Patsystems has gone from a struggling startup to a successful business that is cash rich and debt free in turbulent economic times. “Pats” recently launched Risk Monitor, a superfast pre-trade risk monitoring system, and the company is looking for acquisitions. David Webber, who took over as CEO in January of 2006, was instrumental in turning the company around. He took a few moments away from the Boca FIA conference to talk with JLN editor Sarah Rudolph.
Q: You started out in accounting. How did you get into the trading software business?
A: I was a manager at Price Waterhouse, and about 1994 I moved to a mainline finance role. I joined a software services group, Attentiv, that had a number of businesses. I was responsible for identifying acquisitions and putting them together. The proprietors of one of the businesses we acquired left shortly after the acquisition, and I began actually running the business, being involved in sales and commercial. By 1997 I had stopped operating in a finance role and was running the business from the operational and sales side. I ran that business for the next 11 years, during which it went from 45 people to 400 people and 3 million sterling to 30 million per year in turnover. It was a mixture of organic growth and acquisitive growth.
Attentiv was originally a subsidiary of a larger software services group. In 2002, I did a buyout of the business and took it private, and then floated it back on the London Stock Exchange in 2004. It was acquired by a Finnish software services group in May 2004. I left in December of 2005 and joined Patsystems in January 2006.
Q: Why Patsystems?
A: The chairman of the company I had worked for back in 2000, Stewart Douglas Mann, was on the board of Patsystems. He introduced me to the Pats board in December of 2005. I didn’t join as an expert in trading systems, but I am a software tech guy with a focus on marketing and operating execution. The Pats board really brought me in because they felt the business hadn’t fulfilled its potential. It was a great team of people and products, but all the pieces were not quite working in harmony. It needed some fine tuning.
Q: You helped bring Pats from a rocky start to a successful business. To what do you attribute Patsystems eventual success?
A: There were a number of important things not working. The first was market positioning. Pats was positioned as a trading screen vendor but our broader technological capability was not really being marketed. So we concentrated on marketing that.
Next was an investment decision. One of the most important decisions as a company is the level of investment you put into your products. Before I joined the business, Pats had made a number of investments, but the return was not clear. We had to be smarter about how we spent our money. The third element was execution—the sales process and implementation of software. Those areas needed time and attention. It takes longer to get the payback. But in 2008 and into 2009, the machine that is Patsystems works very efficiently.
The actual Pats trading screen, the front end, is a GUI. It’s not the most complex part of the proposition, it’s just the presentation. Everything that fits into that trading screen – connectivity, prices, fulfillment – all that is more important. It was an iceberg of technology and we were just marketing the tip of the iceberg. We had to promote the rest of our value, which is combining our connectivity to exchanges with the ability to handle a high volume of prices with low latency. Also important is the low cost of ownership for our customers. That is something that has been neglected for years, but in this economic climate it’s very important.
Q: Patsystems is very active in Asian markets. What do you see happening there in the near future?
A: Thirty-five percent of our revenue comes out of Asia now. It’s our fastest growing area. We’ve invested in putting people in a broad number of territories—Tokyo, Hong Kong, Singapore and Sidney, and countries around there. We expect to pick up business in Malaysia, Indonesia, Taiwan, South Korea. We’re seeing a lot of activity in those countries as well as a lot of opportunity in mainland China. We opened our Hong Kong office at the beginning of last year and signed four businesses there.
Q: Is Pats looking to make acquisitions?
A: Absolutely. Our share price has held up very well. It’s risen 50 percent over the last couple of months, in contrast to what’s happening elsewhere in the markets. We’re pretty cash rich and we’re looking for acquisitions that are complementary to our existing business. We have trading systems, risk systems, and exchange systems. I want to acquire software products that complement those three areas. We want to take companies that have been successful in one region of the world and make them successful globally.
For example, we acquired our risk business a couple of years ago. It was a very small company, but we have sold that product a million times across the globe. That smaller company could never have sold it in that way.
Q: How is the economic crisis affecting the trading business??
A: This whole crisis has created a huge demand for our risk systems. The challenges in the economy are actually good for the sale of risk systems. On the trading systems side, I’m expecting moderate growth in our revenues this year, between 3- and 5- percent.