Critics Give Aleri-Coral8 Merger High Marks, But CEP Bloodbath Continues
Complex event processing vendors Aleri and Coral8 announced today that they will merge, shortening the list of products Wall Street firms will need to look at when they consider this category of software for real-time analytics. (A few examples of recent projects: Barclays Capital uses Aleri software for liquidity management and Mitsubishi UFJ Securities uses it for data filtering and performance monitoring. Citi uses Coral8 for equity order flow analytics.)
In a very short video interview we did Friday, Aleri CEO Don DeLoach and Coral8 vice-president of product marketing John Morrell told us of the synergies they expect to achieve through this merger: Geographically, for instance, Aleri has offices in New York, Chicago and London, whereas Coral8 has been headquartered in Mountain View, Calif.; now the merged firm will have a global footprint. Aleri has had a high-end CEP processing engine geared toward the capital markets whereas Coral8 has had a low-cost, developer-friendly and easily downloadable product that could be used by several industries.
The combined firm will offer a product suite to include a CEP engine, an OLAP engine, a business user portal and toolset and application frameworks that will provide specific solutions to meet customer needs. Don DeLoach will remain CEO of the merged operations, while Terry Cunningham, former CEO of Coral8, will become chairman of Aleri's board. The new company will be called Aleri.
Everyone we contacted for this story had good things to say about this merger and the technology, business and geographical strengths Aleri and Coral8 will be able to pull together.
One competitor's reaction to the merger was surprisingly gracious given the ferociously competitive nature of this market (more on that later). "The two vendors' technology is different and their position in the market is different," notes Giles Nelson, senior director of strategy at CEP vendor Progress Apama. "Coral8 has a pure, developer-oriented product. Aleri has been focused on the capital markets, it's application focused and it has a good understanding of financial services. So Aleri gets access to purer CEP technology and Coral8 gets better access to the market that's pulling CEP technology" (meaning Wall Street). "I can see the sense of it."
However, Nelson also believes Progress Apama will benefit from the fact that there are now fewer CEP vendors. "That gets us a bigger piece of the pie," he says. "In the short- to mid-term, this will create an upset with Coral8 and Aleri's existing customers: what's going to happen with the road map of the product I bought? Will it be compatible in the future? And that will be a concern for new customers as well, which may drive organizations into our hands because of our larger market share." He says Progress Apama has more than 110 deployments of its software worldwide and that 80%-90% of those are Wall Street firms. This outstrips Aleri and Coral8's combined customer base of 80, 60 of whom are financial firms. "We don't feel intimidated by this at all," he says.
Blending Technologies
Observers say Aleri's and Coral8's products should complement each other well. "They're offering a one-stop shop for not only the underlying engine and framework, but the broader set of tools, adaptors and streaming OLAP capability Aleri brought to the table and the portal and visualization that comes from the Coral8 side," says Daniel Chait, co-founder and managing director of Lab49 which has a partnership with Aleri.
On the developer side, Chait says, Aleri has had a stronger focus on visual modeling for development. On the end user side, Aleri offers an OLAP server that can handle OLAP queries on live, streaming data. Coral8's SQL language has been very popular for creating streaming applications. Chait also notes that Coral8 "made strides by approaching the market with a very approachable method of engagement — you could download their product for free and that got a lot of small teams and developers familiar with their model. It got them a big footprint at a time when firms were competing for market share." Coral8 also has a framework for building CEP portals and for putting together visualizations and queries in a web-based presentation, he says. Aleri has focused more on developing end user business solutions (such as liquidity analysis tools), whereas Coral8 has been more focused on the plumbing underneath.
The CEP Bloodbath
Although she believes the Aleri/Coral8 merger makes sense, Candyce Edelen, CEO and founder of consultancy PropelGrowth (and co-founder and president of early Wall Street CEP vendor Kaskad Technology, which built a CEP-based surveillance system for the Boston Stock Exchange but later ran out of funding when the BSE was bought by Nasdaq) has broader concerns about the CEP market. "I want to see this space develop, mature, be profitable and deliver on the promise it offers," she says.
But the battle among CEP vendors for Wall Street business — and we've seen and heard for ourselves the rounds of gossip, rumor and anonymous, back-stabbing attacks that go on among the CEP players — gets in the way. "They're engaged in a competition in a market that's too small to provide sustainable growth for them all," Edelen says. She notes that it's also still an immature market and it's too early yet to even define the competitive needs. "The fact is, a lot of customers are still using CEP in R&D, as opposed to in production," she says.
One large financial firm is said to have spent four years evaluating CEP vendors at a collective cost of about $3 million to the vendors doing proofs-of-concepts and bake-offs. The firm eventually purchased a product for less than $150,000.
"The bloodbath puts downward pressure on pricing very early in the product lifecycle," Edelen notes. "This is minimizing the CEP vendors' ability to support their products."
Edelen believes CEP vendors should differentiate themselves more, go after middle-market and smaller potential customers, and extend their products to applications beyond trading. Examples of other areas to which CEP's basic capabilities — pattern matching, pattern detection, detecting aberrations in patterns, data scrubbing, comparing historical and real-time events — could be applied on Wall Street include risk management, portfolio risk detection, analyzing the changing values in the underlying assets of structured products, market data analysis, treasury management and global surveillance (e.g. looking at market manipulation in equities and options).
New competitors, including large software companies, are entering this CEP market. IBM has acquired Infodyne and Apsoft and is said to be investing heavily in this space, Oracle bought BEA and is also exploring it, and Tibco, Sybase and Microsoft are looking at it as well. "These companies will come into this space as they see opportunity," Edelen says. "IBM clearly sees opportunity here."
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