Using a Niche to Get Infront of the Competition

Nesbak: [The most important lesson is] that this business is all about delivering reliability, stability and quality married with relevant datasets and high performance, [and that you must] focus on getting the best developers with experience in the business-this is absolutely essential for building a solid platform that can grow for many years without reaching limitations that curb growth.

IMD: After selling Falcon, you spent a number of years at Reuters, where you were responsible for their Internet products in the Nordic region. How did that experience compare to heading up a smaller regional player?

Nesbak: I learned that the old distribution model, with a centralized datacenter, was not the solution for us. With more and more standardization around market data, it might be for the future, but it is still not the model if you want to get all the details right. Infront is always on the lookout for unique datasets and innovative views which give our customers an edge over others in the market.

IMD: How did technology change between the time that you founded Falcon in 1986 and Infront in 1998? And how has that enabled you to deliver a better product the second time around?

Nesbak: Global connectivity due to the spread of the Internet and private networks, combined with ever increasing bandwidth, made it possible for us to build solutions which are extremely complex while at the same time very easy to use and cost efficient.

IMD: How has the market changed since you first founded Falcon, both in terms of industry trends and client requirements for new content?

Nesbak: Demand for the combination of a best-quality information system and a trading solution did not exist earlier. The idea that the sell side could distribute our solution to a large number of buy-side clients, with the performance and quality that institutional traders take for granted, is still a surprise for many.

IMD: Are there any data requirements of Nordic investment professionals that are specific to the region?

Nesbak: Absolutely-we see this in several regions. This is also what Nasdaq and the London Stock Exchange experience when rolling out their Inet and TradElect/Infolect platforms in the Nordics. A solution that works fine in one region doesn't necessarily meet the requirements of the others. We are local market focused and pride ourselves on finding the niche local market data that private investors, as well as institutional traders, are looking for. Even within a region, the data needs of specific buy-side clients can vary. The flexibility of our platform enables us to seamlessly stream proprietary data such as research, prices and news into the standard packages we offer as a data vendor.

IMD: Infront acquired Nordic newswire provider Direkt at the end of 2008. Has there been much further integration of the Direkt business, and how has that business developed since it was acquired?

Nesbak: The newswire Direkt has a very strong position in Sweden and Denmark. Direkt's services, in combination with our Online Trader terminal system, make a perfect match for customers in the Nordic region. We knew that an acquisition of Direkt would give us great opportunities to increase our business in Sweden very quickly. Earlier, SIX Telekurs was the largest reseller of Direkt news. We have since moved a majority of these clients to The Online Trader. This has not only increased Infront's revenue, but also secured Direkt's client structure. Our goal is to keep Direkt as an independent and leading news provider in Sweden and Denmark, delivering news to all the players in the market.

IMD: Do you still re-sell Direkt via other vendors, such as SIX Telekurs, or are you leveraging it to add value to-and drive clients to-The Online Trader?

Nesbak: Direkt has an open channel strategy, distributing news via the platforms of Thomson Reuters, Bloomberg, Interactive Data, FactSet and several more. This is important for the customers, as well as for Direkt. Direkt made a good faith effort to continue distribution with SIX Telekurs, but fundamental conflicts made that impossible.

IMD: How important is it to your growth strategy to own proprietary content?

Nesbak: Proprietary content is not a part of our growth strategy. We will compete on quality, innovation, relevant content, flexibility and reasonable price.

IMD: Does that approach leave you exposed to the pricing whims of source vendors, or to potential fallout from structural changes/M&A activity among your partners?

Nesbak: I cannot see that the development of proprietary content can be a winning strategy for us. How can you stop competitors from collecting the same data? How can we hinder Reuters and Bloomberg from employing more journalists? It's just a cost driver for everyone, and the upside is small. The content providers will always charge what the market will bear, but as we've seen with the surge of MTFs, regulation of anti-competitive behavior and market forces bring prices back in line very quickly.

IMD: What are the benefits of partnerships with third-party vendors like Interactive Data to broaden the content that you can source and deliver?

Nesbak: The relationship with Interactive Data makes it possible for us to supply data from several markets at a reasonable cost to our customers.

IMD: Is that because cost is still a priority for all clients in the current economic climate, or because your clients fall into particular market segments that don't have huge data budgets to spend on infrastructure and premium products?

Nesbak: Buying data from a global vendor is a cost-effective way for us to cover huge amounts of markets, with the downside that it's harder to add value for those markets. On our primary markets, we have no other choice than connecting directly to the marketplace. It's more a cost question than a price question. The data from Interactive Data is premium, but it is further from the source.

IMD: Do you feel that smaller independent regional vendors have an important part to play in the global data community, and what are the advantages of being small and regionally focused, as opposed to large and globally focused?

Nesbak: We are focusing regionally in a global market. Our goal is to provide all the details that the global players miss. Being a relatively small, privately owned player enables us to have a quick turnaround time compared to our competitors.

IMD: Can you give some examples of data or capabilities that your niche market demands, but which larger vendors miss?

Nesbak: The most obvious example: In several markets we can offer Broker Statistics, a service that shows who is selling and who is buying individual shares-both in real time and historically. The largest players are not close to what we offer, if they have anything at all.

IMD: Would you ever go down the same route again and sell your business to a global vendor?

Nesbak: I will never say never, but selling Infront is not in my plans right now.

IMD: Do you have plans to expand your business beyond Northern Europe, and would you ever look to develop your business on a global scale?

Nesbak: We are highly focused on growth in EMEA at this point, with our base being Northern Europe. We have made substantial investments in people and our infrastructure to ensure that our platform will continue to scale in order to support our plans. We will be present at all major events this year.

IMD: What key trends-either in terms of technology, user requirements or market developments-do you think will impact your business over the next five years, and how do you intend to capitalize on those trends?

Nesbak: This is an area that we are very focused on, and to understand this is, of course, essential for our future success. Sharing future plans with competitors is not a part of my future plans.

IMD: Who do you see as your primary competition? Global vendors, other regional niche players, or internal data sourcing groups within potential client firms?

Nesbak: Today, our competitors are mostly niche players, either regional information systems or trading systems, but we do come up against global vendors in certain segments of the market, and we present a very compelling value proposition.