Neon Signs VAR Pact With Sungard To Offer Its Integration Middleware

Neon Software has signed a six-year value-added reseller agreement with Sungard Data Systems that will allow Sungard to include Neon's Neonet integration middleware in Sungard's trading and investment systems. In going with Neon, Sungard decided against working with Tibco and its Enterprise Transaction Express software.

Sungard sells software for derivatives, foreign exchange and securities trading, risk management and portfolio management, in addition to custody and participant record-keeping for trading firms, stock brokers and mutual funds. Neon is a start-up founded by Rick Adam, formerly Goldman Sachs' partner in charge of technology and operations. Neon and Sungard signed the agreement December 31.

Neon hopes that this VAR agreement with a leading financial services software company will vault it forward as the industry standard for software integration of legacy systems and new technologies, regardless of their hardware, operating system, database or network.

According to a source close to the deal, Sungard came close to signing with Tibco instead of Neon. "But after speaking with users of the Tibco Information Bus and Transaction Express, Sungard learned that those products have been plagued by rollout problems, with loss of data and scalability problems," the source says. A Tibco spokesperson had no comment.

As Kevin Scully, Neon's senior vice president and general manager of financial services, puts it: "By working with Sungard, the global leader of financial technology solutions, Neon will take the lead in creating the industry standard for straight-through integration and data delivery across heterogeneous hardware, operating systems, databases and networks, including the Internet."

Cristobal Conde, Sungard Trading Systems Group's chairman and CEO, agrees that it is possible that Neon could become an industry standard, because Sungard intends to integrate Neon's software into all of its products.

Initially, however, Sungard will integrate Neon's integration software into three products: the Panorama risk management system, Devon foreign exchange system and its Octagon options and futures exchange order routing system. These should be completed by the third quarter, Conde says.

Sungard also announced that it will work with Neon to develop an electronic trade confirmation protocol for exchange traded derivatives, to be used across proprietary networks and the Internet.

The linking of disparate systems in trading operations is looming as a major challenge for technologists. Industry consultants estimate that as much as 65 percent of a financial firm's programming budget is expended on extracting data from disparate systems and importing it into others. "By providing Sungard the corporation with the full range of our middleware software, we will be paving the way for an industry-wide electronic middleware process for information integration and secure data transmission," Scully says.

Neon's software accomplishes this task via three basic components. One is a GUI-based data reformatter. The second is a rules engine that controls how and where data is delivered to applications. The third component is a messaging and queuing segment that guarantees data delivery.

Currently, Scully explains, a great deal of programming work is required to get disparate systems to interoperate. If a firm wants to get data from one system to another--regardless of whether it resides on disparate hardware or software, application or operating system, database or network--a software engineer has to write a program to do data reformatting in addition to writing transaction processor for each end, he says.

"And, if they wanted to deliver the data in real or semi-real time, they would have to build a reconciliation component to make sure the message is safely delivered," Scully adds, continuing that "if it was batch, they would have to write another type of reconciliation. So, traditionally there is all this integration spaghetti used in the industry."