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2000 Middleware Survey
Middleware Survey Identifies Leading Vendors, Emerging Trends
The Summit Group's 2000 Middleware Survey looked at both current and potential U.S. 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 the 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.
Following are the results of the survey.
Which Products Are You Using and Why Did You Choose Them?
110 Ltd. ranked highest in this category with 19% of survey respondents reporting use of the company's products. Mercator and IBM-MQ followed, each claiming 16% of survey respondents, while NEON was third with a 12% share of survey respondents. Candle, Constellar, Trace Financial (distributor for HIE), Level 8, MINT, STC and Wilco all received lesser responses, with Wilco leading slightly. Netik, a new participant in the middleware industry, was not included this year. However, based on positive anecdotal input, the company will be included in next year's survey.
Reflecting the fact that one half of the respondents were from large48% 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 advertised functions, 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.
Percentage of Firms Using More Than One Vendor
Implementation Costs (Current Users)
Market Share Leaders Among Survey Respondents
How Satisfied Are You With This Product?
Survey respondents were asked to rate their level of product satisfaction using 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 3.6 (on the 1 to 5 scale). The most highly rated criteria were functionality (3.9) and overall value (3.8), with ease of integration in existing applications and vendor support during installation coming in third (3.7). The lowest rated criteria were availability of upgrades (3.4) and ease of installation (2.7).
What Was Your Approximate Cost?
The bulk of respondents reported that their firms' software and installation out-of-pocket costs were each between 0-$100k. 23% stated that software costs were less than $100k, while 26% stated the same about the cost to install and integrate the product. 15% and 21% reported that software and installation costs were between $100-250k respectively, while 18% and 8% reported those same costs between $250-500k. The remaining respondents reported that their software (5%) and installation costs (8%) each totaled over $500k.
Usage In Conjunction With S.W.I.F.T.
Fifty-four percent of respondents wrote that they use their middleware product to connect to S.W.I.F.T. Of those, just 8% said that S.W.I.F.T. endorsed the product. Of those respondents, only 3% 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 6 (on the 1-5 scale).
Respondents with middleware connected to S.W.I.F.T. also reported that the connection process was slightly more difficult than expected and rated their satisfaction with their product's ability to support S.W.I.F.T. messaging at 3.
Of those respondents whose products are not connected to S.W.I.F.T., 5% stated that their firm would connect to S.W.I.F.T. in the future.
Market Share of New Business
MINT, now SunGard Business Integration, has increased its market penetration since last year's survey. At the same time, NEON's dominant share has dropped as they seem to be focusing elsewhere. M Series and MQ Series Integrator has increased its market share considerably, while TSI Software, after acquiring Braid and changing its name to Mercator, has lost share. The latest entrant into the US market, Netik, did not make the US list this year, but is expected to have a noticeable share of the business by next year.
Firms Not Currently Using Middleware
Of those respondents whose firms are not currently using middleware, 61% stated that they will purchase a product in the future. Of that group, 50% stated that they would purchase a product within one year, 33% stated that they would purchase a product in 1-2 years, and 17% said they would take that step in two years or more.
Of those respondents actively seeking a middleware product, MQ surpassed last year's winners, NEON and Braid as the most popular vendor being considered. Thirty-three percent of those same respondents stated that they are considering MQ. MINT and NEON shared second place, racking up 17% each. MINT's rating rose from last year ‘s 12.5%. Constellar and Mercator were the fourth most popular vendors, each earning the consideration of 8% of respondents.
The survey showed that MINT is increasing its market penetration, NEON's dominant share has dropped as they seem to be focusing elsewhere. M Series and MQ Series Integrator has increased its market share considerably. TSI Software, after acquiring Braid and changing its name to Mercator has lost share.
The latest entrant to the US market, Netik, did not make the US list this year, but should have a noticeable share by this time next year.
According to respondents actively seeking a middleware product, vendor track record, anticipated ease of integration with existing applications, vendor size and long term stability, and anticipated ease of integration with industry standards, as well as with S.W.I.F.T. standards were the most important factors in evaluating an application.
Will You Purchase Middleware ?
When Will You Purchase Middleware ?
Vendors Being Considered by Prospective Users
Current Progress And Anticipated Cost
Possibly due to Y2K project delays during the past year, 100% of respondents who reported being a prospective middleware client stated that they were just starting to consider alternatives. This figure is up from last year's 83%. Twenty-three percent of those same respondents also reported that their firms were already connected to S.W.I.F.T., while 37% stated that they planned to use a middleware product to replace that connectivity. 50% of this cross section stated that middleware was critical to their plans to connect to S.W.I.F.T.
Half of respondents who are prospective middleware clients also reported that expected costs for software and installation were below $500k, while 60% of this group stated that they expected installation costs to be less than $100k. Respondents this year showed an expectation of greater expenditure in this area overall, although they reported an anticipation of lower installation costs than last year. Firms reporting lower costs also reported MQ Series, which is the less functional version of M Series Integrator.
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 several significant perceived differences. Since there were some marked differences in 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 anticipated availability of upgrades. Here, MQ scored the highest, earning a 4.2 rating (out of a possible 5). MINT and NEON followed behind with a 3.2 rating each, ahead of the average score of 2.4.
Another category where the leader significantly outpaced the average was in cost. In this category, Constellar and Trace Financial led with a 4.0 rating each, followed by MQ and NEON at 3.3. The survey overall average score was 3.2, unchanged from last year's survey.
MQ also scored first in the advertised functions category, scoring a 4.1 rating. Candle and MINT scored 3.8 and 3.6 respectively, allowing both to outpace the average of 2.7. Last year's average in that category was 3.2.
MQ scored the highest rating in five categories, while Trace Financial scored the highest rating in three categories. Mercator shared the lead with MQ in two categories-anticipated throughput performance and vendor support during installation. Both middleware providers scored 4.0 and 3.7 in each category, respectively. The average ratings in anticipated throughput performance was 2.6, while the average rating for vendor support during installation was 3.0. Trace Financial also topped the anticipated ease of integration category. The 4.0 rating earned by MINT was just ahead of Mercator's score of 3.7, and significantly higher than the category average of 2.5.
The ease of installation category was led by Trace Financial whose 4.0 rating outpaced Mercator and MQ who scored 3.7 and 3.6, respectively. The overall average rating in this category fell to 2.5, down from last year's 3.2.
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. Similar to last year's responses, nearly every function queried rated higher than 3.0 (on a scale of 1 to 5), except in the categories of connectivity to FIX Applications, Clearstream (formerly Cedel) and Euroclear. The most highly rated functions were: reformatting, routing, message monitor, the presence of a S.W.I.F.T. message library and protocol conversions.
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. As in the 1999 survey, the need for an increased STP rate finished a distant fifth, continuing to indicate that respondents are still 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 ISO 15022 messages. In constrast to last year's 18%, over 57% of respondents stated that they would use their current system to support the new message format, which will be mandatory next year. Thirty-three percent of respondents wrote that they had no plans for ISO 15022 messages, down from 75% in the 1999 survey. The remaining 9% stated that they would require a new system. Of those firms that indicated that they would use the new format, 43.9% stated that they would use it for settlement and reconciliation, while 31.7% indicated that they would use it for trade initiation and confirmation, and 24.3% said they planned to use the standard for corporate actions.
Middleware Goes Mainstream
In recent years, as financial services firms have moved closer and closer to Straight Through Processing, there has been an increased focus on the concept of moving data as a message from application to application, or from firm to firm, rather than moving the data in files. This increase in the use of messages 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 by itself to another application for further processing, while a file typically contains many transactions.
- Messaging is also 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.
It is clear that an order for a trade must be sent and processed immediately, 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.
Most financial services firms have a technology architecture that evolved as users defined their changing needs, specific applications were acquired and as new technologies were developed. These architectures consist of a mix of batch and real-time systems on various platforms. Efficient and high quality processing increasingly requires the movement of data in the form of a message between these legacy applications, new applications, 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.
In the past, programmers 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 increased. The new category of application has been called Middleware, and is increasingly called Enterprise Application Integration (EAI).
Middleware Overview
The Middleware layer of code sits between the processing applications and the network and performs three primary functions: reformatting, routing and protocol connectivity. Middleware eliminates the need to hard code each of the connections between applications or firms.
Even with Middleware, firms must develop a way to extract the required information from one or more files. The extracted information is then routed by the Middleware to a specific formatting routine that is linked to a protocol module that establishes the technical requirements for the data transfer.
Reformatting, which can include intelligence for transforming and enriching data, is the process of changing data in one format, such as SWIFT into another format, such as FIX. It can include something as simple as changing the data in one file format directly to another format in a new file, or it can include complex transformations such as taking data from multiple files with different formats, enriching it with data from multiple files or tables that reside on multiple platforms, and creating a message in a totally different format.
Routing processes are needed to determine where specific messages should be sent, either internally or externally. This is usually based upon some rules that evaluate the content or address of the file or message to determine where it should be sent.
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. This delivery process, which may include some of the process that is needed for transporting the data, can be included in the Middleware application or be in a separate program that works with the Middleware application. For instance, a Middleware application can provide the routing intelligence while using a transport service such as IBM's MQ Series to perform the actual transport, or the transport control processes can be built into the Middleware application itself. And, the distribution process can either be Conversational, Request and Reply, Publish and Subscribe or Store and Forward. In summary, the intelligence embedded in a Middleware application can cover several different areas (see chart below, left). 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 internal and external connectivity continues to increase.
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, for its second year, 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 2000 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 chose 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. This publication contains the results of the 2000 survey and compares these results to key results from the 1999 survey.
Respondent Level
Function
Firm Type
Survey Profile
Thirty-eight percent of survey respondents reported being the middleware "Decision Maker" in their respective firms. "Implementers" represented an additional 26%, while 18% of survey respondents reported being "Evaluators" and just over 10% categorized themselves as "User."
This year, investment managers were the most frequent respondents by type of organization as 41% of all investment professionals who answered the survey reported being affiliated with an asset manager. Brokerage firms and Banks represented 29% and 10% of the respondent pool, respectively. Other participants in the survey included members of trust companies and full service financial institutions.
Fifty percent of all respondents also reported being affiliated with large organizations (assets between $1 billion and $25 billion), while 31% stated that they worked for middle size firms (assets totaling over $25 billion). Respondents from small firms accounted for 18% of those surveyed. Also, 44% of survey respondents were from the ranks of middle management, while another 31% of respondents reported being senior level managers. An additional 26% of respondents labeled themselves professionals. |
