Algorithmics, which started doing business in 1989, has known relative stability in its product line, establishing its bona fides in the realms of market risk analytics and regulatory services. It’s on the M&A front that the changes have occurred.

In the 21^st century, the vendor has been acquired three times. At the start of 2005, Fitch Group bought Algorithmics for $175 million. Then, in late 2011, it was tech behemoth IBM acquiring Algorithmics for about $380 million. That pairing was also not to be long lived, though, as Algorithmics was sold to SS&C Technologies for $88.8 million in late 2019.

SS&C is well known for its growth-through-acquisition strategy, which includes (but is certainly not limited to) the 2018 deals for Eze Software ($1.45 billion) and DST Systems ($5.4 billion), and the 2015 purchase of Advent Software ($2.6 billion). The Windsor, Connecticut-based company has had its fair share of tech integration experience. Since the deal closed on December 2, 2019, the team at Algorithmics has spent the last 14 months figuring out how to intertwine the company’s risk tools into the larger SS&C product base, including Eze, DST, and Advent.

“We see a huge opportunity to embed our analytics and capabilities in other solutions across the SS&C portfolio,” Mina Wallace, general manager of Algorithmics, tells WatersTechnology. “So part of the integration effort over the last year has been identifying where there’s an opportunity for the functionality that we bring to the table to drive value, or vice versa, to drive value in our particular space.”

To take advantage of this new opportunity, the company has gone on a hiring spree that dwarfs anything it experienced while under the IBM banner. Wallace says that over the last year, the company has hired more than 40 new employees; the positions run the gamut at the organization, but there’s been a particular focus on people in development and implementation services.

Perhaps most interestingly, though, is she says that about 10% of those new hires are former Algorithmics employees that left in the years after the IBM acquisition.

“We’ve hired more people in the last year than we hired in eight years at IBM,” she says. “That’s been an amazing opportunity for us. They went off to work at competitors or academia or practitioners, and it was less about us reaching out to folks; it was more about folks reaching out to us. It’s a very tight community in financial risk management, and it’s been terrific to have people reach out to us and ask if there’s an opportunity for them.”

Additionally, she says, being under the SS&C umbrella will also afford new opportunities for Algorithmics’ 200-plus clients due to SS&C’s many tentacles in the capital markets.

When we were acquired by SS&C, it became very obvious that because SS&C is completely focused on the areas of business that we’re focused on, that the kind of investment that SS&C is willing to make is really much different than we’ve had at IBM. And we’ve experienced that over the last 14 months, for sure.

Mina Wallace

While most of these clients are also users of IBM technology, those relationships are more on the infrastructure side. Whereas Algorithmics will be able to plug its risk analytics capabilities into the various SS&C trading platforms, it will also bolster its own regulatory and credit services specific to the capital markets.

“In general, our clients never had the sense that it was an opportunity for them to be part of the IBM world from a financial risk management perspective,” Wallace says. “When we were acquired by SS&C, it became very obvious that because SS&C is completely focused on the areas of business that we’re focused on, that the kind of investment that SS&C is willing to make is really much different than we’ve had at IBM. And we’ve experienced that over the last 14 months, for sure.”

One of the immediate changes clients will notice is Algorithmics’ expansion of its cloud capabilities, she adds.

“Under IBM, we were basically supporting the IBM cloud, which has a very small percentage of the market. We have now moved our first clients to AWS. We’re working with all the major cloud platforms, which is key, because cloud is such an important part of the technology transformation that our clients are undergoing. They’re feeling much more positive about the fact that we’re able to support whatever they happen to choose from a cloud perspective.”

While Wallace is clearly enjoying life at SS&C, she offers no criticism of IBM—the two owners are very different companies, with different sets of priorities.

One analyst who has worked with both companies says that the IBM partnership was “part good, part bad,” but that this new pairing will “herald a shift in focus away from banks and on to the SS&C customer base … it could be a very positive turn as the buy side is the big growth area.”

Bolstering the buy-side roster

Wallace also sees the buy side as being a ripe growth area for Algorithmics. First, though, it is tightening up its tech integrations and improving the user experience.

On the product side, in addition to conducting a redo of the company’s user interfaces to make them “as intuitively usable as the client would expect,” Algorithmics is also building tighter connections with Armanta, which was acquired by IBM in May 2018 for an undisclosed amount. The Armanta unit, which specializes in risk management and data aggregation, came along with Algorithmics to SS&C.

Algorithmics first replaced its aggregation engine with Armanta’s, and then the two companies worked on building a “common platform” for the Fundamental Review of the Trading Book (FRTB) regulation to allow for decision support, querying, and analysis. They are now working to create the same add-on functionality for the standardized approach for counterparty credit risk (SA-CCR) rule, which should complete by the end of June.

We can embed [Algorithmics] on top of our record-keeping systems and the data management part of it goes away.

Mike Megaw

As Algorithmics then embeds these tools into the various SS&C platforms, the company will use a microservices model to deliver these analytics. “So it’s not necessarily that the client would even know that it’s Algorithmics—it’s kind of like Algorithmics inside, basically—but now what we can do is we can replace an external supplier, or we can provide value beyond what they had before,” she says.

In a previous interview with WatersTechnology, Karen Geiger, co-general manager of SS&C Advent, said that her unit has been in talks with the Algorithmics team to plug the latter’s risk and analytics into Genesis, Advent’s cloud-native portfolio construction and rebalancing platform. “There’s a lot more deliberate collaboration than there has been in the past,” said Geiger, who joined Advent in 1999.

Wallace, who joined Algorithmics in 2004 and is based in Toronto, where the company was born, says that the team will continue to focus on market risk calculations relating to things like FRTB, credit analytics, initial margining, and credit valuation adjustments (CVA), but being with SS&C will allow it to expand more broadly into the buy side, specifically around smaller and mid-side fund managers. Algorithmics has traditionally had a stronger presence amongst the largest banks and brokers, and the largest traditional asset managers.

Mike Megaw, managing director of Regulatory Analytics & Data at SS&C Technologies, and who joined the company in 2005 after an acquisition, says that one of the biggest benefits for customers of both entities will come from running Algorithmics’ analytics tools on the data residing in SS&C’s record-keeping systems to find unique insights for users.

“Having the data from the record-keeping systems that can then feed into the Algo solutions is really unparalleled,” he says. “Nine times out of ten, when you’re onboarding a risk management system or an analytics system, your biggest concerns are, where is the data going to come from, is it accurate, and then, ultimately, are the calculations accurate? By doing this, we can embed [Algorithmics] on top of our record-keeping systems and the data management part of it goes away.”