In today's digital age, if you're slow delivering information to your clients, you are literally yesterday's news. The demand for up to the minute information is on and for the institutional investment manager, there is no excuse for waiting.
One of the information technology gladiators in this cyber gauntlet is FactSet Research Systems. I recently met up with Phil Hadley, Chairman and CEO of the company, at the Baron Capital’s investment conference. Ron Baron's company has been investing in FDS for years and Phil presented before his investors. If you check out a one, two, five or ten year chart you can see why Baron has the company as a top holding in three of his funds.
After his presentation, we sat down for a quick chat talking about not only what his company does but also the growth prospects he sees for the future.
PH: The marketplace we serve is the institutional investment management business and the sell side. Certainly the sell side business has more volatility than the investment management business, but the investment managers have good, solid businesses that they stick and focus on their investment work flows whether the market's up or down.
Our strategy really doesn't focus on performing for quarters, it’s a software and technology business you need to invest in to do well over decades. So, we constantly spend our time reinvesting in our product to deliver more value to our clients. And ultimately, that translates into a great deal of stability both in our business model and for our clients and prospects.
Our business model is a combination of three things. First data—integrating data from all different kinds of sources. Second, software—the ability to take that data and to bring it to life for our clients and make it useful for them. And third, providing client service. Our clients are market professionals making decisions for their clients. Their job isn't to be a data expert or software expert. Our job is to help them with that process and produce a more productive work flow for them in the marketplace.
LL: How are you seeing info-technology evolving?
PH: It’s a business that changes rapidly. I've been in the business for 25 years and if you wind the clock back, and look at what the business was 25 years ago, it was a toy relative to what it is today. I'm 100 percent positive that if you look at our product from today, it will be a toy as to what it will be five or ten years from now.
As a business, we have changed dramatically as well as the marketplace. One of the biggest changes for us in the last decade was to move into the content business. Before, our business model was integrating content from all the sources that existed in the marketplace. As the industry has consolidated, and as content has become scarcer, it became more important for us to invest in our own content.
Its a unique opportunity for us because we can now capture the value from collecting content and writing software and really advance what our clients are able to do. Before we could only take the client data that was given to us. Now we can actually collect the content, and enhance their work flow. Our work flow really centers around the market professional.
So Ron (Baron) is really a perfect example of that as well as his team. They need financial information everyday to make good investment decisions for their clients. We don't focus on the retail marketplace. We do that through a little of redistribution, but our work flow is 100 percent of people that are in need of product everyday.
LL: Moving outside of the U.S., are you seeing more opportunities available with the emergence of the BRIC countries?
PH: Absolutely. When I look at the global opportunity for our product its really 50 percent outside of the United States, 50 percent within in the United States. But clearly we are seeing a huge shift taking place.
Ten years ago, somebody who had wealth in the BRIC countries had their money managed elsewhere and now you see that money staying home which creates prospects of clients for us.
LL: Have you been able to quantify that opportunity?
PH: We have tangible clients in those marketplaces and that it continues to grow. We can see the trend in organic growth rates in those marketplaces growing at a much faster rate compared to a more mature market like the United States. But, its one of those opportunities where its a moving target as to what the current prospects are and what you believe it will be five to ten years from now.
Companies mentioned in this post
FactSet Research Systems
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A Senior Talent Producer at CNBC, and author of "Thriving in the New Economy:Lessons from Today's Top Business Minds."