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Misys Banking Division
Ivan Martin CEO Misys Banking Division
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Agenda Misys Banking Division Strategy Ivan Martin
Business Drivers Steve Gowers Product Management Jerry Luckett Break Three Great Stories SummitFT Georges Bory MidasPlus Andrew White EquationPlus Andrew Derrer Summary Ivan Martin Questions and Answers All
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Key messages 1. Banking is a large and growing software market
2. Misys is well positioned to benefit from this growth 4. Misys is growing its market share in key markets 3. Misys leads in functionality and technology 5. Retail is key growth sector going forward
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Where were we? What did we do? Where are we now?
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Where were we? What did we do? Where are we now?
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What did we see in 2002? In 2002 you told me …
“Products are old legacy back office systems” “Losing market share to competitors” “We see no product roadmap for the future” “There is a risk the business will not benefit from a recovery in spending”
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What did we see in 2002? Banking Division ILF 150 100 Revenue £m 50
- ILF moving annual total - Smoothed ILF trend line 1996 1998 2000 2002
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Where were we? What did we do? Where are we now?
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What did we do? Portfolio Management Talent Management Columbus
Product Management Services R&D investment
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Banking software market
Significant opportunities in target markets Securities US Retail Asset Mgmt Treasury International Retail Corporate Addressable market > $5bn
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Misys Banking Division
Healthcare Systems Division Financial Services Division Banking Division Misys Retail Banking Misys Wholesale Banking Systems Summit Systems Misys Risk Management Systems
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What did we do? Portfolio Management Talent Management Columbus
Product Management Services R&D investment
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Misys and Banking Systems Market
Private Banking Investment Retail Corporate Universal RISK GMS LOAN IQ SUMMIT Over $100 bn MIDAS OPICS EQUATION BANK MASTER Asset size of Bank Below $5 bn Boxes represent market coverage – not size of business
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What did we do? Portfolio Management Talent Management Columbus
Product Management Services R&D investment
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What did we do? Portfolio Management Talent Management Columbus
Product Management Services R&D investment
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Competitor information Customer requirements Technology innovations
Product management Lifecycle mgmt Introduction Growth Maturity Decline Evaluation Qualification Definition Operation Business as usual Launch Design Build Alpha & Beta Development “Build” Decision “General release” Market Understanding Market Engagement Competitor information Customer requirements Technology innovations Misys vision Market drivers “Go external” to beta Outline ‘Delivering the solutions our customers want, when they want them’
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What did we do? Portfolio Management Talent Management Columbus
Product Management Services R&D investment
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What did we do? Portfolio Management Talent Management Columbus
Product Management Services R&D investment
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R&D + 55% R&D Man Days Increasing offshore capacity (,000) 140
Front-office 100 + 55% 60 Technology 20 Back-office 2003/4 2006/7 Increasing offshore capacity
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Where were we? What did we do? Where are we now?
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Banking market conditions
Banking software markets are generally improving Conditions vary significantly between sectors Retail banking continues to show sustained growth Wholesale banking and capital markets have stabilised Marked regional differences; activity in emerging markets Underlying market drivers still apply Cost containment Regulation Rising consumer expectations Long term trends continue Move away from in-house software to third party packages
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Market structure - banking software revenues
Source: 2002 financial statements & Misys estimates Source: Annual Reports and Private Company estimates.
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Global power – local knowledge
Auckland Bahrain Bangalore Bangkok Beijing Brussels Dubai Dublin Frankfurt Hong Kong Jakarta Jo’burg Kuala Lumpur Lisbon London Lux’bourg Madrid Manila Mexico Miami Milan Moscow Munich New York Paris Riga Sao Paolo Seattle Singapore Slough Sofia Sydney Tokyo Utrecht Warsaw White Plains Zurich
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Achievements in 2004 Portfolio moved to new areas of growth
Increased investment in R&D Retail benefiting from market facing structure Increased Treasury & Capital Markets market share Strong evidence of traction in our installed base
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Achievements in 2004 Best increase in H2 order intake in 3 years
Closing order book up strongly Maintenance revenues stable H2 professional services grew by 20% Professional Services backlog grew by greater than 70%
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Business Drivers Steve Gowers Business Development Director
Misys Banking Division
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Misys focus Misys is focused on providing business critical systems in specialist vertical markets Characteristics of vertical markets: Depth of industry knowledge Depth of software IPR Specialist skills able to rapidly deliver solutions Demand for mature and proven systems Long lead times Different drivers from ‘horizontal’ markets (e.g. ERP)
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How do vendors compete in vertical markets?
What drives growth in vertical markets?
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How do vendors compete in vertical markets?
What drives growth in vertical markets?
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Competitive dynamics in vertical markets
1. Breadth of product portfolio 2. Depth of IPR 3. Size & quality of development capability 4. Breadth and depth of geographic network 5. Ability to sell into installed base
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Breadth of product portfolio
Private Banking Investment Retail Corporate Universal RISK GMS LOAN IQ SUMMIT Over $100 bn MIDAS OPICS EQUATION BANK MASTER Asset size of Bank Below $5 bn Boxes represent market coverage – not size of business
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MidasPlus SummitFT Depth of IPR
Midas represents 14 million lines of code in total, with 168 functional modules MidasPlus release was 3 years in the making, delivering 3 million lines of new software IAS Compliance was 50 man years of investment SummitFT Summit represents 6 million lines of code in total SummitFT release was 3 years in the making SummitFT and MUST alone represent an investment of over 75 man years
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Size and quality of development
2,600 specialist staff F&A Support Services Sales and Marketing Software Development Product Management More than 1,000 software engineers
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Breadth and depth of network
Auckland Bahrain Bangalore Bangkok Beijing Brussels Dubai Dublin Frankfurt Hong Kong Jakarta Jo’burg Kuala Lumpur Lisbon London Lux’bourg Madrid Manila Mexico Miami Milan Moscow Munich New York Paris Riga Sao Paolo Seattle Singapore Slough Sofia Sydney Tokyo Utrecht Warsaw White Plains Zurich
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Ability to sell into installed base
3 Core systems Midas 450 Wholesale and international banks Equation 270 Retail banks BankMaster 190 Retail and Universal banks 4 Departmental solutions Summit 110 treasury & capital markets operations Opics 130 treasury departments GMS banks, funds and corporates Loan I/Q banks Enterprise Risk Risk Vision banks Count is number of discrete Banks Total = more than “1400 customers” because many clients have multiple systems
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Ability to sell into installed base
Contracts signed in FY03/04 45% of Misys contracts were for extensions of existing business Upgrades/Extensions Funded dev/Other Additional volume New customer 55% of Misys contracts were for new product and new customers New product Analysis based on numbers of contracts
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How do vendors compete in vertical markets?
What drives growth in vertical markets?
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Drivers of growth in vertical markets
1. New technology cycles 2. Growth in underlying business volumes 3. Increasing burden of regulation/reporting 4. A return to IT spending for competitive advantage 5. Trend to use of third-party vendors
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Growth drivers – technology cycles
IT Spending Cycles Mini- computers Euro and Y2K Client- Server ISV’s Services Oriented Architecture 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 Source: Bureau of Economic Affairs
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Growth drivers – underlying volume
Transaction Volumes 2,007,551,750 messages 2.0 billion 1.8 billion 1.6 billion 1.4 billion 1.2 billion 1.0 billion 0.8 billion 0.6 billion 0.4 billion Swift estimate that Misys systems generate 15% of all transactions in their network. Misys is at the heart of banking 1994 1996 1998 2000 2002 2004
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Growth drivers – underlying volume
Global FX Volumes $1.4 trillion per day $1.50 trillion $1.25 trillion $1.00 trillion $0.75 trillion $0.50 trillion $0.25 trillion Misys GMS confirms approximately 7% of the world’s $1.4 trillion daily foreign exchange transactions This equates to $100 billion per day through Misys GMS ASP solution 1994 1996 1998 2000 2002 2004
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Growth drivers – regulation/reporting
2004 Simple Lightly Regulated Old Boy Network Complex Highly Regulated Performance Culture 1984
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Growth drivers – competitive advantage
Cost Reduction Customer Service Cost Other Service Costs Service Quality 88% of CIO’s 70% of Customers
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Growth drivers – quality imperative
Fails/Million 1 3K 50K NatWest 100K
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Growth drivers – shift to third-parties
Fails/ Million Bank IT budget allocation New Projects Maintenance Maintenance v New Projects Internal v External Software Source: Celent – IT Spending Europe 2004
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The new era and Misys Functionally rich Component based
Engineered on Java & .NET With compliance built in ‘Delivering the solutions our customers want, when they want them’
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Product Management and Development Process
Jerry Luckett Product and Strategy Director Misys Wholesale Banking Systems
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Product management objectives
Target Market Market Requirements Solutions to Meet Requirements Internal Return Resource Allocation
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Product management process
Evaluation Qualification Definition “Build” Decision Market Understanding Competitor information Customer requirements Technology innovations Misys vision Market drivers Outline Operation Business as usual Market- Launch “General release” Decision Lifecycle mgmt Introduction Growth Maturity Decline Design Build Alpha & Beta Development “Go external” to beta Market Engagement
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Customer involvement Strategic Development Partnerships
Customer Advisory Boards Funded Development Market Research User Groups
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Development process Quality Management Configuration Management
Development Process – Development Standards – Quality Plan – Quality Audit – BMS / ISO Accreditation Configuration Management Doc Set Mgmt – Version Control – Collection – Packaging – Shipping – Dev Schedule – Dev Facility – Client Inventory Project Management Dev Plan – Test Plan – Deployment Plan – Dev Tracking Requirements Definition System Specification Design Construct Integration Test Quality Assurance Controlled Deployment Ongoing Fix
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The move to offshore and outsourcing
Misys has been creating offshore capacity for more than a decade What we gain from offshoring: Lower unit costs Increased capacity 24 hour development capability Access to wider skill pool Significant local market presence In addition outsourcing also provides a variable cost model
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Moving to offshore cost base
2004 Getting It Right! Have an ambition, know your target Plan offshore/onshore mix You are moving, your customers are not Inject product skills through secondment Recruit and train Protect domain knowledge – realignment strategy Excellent communications 2007
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Summary Know what you want to build
Get the software factory working effectively and efficiently Result Focus on growth products and new markets Output that meets and exceeds industry quality standards Increase development capacity without increasing the R&D to revenue ratio
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SummitFT Georges Bory Managing Director Summit Systems
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Summit – a brief introduction
Product Treasury & Capital markets solution 400+ staff in 8 countries world-wide 110 global customers Consistent management and technology strategy Loyal customer base Resources Core development in NY & Paris Outsourcing partner Support and local development New York, Paris, London, Frankfurt, Singapore, Seoul, Tokyo Sales – global resource Target Markets Primarily Tier 2 & 3 banks Some Tier 1 ASP solution for Tier 4 / corporates
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Summit solution Derivatives
One Solution front-to-back covering multiple asset classes Treasury Commercial Lending Fixed Income Derivatives Breadth & Depth of functionality – No. 1 Modular Technology that grows with clients needs Market leading tool for exotics & structured products Technological advantages - .NET and real time services ASP
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Multi-asset class coverage
Fixed Income Bonds MTNs MBS/ABS Repos Sec Lending GICs Emerging Mkt Treasury Loans & deposits Foreign Exchange Money Market securities Derivatives Interest Rate Credit Currency Equity Bonds Commodity Lending Syndicated Loans Bilateral Loans Exotics & Structured (MUST)
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Product evolution 14 Years Track Record FT MS .NET 1990 2000 1998 1996
Client - Server C Unix Sybase 1990 2000 1998 1996 2001 2002 1993 2003 MARKETS RISK MANAGEMENT DERIVATIVES FRONT OFFICE MONEY MARKET and FIXED INCOME DERIVATIVES BACK OFFICE CREDIT DERIVATIVES TREASURY FRONT to BACK OFFICE REAL TIME FX COMMERCIAL LENDING REAL TIME STP DISTRIBUTED RISKS EQUITY DERIVATIVES WEB TRADING CASH MANAGEMENT Extendible Data Model Customizable GUI Pricing API C++ Native NT Oracle-Sybase Product Formula Excel Add-In 3 Tier Corba Orbix Gateway RT FX Position Server RT Event API eToolkit Excel / Java XML Credit Server Risk Server RT STP Framework Web Trading MS SQL Server FpML 2004 FT MS .NET Parallel Distributed architecture EXOTICS & STRUCTURED TRADES MUST Linux Grid Computing SOAP & Web Services
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Investing ahead of the curve
Increased R&D during downturn Ready with market leading technology for upturn Followed a consistent product strategy and vision Employed and retained product development and product marketing expertise 54,000 R&D man days over 5 years
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Client examples Global Investment Banks International Wholesale Banks
Regional & Large Local Banks Hedge Funds/Corporates
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Our customers speak for us
Our decision to pool all applications into one with Summit as the BLB core solution for investment banking, will help us achieve this goal. Replacing such a large number of systems will reduce costs in many areas by reducing system complexity and improving STP. The processing and managing of trades will be massively improved with Summit and I expect to see a quick return on our investment. I was impressed by Summit’s product knowledge and the capability of its solution. It will provide us with flexible pricing, integrated risk management and back-office tools that will enable us to establish and grow our business in this competitive and profitable market.
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Market trends “Banks are looking to consolidate vendors”
“ISDA has estimated that the credit derivatives market has doubled for each of the last six years - $3.58 trillion by the end of 2003 with 51% growth expected in 2004” “Treasury technology spend is now starting to see strong signs of recovery and positive growth rates, and Datamonitor predicts CAGRs of 3.2% and 2.9% from 2002 to 2006 in Europe and the US respectively. “ “the deadline for IAS39 compliance, together with overall pressures to centralize treasury technology in order to improve operational efficiency, is going to drive significant increases in year-on-year growth of investment until 2006 and beyond”
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33 banks of the top 100 Banks use Summit
The Summit advantage Breadth and depth Technological advantage Summit MUST Regulatory compliance Corporate strength Business specialists Worldwide customer base 14 years experience 33 banks of the top 100 Banks use Summit
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Misys Wholesale Banking Systems
MidasPlus Andrew White CEO Misys Wholesale Banking Systems
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This is Midas! Most successful banking software package ever
International branches and regional banks Unmatched corporate banking capabilities Global product, local features, local support Loyal customer base – TRUST
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Source: Bureau of Economic Affairs
25 years of change IT Spending Cycles Mini- computers Euro and Y2K Client- Server ISV’s 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 Source: Bureau of Economic Affairs
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Change again. Banks are under pressure.
Competition: markets, products, price Risk Regulation Manual operations Rocketing customer expectations
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Source: Bureau of Economic Affairs
Next phase IT Spending Cycles Mini- computers Euro and Y2K Client- Server ISV’s Services Oriented Architecture 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 Source: Bureau of Economic Affairs
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This is MidasPlus! Open architecture Global processing
Straight Through Processing (STP) Head office solution Multi-channel eServices platform
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MidasPlus – A whole new world
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Deep functionality New solution - with pedigree
Tightly integrated yet flexible Improved functionality Customer self service Strong support
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Modern technology platform
Deployment options Open Efficient Development tools Faster time to market
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Delivering global processing solutions
The Power of One Improved customer service Cost and credit control Reduced risk Agility Cross-selling opportunities
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Roadmap – more to come! 25 Years Track Record 1996 2002 2000 1999 2003
Client Server GUI 1996 2002 2000 1999 2003 2004 1997 2005 Syndicated Lending Private Banking Euro Support Y2K IBAN Support Repo Processing Collaterals Register CLS Credit Risk management ISO15022 Profit Centre Accounting Overnight Index Swaps IAS 39 Cash Mgmt IAS 18, 32 Local Features Collateral Lending Management Limits KYC eServices Global Reporting Syndication Manager Messaging APIs iSeries Integration Toolkit MUI MQ Series J2EE 10 Digit Account Websphere Thin Client Web Services i5/OS 2006 Enhanced Front Office Enhanced Retail Revenue Analysis Full API support User Defined Forms SOAP Advanced Processing Component based solutions Business Routing
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The MidasPlus effect Single biggest investment in Midas, ever
Three years in the making Delivered on schedule 15 deliveries the day MidasPlus was launched First two customers in production before Dec
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The global processing effect
Banks will each select a single vendor solution All back offices in a bank will converge All Midas customers will upgrade over time Local features and local reporting are musts Misys is market leader and has first mover advantage
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Why Misys and Why MidasPlus?
Trust and expertise Integrated Global processing Best functionality Corporate strength Best local support Best technology 25 years experience
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EquationPlus Andrew Derrer CEO Misys Retail Banking
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Market leading foundation
Brand new technology Market leading foundation More than just a product Elevates the entire market Wider opportunity Equation Plus
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Market dynamics The largest market with the largest growth:
Retail Banking to Bank Retailing Packages will be the norm Compliance deadlines Islamic Banking
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Installed sites market share
Installed base Source: IBS Market Report – International Retail Core Banking Software Market. Excludes North America
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Addressing the market need
Channel Teller Electronic B2B2C Merchandising Process Differentiation Transactional Complex Experience Product Efficiency Deposit/Loans Investment Wealth management Data Knowledge Transactional Customer-centric Real-time analytical
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The challenge Delivering packaged software and related services to help financial institutions: Improve customer service Comply with regulatory requirements Reduce IT costs
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EquationPlus Open technology Channels Process Business Process Product
Branch Channels Internet Banking Call Centre IVR Customer Sales & Service B2B2C ATM POS Mobile & Kiosk Offline Channel platform Process Business Process Workflow Rules Data Propagation Management Product Reporting Consumer Banking Commercial Banking Treasury Analytics Customer Services Other Banking Services Data Misys Retail Banking Database Interfaces Product/ Transaction General Ledger Consolidated Information 3rd Party Information Existing New 3rd Party Open technology
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The roadmap Efficiency + Merchandising + Knowledge + Differentiation
Business Process Engine Q1 06 Platform Independent Back-Office 24 X 7 Q4 05 Platform Independent Front-Office Multi-channel Sales & marketing Q1 05 Complete retail system Today Efficiency + Merchandising + Knowledge Differentiation Based on calendar year
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The execution What convinces us that we can execute on the milestones?
Experience - MidasPlus Partnerships Unique tools and utilities Talent
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Founding principles for customers
Bring every customer with us An attractive future for every Misys Retail Banking customer Easy, worthwhile upgrades Support commitment Technologies that meet the aspiration of banks, both large and small The right architecture Inclusive, not silo-based Right platforms
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What the market thinks In migrating to Equation Plus, Misys has unveiled an expansive vision to combine the best elements of proven retail banking functionality, with the capabilities of leading edge architectures. Equation Plus, a complete new-generation, richly functional, highly-advanced retail banking system, will in our assessment, transform the fragmented retail banking market and competitive landscape. If Misys can deliver on this plan, it will mark a real renaissance for the Equation brand
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Why we will be best in the market?
Single customer view First truly open system Process automation leader CRM leader Functional leader Single point of accountability Company strength 20 years of experience
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Misys Banking Division
Summary Ivan Martin CEO Misys Banking Division
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Growth opportunities SummitFT MidasPlus EquationPlus
Market leading Treasury & Capital Markets solution World class functionality and technology Consistent growth up to and including last 3 years MidasPlus Most successful banking application ever Unmatched depth of corporate banking functionality Significant 3 year investment in new technology platform EquationPlus World class Retail functionality Clear leader in international markets First truly open front-to-back Retail solution
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Customer satisfaction
… today our customers tell us … “Very impressed by the improvement in Equation Support over the last six months.” “If the Customer Satisfaction Survey were to be repeated now, Misys would see a dramatic improvement in feedback from its customers.” “A most impressive display of solid technical expertise and great support. Best wishes from a satisfied customer.“
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Market feedback Morgan Stanley/IBS Survey on behalf of Association
“Our survey indicates that Misys’ customers are planning fewer system replacements than users of other systems The solutions rated more favourably than other vendors on flexibility and instrument coverage Misys’ product position versus the market remains strong ... with products perceived as offering above-average support for banks’ future needs” Morgan Stanley/IBS Survey on behalf of Association of Foreign Banks April 2004
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Key messages 1. Banking is a large and growing software market
2. Misys is well positioned to benefit from this growth 3. Misys leads in functionality and technology 4. Misys is growing its market share in key markets 5. Retail is key growth sector going forward
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Making things that really matter, work better
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