Bill Stone, chairman and CEO of SS&C, talks to FTF News about the unglamorous process of finding niche Ops pain points that turn firms into customers.
(Editor’s Note: FTF News got time with William C. (Bill) Stone, chairman of the board and CEO of SS&C Technologies during the SS&C Deliver customer conference and exhibition in Orlando, Fla., this past September. Stone founded the company in 1986, took it public in 1996, and then private in 2005 via private equity firm the Carlyle Group. Five years later SS&C went public again in 2010 and its shares trade via Nasdaq (SSNC). The company has an enterprise value of $20 billion. In this Q&A, Stone focuses on his business philosophy and strategic focus.)
Q: How do you think things are going for SS&C?
A: SS&C is well-positioned to continue to grow and gain market share. I think we’re a fierce competitor for our competitors. I see an opportunity, with all this technology we’re building, to transform how people are using information. For example, with our technology, we can help people remain compliant with a variety of different accounting and reporting rules, with less people, faster turnaround times, and fewer errors.
I see that as a real opportunity for us.
We’re a pretty big organization, and it becomes increasingly difficult to change on a dime.
I’m used to being able to change the place quickly, and I can get a little bit impatient.
Today, we have 22,750 people and 2,100 contractors, so that’s almost 25,000 people that make up SS&C.
Q: What can you say about your plans for growth?
A: We’re going to do $4.6 billion in revenue this year. If we want to grow 10 percent next year, that means we have to add $460 million in revenue. However, that only happens if we keep our clients paying us what they’re paying us now.
For example, let’s say we have five percent [customer] attrition. That would mean we need to do another $230 million to grow 10 percent. That means we have to add a total of $690 million in revenue, which comes out to roughly $13 million to $14 million per week, every week. If it’s $14 million, then that is two million a day, every day.
That’s what we focus on — getting a bigger, stronger, and better sales force. We try to make sure we have marketing campaigns that are a force in the industry. We try to build products and services that people want to buy, and we strive to gain largescale customers that can pay us $50 million or $100 million per year.
That’s a fundamentally different business from when I started. You want to get a client that would pay you $10,000, and then you want a client that would pay $100,000. Then you want a client to pay you $1 million.
Then, once you have that, you’re going to want one that pays you $10 million, you know? And now we have several that pay us over $100 million. And it’s great. But, if you lose one of them, oh, that hurts.
Q: During your presentation, you mentioned the growth model for SS&C, and it led to so many talented people joining from all these acquisitions. Why do you think that that worked? And is that a more relevant growth model now?
A: People look at it as all financial, but it’s also expertise.
For instance, say you hire somebody that deeply understands, H2 accounting (the accounting in Germany), and they’re a worldwide expert….Then, Bill S3 is accounting for insurance companies based in Canada…And there’s EITF9920, which is Emerging Issues Task Force 1999, the 20th pronouncement about derivative mortgage-backed securities. It’s nerdism to the max. But there’s gold in them thar hills. Because people don’t want to do that, necessarily. If you’re a hotshot salesperson, a hotshot trader, or a hotshot portfolio manager, ‘Oh yeah! That’s what I want to do, go home and read the EITF9920!’ I don’t think so.
But that’s the opportunity. It’s not so good at cocktail parties, but it’s worked out. Find niches where there are pain points. Then when customers get frustrated with their internal organization, they want somebody to do it for them.
Q: But you mentioned how developing a technology from scratch is really hard, really risky and can fall apart. But you seem to have also applied that concept to buying companies that are already in some advanced level of development. They’ve been through the early stages and they’ve survived. They’ve fought off the competition and they’re at a certain point. Then you purchase them. Is that what you were thinking all along?
A: Yeah, because we’re going to bring some poker chips to the table, too. You know, we have 400 people on our salesforce. It’s pretty aggressive.
If you took the fund administration industry and our salesforce, I think our salesforce is bigger than the next nine combined. Now, we may not have a State Street’s or Bank of New York’s or JPMorgan’s relationship manager network, but as far as quota-carrying salespeople, we’re way bigger. And we don’t cap.
Q: When you decide to acquire a company, I assume you do all the groundwork and so forth. But do you have a gut reaction that’s helpful? Some kind of sixth sense or some other variable that’s just you? That helps you say, ‘Okay, we should do this? Or, looks good on paper, but it’s not going to work out.’
A: The people with the company we’re buying have to be honest.
One time, when we were about to buy a company, the first time I went there, we were well on our way into the deal and sitting in a conference room, like this one. I then asked the COO, where do you live? She replied, ‘Oh, I live such and such.’ And I said, ‘Such and such, Connecticut?’ She said, ‘Yeah.’ I said, ‘Oh, that’s about 70 miles from here. Don’t you come in every day?’ She said, ‘Well, no, I come in at least twice a week.’ The COO comes to work twice a week and lives 70 miles away? Odd to say, at the least. I started wondering, what else aren’t they telling us? Because nobody knew this until I asked.
We had another one out in Chicago. We’re getting ready to buy it, and we’re pretty close, and they kept not telling us their second-quarter numbers. They said they were going to do, I think, $7.1 million in revenue that quarter, and they did $5.9 million. Well, the year before, they did something like $4.8 million. So, $4.8 million to $7.1 million, is $2.3 million on $4.8 million, about 44 to 45 percent growth. The difference in value between a company that’s growing at 20 percent and a company that’s growing at 45 percent is almost immeasurable.
I said, ‘Okay, you can offer them $25 million. They won’t take that. I’m well aware they won’t take it, but we’re not paying them anymore.’ I also said, go tell them to get three or four good quarters.
When you’re doing acquisitions, the first thing is to be stone-cold sober. You look at the numbers, and you’re ice cold. It’s a hard thing to teach people. It’s a hard thing to divorce the transaction from the people.
Q: Have you thought about the retirement issue? Have you ever gotten to the point where you’d want to go sailing, or something else?
A: You know, not quite yet.