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1999 Middleware Survey
Middleware Survey Identifies Leading Vendors, Emerging Trends
The Summit Group's 1999 Middleware Survey looked at both current and potential US users of middleware products. One focus of the survey was to examine the middleware experiences of firms currently using middleware. To accomplish that, the study asked respondents to evaluate their product and identify the factors that led to the initial purchase and installation of the product. As a result of this approach, the survey results show vendor performance relative to client needs and expectations. The survey also queried respondents on various other issues, such as cost of purchase and installation and a variety of concerns related to the product's connection to S.W.I.F.T.
Firms that were not using middleware at the time of the survey were also solicited. In addition to asking what products, if any, were currently being considered, the survey also asked these respondents to identify that factors most important in the selection process. This portion of the survey also sought a variety of information related to each prospective middleware client's plan to integrate its chosen product with S.W.I.F.T.
Finally, all respondents were asked to provide their perception of middleware vendors whose products they do not use, and prioritize the most important functions with regard to middleware in general. Each respondent's plans regarding the new ISO 15022 messages were also queried.
During the period in which the survey was conducted, two major acquisitions occurred in the middleware industry: Braid was acquired by TSI and VIE Systems was acquired by NEON. In analyzing the survey, the data for each of the four firms is reported separately.
Following are the results of the survey.
Which Products Are You Using and Why Did You Choose Them?
NEON ranked highest in this category with 27% of survey respondents reporting use of the company's products. Braid, since acquired by TSI (with 2.7%), followed NEON with 22% of survey respondents, while IBM-MQ was third with a 19% share of survey respondents. Candle, MINT, TSI and Level 8 all received lesser responses.
52% of survey respondents reported that their firms were using more than one vendor. In selecting a primary vendor, respondents stated that vendor support during installation and anticipated ease of integration with both existing and planned applications as well as with S.W.I.F.T. were the most important factors in choosing their application (Factors were rated on a scale from 1-5. The most important factors rated 4 or higher).
Survey respondents also named anticipated throughput performance, anticipated availability of upgrades and anticipated ease of installation as important factors (3.5 or higher) in choosing and rating their application
How Satisfied Are You With This Product?
Survey respondents were asked to rate their level of product satisfaction with regard to the following criteria: functionality, throughput performance, customer service, ease of integration with existing applications, availability of upgrades, ease of installation, vendor support during and after installation, and overall product value to firm.
The overall average rating for all categories was 3.4 (on the 1 to 5 scale). The most highly rated criteria were ease of integration (3.7), functionality (3.5) and overall value (3.5). The lowest rated criteria were ease of installation (3.2) and availability of upgrades (3.1).
What Was Your Approximate Cost?
A plurality of survey respondents reported that their firms' software and installation costs were each between 0-$100k. 40% stated that software costs were less than $100k, while 53% stated the same about the cost to install and integrate the product. 25% and 21% reported that software and installation costs were between $100-250k respectively, while 20% and 5% reported those same costs between $250-500k. The remaining respondents reported that their software (15%) and installation costs (21%) each totaled over $500k.
Usage In Conjunction With S.W.I.F.T.
54% of respondents stated that they use their middleware product to connect to S.W.I.F.T. Of those, 33% said that S.W.I.F.T. endorsed the product. The same percentage also reported soliciting S.W.I.F.T.'s assistance in evaluating and selecting products. The average level of satisfaction expressed by those respondents whose firms sought S.W.I.F.T.'s assistance was 3.3 (on the 1-5 scale).
Respondents with middleware connected to S.W.I.F.T. also reported that the connection process was more difficult than expected and rated their satisfaction with their product's ability to support S.W.I.F.T. messaging at 3.1.
Of those respondents whose products are not connected to S.W.I.F.T., 58% stated that their firm would connect to S.W.I.F.T. in the future.
Firms Not Currently Using Middleware
Of those respondents whose firms are not currently using middleware, 64% stated that they will purchase a product in the future. Of that group, 29% stated that they would purchase a product within one year, while 71% stated that they would purchase a product in 1-2 years.
Of those respondents actively seeking a middleware product, NEON and Braid were the most popular vendors being considered; 25% of respondents stated that they are considering these vendors. VIE Systems also received a high level of consideration with 19% of respondents stating that they were researching the company's product's. MINT was the fourth most popular vendor, earning the consideration of 12.5% of respondents.
According to respondents actively seeking a middleware product, anticipated throughput performance, vendor track record, and anticipated ease of integration with existing applications as well as with S.W.I.F.T. standards and network protocols were the most important factors in evaluating an application (the most important factors were rated 4 or higher on a 1-5 scale).
Current Progress And Anticipated Cost
83% of respondents who reported being a prospective middleware client stated that they were just starting to consider alternatives. 7% reported that they were well into the product evaluation and 10 % reported that they have almost completed their selection. 36% of those same respondents also reported that their firms were already connected to S.W.I.F.T., while 16% stated that they planned to use a middleware product to replace that connectivity. 80% of this cross section stated that middleware was critical to their plans to connect to S.W.I.F.T..
Respondents who are prospective middleware clients also reported that expected costs for software and installation were below $250k. 25% of this group stated that they expected software cost to be less than $100k, while 75% expected costs to be between $100-250k. Meanwhile, 33% of the same group reported an anticipated installation cost of less than $100k, while 66.6% reported an anticipated install cost of $100-250k.
Vendor Perceptions
An underlying theme evident in the survey results is the significant level of difficulty in selecting a middleware solution. When asked to rate their perception of middleware vendors, respondents indicated minimal perceived differences. Since there were only slight differences in the vendors' overall ratings, it is important for potential middleware customers to fully identify their specific requirements and match them to the functions provided by each vendor.
The survey also revealed that certain vendors enjoyed a perceived edge over others across a variety of categories. The most significant divergence from the average result occurred in the cost category. Here, Braid scored the highest, earning a 3.4 rating (out of a possible 5). MINT and NEON followed behind with a 3.0 rating, ahead of the average score of 2.8. Another category where the leader significantly outpaced the average was in anticipated ease of integration. In this category, Braid also led with a 3.8 rating, followed by MINT and VIE at 3.3 and the survey average of 3.2.
Braid also scored first in the advertised functions category, scoring a 3.6 rating. STC and NEON scored 3.5 and 3.4 respectively, allowing both to outpace the average of 3.2.
Like Braid, MINT also scored the highest rating in three categories. MINT shared the lead with VIE in two categories-vendor support during installation and vendor support after installation. Both middleware providers scored 3.3 in each category, while the average rating in both categories was 3.0. MINT also topped the anticipated availability of upgrades category. The 3.5 rating earned by MINT was just ahead of NEON's score of 3.4 and the category average of 3.2.
The ease of installation category was led by VIE whose 3.3 rating outpaced STC and TSI who each scored 3.0. Meanwhile, NEON finished in first for "Anticipated Throughput Performance," earning a 3.7 rating, ahead of STC (3.5), MINT (3.4) and the category average (3.3).
Middleware Perceptions
In addition to being asked about their perceptions of middleware vendors, respondents were also asked to provide their impressions regarding the importance of specific middleware functions. Nearly every function queried rated higher than 3.0 (on a scale of 1 to 5). The most highly rated functions were: reformatting, routing, message monitor, S.W.I.F.T. connectivity, and the presence of a S.W.I.F.T. message library.
Respondents were also asked to rank the business benefits that they expected to receive from Middleware. The first four benefits—lower processing costs, easier client access, reduced settlement risk and improved technical environment—all rated closely. Increased STP rate, however, finished a distant fifth, indicating that respondents are focusing on the benefits of STP, rather than the process itself.
ISO 15022 Messages
The last issue for respondents to deal with was their plans regarding the new ISO 15022 messages. Over 75% of respondents stated that they still have no plans for the message, while nearly 18% indicated that they would use their current system to support the message. The remaining 7% stated that they would require a new system.
Of those firms that indicated that they would use the new format, 39.5% stated that they would use it for settlement and reconciliation, while 23.7% indicated that they would use it for trade initiation and confirmation, and 15.8% said they planed to use the standard for corporate actions.
Middleware Increases SWIFT Message Traffic
Several independent studies have shown that firms have been able to reduce their risk and processing cost by increasing their use of the S.W.I.F.T. network, and S.W.I.F.T. has determined that one of the fastest ways for firms to increase their use of the network has been by implementing middleware.
In addition to requesting this survey, S.W.I.F.T. has been conducting an on-going analysis of how the products offered by major middleware vendors have impacted the traffic on the S.W.I.F.T. network. Christy Kohler, Senior Account Manager, Partner Solutions, pointed out that "while the overall growth in securities messages sent over our network has been over 40% YTD in the Americas, we have identified that the majority of the growth has been from firms that have begun to actively use middleware."
Vendors Evaluated
Because of this increased interest in using middleware for S.W.I.F.T.-related messages, S.W.I.F.T. has evaluated the capabilities of many middleware vendors and over the last year has labeled several as having the capability of interfacing with S.W.I.F.T. efficiently.
There are five firms currently labeled as SWIFTReady Gold or SWIFTReady Silver.
Middleware Plus S.W.I.F.T.
A solution that combines middleware and the S.W.I.F.T. network offers firms an efficient and cost effective way to transact business across national borders. The following chart shows the impact on the number of S.W.I.F.T. messages in a middleware implementation by three international firms. All three firms began using middleware in the first quarter of 1998, and saw a rapid increase in the messages flowing across the S.W.I.F.T. network.
The chart also shows that most middleware implementations have an incremental impact on a firm, where additional messages are sent as new end-points are added and new instrument types are included in the messages.
Having recognized the need for middleware and labeled specific vendors as S.W.I.F.T. compatible, S.W.I.F.T. has recognized the requirement to match the needs of individual firms to the functionality of the various labeled vendors. Although often asked for an opinion, as a neutral party S.W.I.F.T. cannot make specific recommendations beyond the purely S.W.I.F.T.- related functionality of middleware solutions. S.W.I.F.T.'s Partner Solutions area felt that a consulting firm with an in-depth understanding of Straight Through Processing and Middleware could provide independent advice for members and participants.
TSG To Recommend Vendors
S.W.I.F.T. has started working with The Summit Group under the Partner Solutions program as a recognized Research Organization and Consultancy, specializing in securities processing and Middleware. The S.W.I.F.T. Partner Solutions program does cover all aspects of vendor product support, certification and training as well as strategy and business development. However, the program does not supply any service of recommending one vendor over another. Now, if S.W.I.F.T. is asked by a customer to recommend a S.W.I.F.T.- approved Middleware solution, they will be able to direct the customer to The Summit Group for assistance. Christy added, "We believe that this approach allows us to maintain our vendor-neutral policy while providing a clear service to the industry. The Summit Group has an excellent reputation in the industry as management consultants and as system integrators. We are confident that they will be able to evaluate each customer's unique requirements and provide an unbiased, but specific, recommendation."
Hal McIntyre, Managing Partner of The Summit Group, added "We are very happy to work with S.W.I.F.T. in this important role and look forward to helping firms make this critical decision. Middleware is an essential tool for firms wishing to implement Straight Through Processing and in preparation for T+1."
Christy emphasized TSG's experience by pointing out that from S.W.I.F.T.'s perspective, "several very successful middleware installations, were assisted by The Summit Group in the selection and implementation of middleware".
Study Looks at Middleware Use
The use of middleware products in the financial services industry has grown considerably. Developing trends in the industry such as the reduction in global trade-to-settlement times and the corresponding convergence of asset settlement methods have created an environment in which the need to quickly and efficiently process data across a variety of different standards and protocols is essential. Not surprisingly, as the applications for middleware products (a term used to describe Enterprise Application Integration [EAI] products and business process automation or STP products) have become more complex, so too have the solutions themselves.
To help firms throughout the securities industry better understand the capabilities of the available middleware vendors, S.W.I.F.T. requested The Summit Group to conduct a survey that not only profiles and rates the major middleware providers, but also looks at how firms utilize middleware products. In addition, the survey also presents a profile of what functions product users most require from a middleware product, and the process by which potential solutions are evaluated and implemented.
By surveying both the users (present and potential) and providers of middleware, this report was designed to identify the trends that have made middleware an important element of efficient securities and information processing and also present the reader with an accurate depiction of how middleware products are used and what factors must be considered in selecting a vendor.
How The Survey Was Conducted
The 1999 Middleware Survey was mailed to over 3,000 operations professionals in U.S.-based brokerage firms, commercial, trust and custody banks, custodians, mutual funds, money managers and institutions with asset sizes ranging from under $1 billion to over $25 billion. The survey also queried respondents on the basis of their function and level in their firm with regard to middleware products.
The survey was composed of four sections, of which each respondent was able to respond to three. The first section consisted of a respondent profile, while the second section queried general perceptions relating to the providers, functions and business benefits of middleware solutions.
The third section was answered by firms currently using middleware. Respondents to this section were asked to explain why they choose their current product and offer an evaluation of its performance. Current middleware users were also asked to describe the extent to which they use their product to connect to S.W.I.F.T. and the role, if any, that S.W.I.F.T. played in the product's selection.
The fourth section, answered by firms not currently using middleware, identified the extent to which these firms are considering a middleware purchase, the products that they are evaluating and the progress that they have attained in the decision process. Prospective middleware users were also asked to rate various factors behind the selection of a middleware product as well as reveal the extent to which they plan to integrate a potential solution with S.W.I.F.T.
Vendor ratings and various function-related evaluations were conducted on a traditional Likert Scale, with "5" being the highest possible score and "1" being the lowest.
The Summit Group will continue to monitor the middleware industry as it pertains to the financial services industry by conducting this survey on an annual basis. While the results of this year's study have yielded definite conclusions due to the statistical significance of survey responses, The Summit Group expects to see some movement in the results of future surveys as the middleware and financial services industries continue to evolve in their relationship with each other. All future studies conducted by The Summit Group will feature a yearly comparison of results: an advantage that will allow each survey to identify the shifting trends occurring in the financial services industry's use of middleware solutions.
Survey Profile
Forty three percent of survey respondents reported being the middleware "Decision Maker" in their respective firms. "Implementers" represented an additional 25%, while 18% of survey respondents reported being "Evaluators" and 9% categorized themselves as "User."
Investment Managers were the most frequent respondents by type of organization as 38% of all investment professionals who answered the survey reported being affiliated with an asset manager. Brokerage firms and Banks represented 22% and 20% of the respondent pool, respectively, while Insurance companies comprised 10%. Other participants in the survey included members of industry utilities and institutional investors.
Just over 55% of all respondents also reported being affiliated with medium size organizations (assets between $1 billion and $25 billion), while 36% stated that they worked for large firms (assets totaling over $25 billion). Also, 50% of survey respondents were from the ranks of middle management, while an aother 39% of respondents reported being senior level managers. An additional 8% of respondents labeled themselves Professionals.
Middleware: Past, Present and Future
In recent years, there has been an increased focus on the concept of moving messages from application to application rather than moving files. This increase in the use of messaging within a firm and between firms has driven the need for flexible applications that can reformat and reroute these messages so that they can be easily read and understood by the appropriate systems.
Messaging involves individual transactions that are sent from point to point as they occur. The message is a single transaction that is sent to another application for further processing, while a file typically contains many transactions.
Messaging is generally associated with real time processing, where the actual processing occurs as soon as the transaction is received. The opposite of real-time processing is batch processing, where a file of transactions is held until the system is ready to process them. While the industry trend is towards the increased use of real time processing (or near real time) and messaging, there is still a definite place for batch processing to support operations.
It is clear that an order for a trade must be sent and processed quickly, and therefore messaging and real-time processing are appropriate. It is also clear that in today's environment, we can easily process transactions such as dividends in an overnight batch, so not every transaction needs to be converted to real-time processing.
Technology Evolution
Most firms have a technology architecture that evolved as users defined their changing needs, specific applications were acquired and as new technologies were developed. Efficient and high quality processing increasingly requires the movement of data in the form of messages between these legacy applications, new applications and to/from other firms and industry utilities. This increase in the use of messaging has increased the need for flexible applications that can reformat and reroute these messages so that they can be read by the appropriate systems.
To make messaging work efficiently in the past, the industry has accepted the challenge to develop message standards. S.W.I.F.T., ISITC and FIX have supplied, and are continuing to supply, a variety of useful message formats. When both sides to a transaction use the same format, the chances of a misunderstanding are reduced, and the processing is more efficient.
As the potential use of messaging has increased, so has the need for a new category of application, often called middleware. This layer of code sits between the processing applications and the network and performs three basic functions: reformatting, routing and protocol connectivity.
In the past, each programmer wrote specific code that generated the application's output in a specified format and told the network where to send it. This worked fine when there were only a few applications and a few end points. However, as the number of both has increased, it has become more and more difficult to maintain the hard-coded instructions, and the need for a flexible application has increased. Middleware eliminates the need to hard-code these connections between applications or firms.
In addition to routing and formatting, systems developers have had to contend with various telecommunications protocols, which describe the technical points of connectivity. To provide true middleware functionality, an application must also support the transfer of a message from one protocol to another while routing and formatting.
Middleware is a tool that can be used to satisfy a firm's internal and external STP requirements. It can sit between multiple legacy applications and assist the movement of data and transactions between these applications, and it can be used to interface with other firms throughout the securities industry.
The use of middleware will continue to expand as real time processing and messaging become more prevalent, as developers realize that it is not economical to hard code every interface between applications and firms, and as the number of different points of connectivity inside and outside of the firm continues to increase.
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