to change their entire accounting system, which can be disruptive no matter what. See: Peter Hess throws a Black Diamond lifeline to stubborn Advent Axys users, but will the price be right?.
Eventually, third-party applications, like RedBlack Software will be able to integrate through the Direct platform, says Sperling.
“These are things we’re moving towards,” says Sperling.
But the “moving-towards” aspect does not inspire Bruckenstein’s confidence. “I have a healthy dose of skepticism,” he says.
Rock, hard place
Still, Sperling allows that from Advent’s executives’ point of view, the move makes a lot of sense. Within the company, there are a number of platforms that don’t connect or talk to each other and, he says, “this is the glue that would do that.”
Advent Direct was conceived of because Advent has 4,300 customers “in various stages of accounting platforms they’ve been on, in some cases, for decades,” says Sperling. Many of those users have no desire to move to another system, be it Advent-owned Black Diamond or another company’s platform. In fact, despite the company’s best efforts, there are still about 2,500 users on Axys and another 500 using the local desktop version of APX, says Welling.
At least some of those users, though, want the benefits of being in the cloud, access to social media and to mobile data — even if they lack an understanding of what all that means — without having to actually change portfolio management or accounting systems. The problem for Advent is that as more and more of its users want out of desktop-based systems and are unhappy about being on a portfolio management platform built in the 1980s, they’re choosing instead to leave Advent for a competitor. See: Cambridge, Commonwealth vault advisors into social media; the boost is mostly free, for now.
Advent Direct is aimed squarely at solving that problem, keeping the users on Axys happy (and keeping them as paying Advent customers), while moving them toward the Internet. “It can sit on top of any of these systems,” says Sperling, “and start delivering value immediately.”
The advent of Advent Direct
Advent president Peter Hess first hinted at what would become Advent Direct at the Advent Connect conference in 2012 where Hess said, “We built this so people don’t have to migrate.” See: Advent envisions a cloud-based world under stormy Las Vegas skies at the software giant’s annual confab. More details were laid out at the 2013 conference,
To do that, Advent engineers developed a piece of software that, once installed, extracts information from the portfolio accounting system — be it Axys, APX, Geneva, or potentially a non-Advent provider, pulls all data and any changes into the cloud, augments that with additional information like benchmark data and performance indicators, as well as integrates the accounting system with CRM notes and tasks, and then allows advisors to access the enhanced version of their clients’ data anywhere, on mobile devices or other computers.
“We’re not trying to replicate what accounting systems do well,” says Sperling. See: Advent founder urges advisors to steer away from 'disruptive’ course of switching systems.
Advent plans to eventually operate like an applications platform, on which “solutions” can be built or used. The first of these has already launched: Advent Direct Community, a type of social media network and forum, has had about 10,000 people register in its first six months, while its predecessor had less than 7,000 users over its ten years, says Sperling. The next tool coming out after the launch of Advent Direct will be a product allowing advisors to do investor management through the platform.
Price point, pain point
Advent Direct will be released next quarter, though when in next quarter is not yet definitive. Key details — like price — are also still being worked out, says Sperling, but “a lot of progress has been made” since Advent Direct was originally announced two years ago. Advent will be offering 30-day free trials of Direct to potential customers, something Sperling says the company’s never be able to do before, but is now made possible by the scalability of Advent Direct and the fact that it takes just a few hours to get up-and-running. See: The inside story of a giant RIA’s move to Tamarac from Advent.
There have been about a dozen advisors, with between $50 million and “mid-to-upper-single-digits billion” in assets, he says, using the system in beta and “every single one of those has purchased it.” The plan is for advisors to pay for the tools they want to use on the platform with “a la carte and bundle options,” says Sperling. Advent Direct Community is free, but then the other tools that an RIA would want to use in the cloud will cost. Advent declined to put us in touch with those advisors who have experienced the technology.
Implementation, adoption and price
For the advisors who are heavy Advent users, says Bruckenstein, “it’s somewhat of a solution if you love Advent and want to stay with them.”
But he adds this caveat: “Ask yourself: am I going to be an Axys user five years from now and will this limit me in the future?” Instead of extending the life of an outdated system with this fancy new toy, Bruckenstein says it might be time to get off Axys anyway. “For the majority of firms, it doesn’t make sense.”
A big variable in making that decision will be cost, he allows, which is still a question mark.
The company has spent a lot of money and resources on making Advent Direct work, according to sources with knowledge of the system, and if it fails it won’t be because the technology fails — it’ll be because it was implemented poorly or priced incorrectly, and didn’t win large-scale adoption from RIAs. See: Advent Software is for sale, with Frank Quattrone as the sales agent, reports say. See: Can the new Envestnet-Tamarac Godzilla take on the Advent-Black Diamond King Kong?.
No plan B
According to a source close to the product this is a bet-the-company kind of deal. There is no plan B per se, the source adds, if Advent Direct doesn’t attract RIAs and appease Axys and PX users.
Sperling and Welling concede that the development of Advent Direct has involved a large amount of time and staff. “You are correct that Advent Direct is a big deal for Advent. This is a significant endeavor that we are investing resources in appropriately,” says Welling.
There is a less rosy take on that view.
“If they don’t get traction with this, then they’ve got a problem,” says Bruckenstein.
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