STERCI COMPANY Business Model Muriel Hugo Marcelo Ragnerstam Erik Robert Pierre-Alain khedri sassi 1. Overview Sterci is a company based in Geneva, employing about 70 people, and which provides products and services for the banking world. The core business is the STP. “Straight Through Processing (STP) enables the entire trade process for capital markets and payment transactions to be conducted electronically without the need for re-keying or manual intervention, subject to legal and regulatory restrictions.” (c.f. http://en.wikipedia.org/wiki/Straight_Through_Processing) Stercihas developed four different applications: 1. Stelink, the Financial messaging application 2. Steform, the application integration by mapping messages 3. Stematch, the application for reconciliation and exception management 4. KEYdata, the market data management application Sterci provides also consultancy on request or on a regular basis depending on the client. 2. Costs First we are going to explain all the costs structure of the company as detailed as possible and then we’ll structure the data in a schema to provide a global view of the costs. Moreover it will be very useful to take a look at how a banking service-company behaves in relation to the costs. Sterci is a service-oriented company with continuous projects development. The company is investing in its highly prepared human resources. The mainly costs are destined to the human resources distributed for the different products: Stelink, Steform Stematch, KEYdata. Furthermore they are Engineers who work on products development & support and consultants who work on implementation of projects, training and consultancy services. The high-skilled engineers are specialized in the Oracle DBMS and C, JAVA languages. The sensitive work at Sterci explains why is applying a good quantity of its economic resources in its teams. A characteristic of the company is employees’ mobility that falls into a necessary and variable cost. This is due to the nature of the company. After 25 years of experience Sterci may be considered with a maturity in its costs management, this is proved by its international certifications and accreditations. In such a company like this the most interesting costs are the variables because its product developments are permanent and the company is always attentive to the banking environment changes. The company is ready to invest the amount that would be necessary to be up in the market. The dynamism of Sterci is high in terms of software development, and again this is explained for the company’s sector dynamism (Banking). The next table shows the background of the company since 1977: Sterci's background 1977 - Stelex Test key software on GA 1979 - Development of first Swift CBT 1981 - Bull Swift CBT on DPS6 1984 - Stachem Telex on VAX/VMS 1986 - Stachem Swift CBT 1989 - Swift II migration on X25 1990 - Stachem for Sic (Swiss Interbank Clearing) 1991 - Stachem for Secom (Sega Intersettle) 1996 - Launch of Stelink on open systems 1997 - e-mail & fax on Stelink 1998 - Stelink for Sarie (Saudi Arabia Clearing) 1999 - Launch of Stematch for reconciliation 2000 - Stachem to Stelink migration 2001 - Launch of Steform for ISO 15022 2002 - Stelink certified for Swift Net 2003 - Swift Net migration 2004 - Stelink FileAct solution 2005 - KEYdata successful rollout 2006 - Launch of Sterci service bureau 2007 - Solutions for SEPA Table 1.1: Sterci’s background Looking at the table one can realize that in average each year the company presents a product release or upgrade. Now looking at the technology they’re using (Oracle, Java, C) and the sector they belong, these results prove the dynamism at Sterci. Such dynamism requires good quantities of investment on projects and all the factors to make them a success. Now, Sterci take care of its partners, customers and potential customers. For this purpose it’s permanently organizing events not only in Geneva but also around Europe and Middle-East that are its target markets. These events are of a wide variety from breakfasts to conferences, forums and seminaries. The related costs to these events may seem unimportant but for Sterci it is looked at as an investment for future business opportunities. In fact there are two programmed events before the end of this year; the first one is the “Finance Forum” that will take place in Zurich at 06-07 November and another is the “SWIFT Operations Forum SOFE” in Brussels at 10-12 December. The table 1.2 shows the major costs of Sterci represented by nominal names. It’s not a classification between fixed and variable costs, its purpose is to give a general idea about the cost structure of the company. COST STRUCTURE Salaries Projects development Products Maintenance Events Rents (Infrastructure) Servers Maintenance Workstations & Laptops Telephone services Internet access General services (electricity, water, calefaction) Office material Others Table 1.2: Overview of Sterci’s costs Source: Sterci Company 3. Revenue: The main revenue of Sterci is focused on its products. They are in constant maintenance and development and the revenue is mostly made through “Software Licensing”. Once the license is granted it means for Sterci additional revenues because additional services are required, and of course Sterci has a service configuration ready to be offered. The Licenses consist afterwards of an annual payment for maintenance and corresponding IT support. Sterci Licenses are granted depending on the workload of the customer. As we said before Sterci is present in Europe and the Middle East. More precisely the company Licenses for IT Solutions are distributed in 100 financial companies around 10 countries as it’s shown in the figure 1.1. Switzerland Sterci UK Germany Steria Ltd Steria GMBH Singapore UK TBD Simplex Luxembourg BeLux Italy France DPCS Sterci Saudi Arabia France Newtek Azane Spain Singapore Sterci TBD Switzerland, France, Germany, Italy, Luxembourg, Belgium, Spain, Saudi Arabia, Singapore, Bulgaria, UK Figure 1.1: Sterci’s presence in 10 countries When installing the products by a client, there is a phase of project to integrate into the client architecture, as well as formation to the new users. Some clients may require some special developments which are usually billed. Sterci also offers consulting competencies to its clients. Finally, when companies want demo of the products to choose between different solutions, they have to pay for this service. 4. Value proposition: Sterci has a lot of value to offer to its customers: - Sterci has been a player on the market for a very long time and thus have a lot of experience and a strong background in the field of financial messaging; it was one of the very first companies to offer solutions for the SWIFT network. The first application developed by SWIFT was as early as 1977, and until now several successful applications has been developed and delivered. - Sterci’s software has full SWIFT accreditation which makes them a safe choice for use within the SWIFT network. Sterci’s solutions also comply with other regulations and standards which allow them to easily interoperate with any other system. - Sterci is certified ISO 9001 which assures that consistent business processes are being applied. - Sterci has big and famous customers like Euroclear, Clearstream, Lloyds TSB, Crédit Agricole, BNP Paribas, the Swiss National Bank, Swissquote, Union Bancaire Privée etc. which makes Sterci a trustworthy service provider. Sterci offers aggregated value to its customers using its STP chain in four dimensions. They are explained in the next schema: VALUE PROPOSITION THROUGH STP Competitivity time to market (e.g. SWIFTNet Funds) new standards / new business quickly implemented integration broader – wider offer Risk mitigation controlled workflow : alerts storage reconciliation : immediate recognition of discrepency Cost reduction less exceptions less manual processing, less errors less maintenance (interface, format,…) flexibility / agility ROI operational risk : less funds required to cover the risk optimal liquidity management : better margins optimize the ressources Source: 7th IDG Executive Bulgarian Financial IT Forum 5. Channel: As Sterci is a highly specialized company with clients such as banks and investments funds most of the channels are based on relationships with other companies. The most important channel for Sterci might be the SIBOS conference (SWIFT International Banking Operations Seminar) which is the world’s leading financial forum organized by SWIFT. This meeting is organized on a yearly basis by SWIFT and is a very important opportunity for companies working with financial messaging, such as Sterci, to build new relationships. Another important channel is the networks of Sterci’s partners. Sterci has many big and very important partners, such as IBM, Reuters and SWIFT, which covers main Europe as well as Middle East and Asia. As Sterci can offer unique services to its customers and is a very well known player on the market clients often contacts Sterci directly to take part of the service offers, this can also be regarded as a channel. 6. Value Configuration: Sterci offers innovation to its customers with its products through a systematical integration to the current customer IT Infrastructure. To understand how Sterci implements its products we propose a real case of one of its customers. Since the name of the customer is classified we refer to it as “STP Business Case”. First the situation at the customer was poorly in terms of technology integration and with a high degree of complexity. The next figure illustrates the initial situation: Financial information (e.g. Reuters) SWIFT-FIX Network Back-office Interface A Trading Portfolio Mgt Network System Interface B Back- office Manual reconciliation Risk, cost, manual, time, rigid As shown the situation was critical impacting directly in the customer competitive service. In that complex situation when a query about financial information was needed it was difficult to respond in a short time. It’s now when Sterci propose is IT Solution as follows: CURRENT SERVICE « Query for financial information » Back-office STERCI IT SOLUTION Financial information (e.g. Reuters) Data loader KEYdata Back-office EAI - Steform Now the customer IT Support looks and is more organized and robust in time to respond to query about financial information outside its boundaries. But Sterci solution also works inside the IT platform of the customer to be integrated with the Application Portfolio, as is shown in the next figure. Financial information (e.g. Reuters) Data loader KEYdata Back-office EAI - Portfolio Mgt System At this point we have shown the use of two of the Sterci IT Solutions: Steform and KeyData. Now to interact with Swift trading it’s necessary to apply Stelink and to replace the manual reconciliation Stematch must be applied. At the end the customer profit of the whole value proposition of Sterci on its four dimensions: Competitivity, Risk Mitigation, Cost Reduction and optimized ROI. Source: 7th IDG Executive Bulgarian Financial IT Forum 7. Relationship: Sterci establishes and maintains long term relationships with it’s customers through licensing and support agreements. For example a client that has acquired KeyData and Steform at the beginning becomes a potential customer to implement Stemach and Stelink or simply it may require some additional services already offered by Sterci or depending on the particular customer’s activity may require a customized software development. To maintain and to create new relationships Sterci has a HelpDesk to interact with the customer. Whenever a new standard or financial regulation is introduced Sterci through the HelpDesk offers the solution and in this way enforce the relationship. 8. Customers: Sterci has established a track record of long term relationships with its customers including Bank for International Settlements, Euroclear, Clearstream, Fortis, Dexia, Lloyds TSB, Crédit Agricole, Saudi Arabian Monetary Agency, Swiss National Bank, BNP Paribas, Swissquote, Union Bancaire Privée, Banque Privée Edmond de Rothschild. Now, we present the customer configuration as Sterci present it: - Banks, investments funds and financial institutions. They represent the traditional and first clients of Sterci. They can use all the products of Sterci, in different configurations and the expertise of Sterci experts. - Service Bureau providers. Two kinds of Service Bureau are offered. The first kind is only an outsourcing the IT to Sterci itself or some partners out of Switzerland. Another kind (only for Stematch) is by outsourcing the complete reconciliation process to an external company. - Large corporations. Recently, SWIFT offered the possibility to large corporations to access the SWIFT network to access directly their bank wherever in the world. Before they needed to gain access through a local bank. These companies thus have a need for an application like Stelink to access the SWIFT network and often of an application like Steform to map the messages generated by their internal system into a SWIFT format. 9. Partner: Being a complex solution provider through its applications, present in many countries but remaining a small company, Sterci has developed a vast partner’s network. We can separate these partners in three different categories. Service partners: - Messaging partners. Sterci has partnership with major financial messaging infrastructures, which means it provides links to their systems and supports their standards. SWIFT, Telekurs (SIC) or Swiss Exchange are some example of these partners. - Data provider partners. Sterci products can easily integrate market data provider’s flow. Reuters and Telekurs Financial are part of them. - Service Bureau. Sterci has partnership with some service providers which host Sterci applications like Unicible in Lausanne or Simplex in London. Distributor: Sterci is directly present for the sales in Switzerland and some other countries like Belgium or United Kingdom, but it can rely on some distributors in Europe on Steria and other partners, or Ejada in the Kingdom of Saudi Arabia. Technological partners: Sterci has three kind of technological partnerships: - Software applications that are integrated with Sterci solutions like the OFAC-Agent (anti money laundry) which is a filtering solution to comply with embargoes and reinforced regulations on terrorism and illegal trafficking and is directly integrated in Stelink. - Software applications that interact with Sterci solutions like for Finnova. - The technologies used by Sterci to provide performance, scalability and security. For this reason Sterci has partnership with companies like BEA, HP, IBM, Oracle or Sun. 10. Capability: To provide a high quality service Sterci can count on the following capabilities: - State of the art engineers. Sterci development teams count some 30-40 development engineers which master databases, client- server architecture, 3-Tier architecture, SOA as well as technologies like J2EE. - Strong quality standards. When working with banks and other financial institutions, quality is more than required. Even if all products except Stelink are back-office, they remain key applications for the risk management and general functioning of the back-office. Sterci is certified ISO9001 and Stelink, Stematch and Steform are certified by SWIFT. - Adaptability. Sterci solutions are very adaptive and can be integrated in any architecture. - Strong background and knowledge in banking. Present in the business since several years, Sterci is one of the most expert team in its business. Strengths: - Products developments. Sterci develop its four applications to integrate new functionalities as well as to comply with new standards. This is a very time and money consuming activity, but is one of the strong points of Sterci. - Product support and maintenance. Sterci clients need fully operational applications, in very complex environments. This is why Sterci provide a help desk which supports Sterci applications as well as guiding the customers with the configuration of the more general environment. - Project management. When installing Sterci application for a client is always an integration and configuration work. This is always done by Sterci project managers and can take from few weeks to several years depending on the size of the client, the complexity of the solution as well as the need for former solution data reintegration or not. - Consultancy. By being active in the messaging business since 30 years, Sterci has accumulated a very large expertise which is available to its clients. - Training. Sterci applications and financial applications in general imply the end-user to be trained to use them efficiently. - Marketing and sales. The marketing and sales teams of Sterci intend to offer the best suiting solutions to current/future clients. After the potential client short-listed some solutions, Sterci provides personalized demo(s) to demonstrate the use of its products. - Management and strategy. The management of Sterci is always following the new solutions and new standards of the business. Project managers can follow on the field the needs of the customers. This allows Sterci to always be in phase with the trends of the business.