Hiten Patel: Welcome to the show. It is Hiten Patel, Oliver Wyman's global lead of the financial infrastructure, technology, and services platform. And I am delighted to have you with me today, Maroun Edde, CEO of Murex. Thank you for joining us, Maroun.
Maroun Eddé: My pleasure. And good day, everyone.
Hiten: It would be great to start with a little bit of background.
Maroun: Yes, with pleasure. Murex is a software house, which is a little bit more than 30 years old, which is specialized in managing trading risk management operations, settlements, funding for capital markets in general, across asset classes and functions. Asset classes being interest rate, foreign exchange, commodities, equities or credit and the functions, I listed a few of them.
We are present in something like 20 countries with our offices, but we have clients in 60 countries. Essentially all the financial places which have reasonably evolved capital markets. Our clients are mainly banks, but also investment managers, and a few corporations.
Hiten: Awesome. Rewind the tape for me back a little bit. You say 30 years ago. Talk to me a little bit about what the journey was like at the start. How did it come about?
Maroun: Yes, in the early nineties, capital markets and particularly derivatives were a little bit like a gold rush where everybody had to run very fast to be able to grab some market share. And along the way, inventing different products. And obviously at that time, portable computing became very handy that it became standard and we started developing tools for traders, essentially.
I happened to be one of them before I switched to Murex. These tools were there to provide real time calculations, which in those days were not common, with very heavy mathematical formulas, but still real time calculations in order to be able to price and hedge very quickly. And it is this very strong development in the US, in the UK, then in continental Europe and then in Asia-Pacific, which led to the development of Murex. Little by little, of course, what was a tool for traders became a vertically integrated platform, front-to-back office, and since the financial crisis of 2008, it became a front to back, to risk, to funding a platform, aggregating all these functions to make them consistent.
Hiten: Awesome, awesome. And at what stage on that journey did you know you were going to win? At what stage did you start to get a sense that that you have a winning product? So, that this is going to be something that is going to be a real success.
Maroun: I think if you ever think that you have won, it means that you are dead, The challenges are ahead.
I think that going back to the past and being satisfied with what can be interpreted as a victory is not necessarily the healthiest way of doing things. More so because our field is changing all the time at a pace which is dizzying sometimes because it is at the intersection of technology, I am not going to have to explain that you know it better than I do, which is changing fundamentally all the time.
And now more than any time in the past and capital markets, which have been moving quite a lot, I would say capital markets are moving to a triple extent. On one hand, because you have to move to something industrial where you start building as a bank, for instance, building your capital market products, distributing them with an industrial scale.
So, you have a lot of automation. From a business point of view, you constantly have evolutions. You see, for instance, recently commodity derivatives have been booming, whereas a few years back, lots of banks closed these activities because they were consuming too much capital. And finally, you have regulations, and the regulations should not be understood as simply an end game where you have to produce a report. Regulations have changed the way capital markets operate, so you find the effects of regulations everywhere, from pricing to risk management and down to the to the operations. So, the reality is that you can never say that you won, and you always have to look forward to the next challenge.
This said, to answer your question, there is a very good measure, which is that people buy your software, which obviously is a good one. But also, you feel very quickly if you are capable of resolving a problem and helping your clients expand their business. And you feel in a certain way in this field, if you are competitive quite quickly, because the market is very differentiated.
Clients do not buy only on price, of course, price is always an element, they price on the quality of the products. And they price today also, they decide and choose you on the quality of your product today and on the roadmap equally. And step after step, you know I could go back decade after decade to tell you what were the particular elements which allowed us to get new clients.
What I would simply say is that you have to have a view on where capital markets and technology are going. And if you are right, you sort of feel it, you feel it in an RFP, you feel it in a presentation. In capital markets, our clients are very direct, and they do not like to waste time. So if we are totally off the chart, we know it quickly. And if we have something to say, they listen, and we know it quickly also.
Hiten: Awesome, I love that drive and that mindset. I lazily assumed having, you know, 30 years in the game and lots of people giving you plaudits that you may have started to rest on your laurels. Fool me for thinking that. And I love the love the energy.
Talk to me a little bit. You have teed this up nicely. Talk to me a little bit around this next wave of opportunity and challenges as you see it. There is obviously a ton going on out there that we see. Obviously, generative AI most recently, the blurring of the boundaries between data and software, what is exciting you the most when you think about what lies ahead for the industry and for your company as well?
Maroun: Yes, what excites us is what challenges us also. And I would reverse a little bit of your question, if I may, or actually change it, because for me, AI and the blurring between data and software are absolutely fundamental. But they are the background, they are tools which allow you to do something. I think we should not lose sight of the fact that what we are trying to do is to resolve problems and provide opportunities for our clients in capital markets and treasury in general.
There, already, you do have a lot of changes. Why is that? Simply because our view is that the way financial institutions, in general, operate in capital markets today is suboptimal. And it is still fragmented to a large extent. It is not flexible, so it does not allow them to evolve quickly. And this evolution is a huge challenge for most financial institutions, which keep piling up old stuff, which becomes legacy.
And at some point, in time, they have to clean it rather than make it evolve. And finally, there is a cost issue. Of course, all these topics are linked. The cost of doing businesses in capital markets today is way too high for financial institutions. Back before the crisis in 2008- 2009, it was sort of justified because the revenues were growing faster.
It is no longer the case. It does not mean that the market is not enticing. You still have growth, and you still have good perspectives, but you cannot keep piling up costs coming from regulations, from old technology, from convergence and from the like, while having revenue growth, which is modest. So fundamentally, what is this telling us? You could say that, oh, you know, the market is not sustainable.
Lots of people, lots of institutions will exit. We do not believe it is the case. It is extraordinary to see that even though a lot of complicated products are gone now, you know, all the complex derivatives from the heydays, still the spectrum of products, you know, payoffs of products across asset classes is huge. So even if you see a tier three bank, they need to have access to this palette of products for their corporate clients, their wealth management clients or their internal asset managers or the individuals that they that they serve.
And so, it is not an option for a bank to say, I am going to exit. You know, some of them do it. Sometimes they come back, some of them go to white labelling sort of, but then very often they try to come back on certain products. So, the fact that they need to manage a full value chain of producing and distributing and risk managing capital markets’ products is a certainty and the cost of it is too high.
The fundamental question for us is what does it mean? You know, what are the options? How will capital markets evolve? What will they be like in ten years and based on that, what are the bets that we take? And so, it is absolutely essential for somebody with an industrial mind to have an opinion on that. And then based on that, you have lots of means.
Obviously, artificial intelligence is a fantastic means. Obviously, the way you provide software as a service with a mix of data, obviously the way you exploit, this enormous power that cloud could give you if you are well adapted to it. All of these are means which are essential. But the first thing is not how you do it.
The first thing is what exactly do you want to do? And that is the most challenging topic for us, for our competitors and for I.T. within our clients.
Hiten: You put it well, I think it is a particular challenge for us as well at the moment. Because I guess from the conversations we have in the market, it is not even clear to me that the current incumbents in a lot of those banks and a lot of those seats themselves necessarily have a tremendous strong handle on exactly where things may go in the next five, six, seven, eight years.
I think we have had a period where a lot of the changes have been an incremental evolution and people have understood. And right now, we just see a wide spectrum of people thinking, hey, this is just another incremental change or hey, the demands we are going to have, are going to be completely different. And so, it will be equally exciting and challenging as you try and figure some of that stuff out.
Maroun: Absolutely. If you want, I will come back to something you said, which is very interesting, where you mentioned the fact that the incumbents do not have necessarily the answers. I would argue that they could have the answers better than newcomers, but they do not necessarily put the means behind it. I will give you an example, which was very impressive or at least impressed me personally in a field which is totally different. Look at Microsoft, which at some point was a company that was sort of aging, in the sight of candidates and the markets in general. Look how they reinvented themselves based on the position they had and products they had, based on information they had as incumbents. And that was extremely impressive.
Now, of course, it is normal to see it, and it is everybody has digested it. But when you think of the effort that they did and the strategic choices that they took, you have this kind of transformation. Now, it is true that with most I.T. companies in capital markets, there are a few exceptions, but it is true that you do not have that.
It is true that you see very often that they have a current business model which works, and they extrapolate. So, they squeeze it a little bit. They adjust it, they oil it, they push it, they sell it better, but they are not necessarily seeing what is going to be the story in a few years. And there are lots of reasons for that.
Some of the reason is that you are not necessarily rewarded financially for something like that. And second is that if your term is a six-year, five-year, three-year term, you cannot think this way because these are investments over 15 years. They are investments which go beyond, you know, my tenure as CEO. You have to be at this same time a little bit crazy and a little bit not too much attached to the model, which apparently maximizes your net present value (NPV) financially in order to do something like that.
And it is essential. You know, it is absolutely essential for this business.
Hiten: It is interesting. Let me go to that, because I think there is often these challenges of what is the right ownership structure. Some of the biggest companies, whether they publicly listed or privately owned, and we have seen many of the companies that were publicly listed come private to go through big transformations that the public markets could not handle.
Many peers who sell software into the financial services sector, obviously private equity owned. It is a model that has been pushed incredibly hard. You guys are relatively unique. Successful and not having gone down that path. Talk to me a little bit around how you have made that decision. What kind of benefits trade-offs have you faced as you've if charted that path?
Maroun: Yes, let me comment a little bit on your question before I answer specifically to us. I am not sure that it is necessarily a question of regime, you know, listed private equity or fully private. I think it is more a matter of the mentality of the company. You know, are you sort of product based? If you are product based, you are in this cycle where you keep thinking about improving, you know, your product and your services all the time.
Look at a few different regimes of Apple. You know, another company and I say this because everybody knows them, but you have that in much smaller companies. Also, there was a time where at some point in time they had lost track of, you know, this product dimension. And then another time where they came back to this product dimension, it changes completely the view of the company, and the investors follow.
You know, investors are not stupid in a certain way. If they have at the helm a company or a management team, which is long term oriented, they love it. Also, of course, they put a little bit more pressure. Of course, there is a balance to discuss, but I am not sure that it is only the ownership of the structure of the company which guides whether it is going to be long term or not.
It has to be fundamentally, a belief. On our side, I do not think, and I will not say that what we did is unique and better than anything else, because had we had professional investors one way or the other through listed or private, maybe we would have been a little bit faster to develop. Maybe we would have taken a little bit more risk when we were smaller because we did not take a lot of risk financially.
We take a lot of risks from an industrial point of view and there is where we found that our current functioning was useful because if we have an idea regarding a long-term development, we almost do not need to build a business case around it. You know, it does not sound very professional what I say, but the thing is that when you think too long term, a business case is usually not what is going to happen.
You have to be able to iterate, you know, you cannot be blind either, but you have to be able to iterate. And it is true that in our environment, when you know, your business, you know the environment, you are more comfortable taking an important risk for the corporation than you would have had, you know, in another set up.
But I do not think once again that there is a magical formula. Even if you forget about, you know, whatever the structure of the capital, it is essential to have an industrial view. And I think that if one thing we sort of learned in all these decades and we had no clue initially is that software development is a heavy industry. And it is not a game for a few quants developing something quickly on the side, as it used to be in the beginning of our business.
Hiten: Interesting, that point on industrial risk versus financial risk, I think that is a really powerful one. And one that probably is in my own exposure, probably been a bit underweight. The industrial risk exposure. And we are usually spending a lot of time in situations where it is very financially risk driven. It is a really important reflection. I am going to pull you up on a few more of those.
Actually. I guess one of the things we like to do there are people out there right now much earlier on in their journeys, building products, trying to develop companies. I guess any guidance you would give to those who are trying to break into the space scale of the company, evaluate that kind of early, early investment options, any other guidance you would give having three decades down the line for the for the next generation who are trying to get going in this space?
Maroun: Yes, maybe a few. I think the first one is, but that is natural when a company starts is to look at the solution of the future, not at the past. See, we have still lots of company which try to take assets or ways of working from the past and adapt them. I think when you are starting, it is a mistake. You have to take a bet on the way capital markets will be, not the way they were.
That is number one. Number two, I think that is the most difficult for a company which starts is to know how to scale. We had this problem, of course, but we had more time because when we were small, there were very few companies in our space, and we had the luxury to grow slowly. And if you want to bootstrap internally and to grow organically. Today, if you are a very good startup in capital markets or elsewhere, it is very tempting to develop a narrow business and then to sell to a big one.
It is already a good success, and it happens in technology in general. It is not only in capital markets, but also already a good success. But the point is that if you have a view for something which is wider than this specific function that you've built, you have to find the right partners to allow you to give you the 5 to 7 years which are essential to build a solution which is wider, and in which case it is important to stay in control.
It is important to focus on the IP and the products and to get help from the whole ecosystem in order to accelerate whatever you do. And it is important to make this choice. I think that if a startup has a very good idea on a certain functionality, but not necessarily on a piece of the value chain, on a sizable piece of the value chain, better develop quickly and sell without a doubt.
But if you have ideas behind it, in order to be able to disrupt the important piece of the value chain, that is where I think it is an illusion to think that you can do everything in a couple of years. It is classical in technology. They are very bright people. They can do everything quickly. The start is very fast and then it slows down.
But that is when you need help, you know, that is where you need to find assistance in order to get to the to the next stage. And it is a very delicate part because very bright people you have stacks of them in capital markets, people who can take an idea and go very fast and develop it. When it comes to building a business around it, it is more complicated because it takes a collection of skills.
Hiten: Very interesting to hear you use the words luxury to grow slowly. It feels like we are in an era now. Everything is about speed.
Hiten: And quality and caliber are associated with speed. And actually, your point around narrow versus broad solutions, allowing things to kind of take its time, I think that is something that is a little bit lost in the current mindsets.
I think that is a really, powerful reflection. And I am going to take you back to something you said at the outset. You talked about the start of your journey, that being a gold rush that was taking place. If you were to do it all again, if you were to leave Murex behind and you have to start something from scratch today.
Like where are the gold rushes that you see? What are the areas that you would be drawn to if you were to have another crack at things?
Maroun: I am going to answer you, but I would not say it is a gold rush. It is a potential gold rush because, you know, the gold has not appeared yet. I think that today, once again, the exercise of creating financial products, pricing them, doing risk management around them, and settling them and funding them and all this stuff is expensive for most financial institutions.
I think that an important element of the next decade is going to be that this value chain is going to be to some extent dismantled, and parts will become ritualized or managed by other companies on behalf of many financial institutions. That is not new. You know, you look at data, for instance, you already have a lot of that.
You look at Bloomberg, you look at things that market has done. You know, even on the technology side, on the buy side, you look at BlackRock, you have quite a bit of that. And I think that there will be an acceleration in this direction. So, the reality is that it is difficult for a newcomer to enter into this space because it is a space of infrastructure in a way.
So, it takes a lot of investment, it takes an enormous amount of investment. Newcomers will be better off in specific functions which are narrow, you know, certain types of calculations or certain types of I would say complex post-trade processes or the like. And this is where coming back to my point from before that we will have to decide when to have succeeded, if that is all what they do, they sell it off or if there is a model to extend.
But taking a piece of the infrastructure on behalf of many financial institutions is a very expensive, very capital extensive operation. And I think there is where I see a gold rush, I am hesitant to call it a gold rush because the gold rush in the nineties was, you know, you could almost run anywhere, and plant and you would have buyers because everybody was developing this activity.
Today it is more if you want a forced and accelerated industrialization of what has become a necessity, you know, to power the global economy. It is as if instead of industrializing the car factories over 60 years, you had to do it in ten, 15 years. That is the way it feels. But it does not feel as the same case as today.
You know, building a new car, it is not a gold rush because, you know, it is already crowded. So, you have to come up with a different angle.
Hiten: It is fascinating. It is definitely something that feels like needs to be done and worth leaning into. And I am going to change tact slightly. So, when we were starting to profile this whole financial infrastructure, technology, and software space, we started mapping out the big publicly listed, the big privately owned companies.
And it should not be a surprise, but it always comes as a surprise, how US dominated it is in terms of both the privately owned and publicly listed providers. We often get asked as well, like what should policymakers in Europe be doing to kind of ensure that helping seed and create the next batch of European champions? I ask that as you are at the helm of one of the European champion names out there.
Have you got reflections on what should and could be happening to make sure the next generation of companies on the continent have a fair chance at making a success of things?
Maroun: Yes, unfortunately, there is no silver bullet. It is a collection of things you see the US is a huge homogeneous market. Europe is still not a huge homogeneous market and, you know, even less so since the Brexit.
So, if you want the temptation to start in the US is absolutely enormous. Number two, the relation between universities and the whole ecosystem of start-up is very strong. Number three, if you want the ecosystem, the funding ecosystem is normalized and super deep. You have people who can back you at any stage of what you do, and it is all very well formalized and it is great if you succeed.
It is not a catastrophe if you fail, you just move on to something different. And all of this exists in Europe but is not necessarily homogeneous. You take Sweden, you have very good pockets of innovation or other countries in the Nordics. You take France, you have certain efforts which are done around IP. But if you want first, it is not consistent across countries and second, it is not necessarily consistent in time.
Take, for instance, I am talking about France, because our largest R&D center is sitting there. Very good measures which were taken under Macron's first presidency. Maybe next time there would be somebody else who is going to wipe them away. So, you would have had that for six, seven years. And practically, you could argue that it helped a lot IP. And I do.
Other people would say, yes, but, you know, you are giving advantages to companies based on IP. So, it is not equalitarian, so you see that fundamentally you have to have consistency across all of that. You have to put a framework and let companies do their thing. So, it is lots of things, if you want, around regulations, around schools, around having a lighter system to create companies, a lighter system to reduce your staff if you need to, to close and reopen, you know, a more formal and general access to funding across all these stages.
It is all of that which leads to having this kind of power that you feel in the in the US. Europe is perfectly capable of doing that. It is perfectly capable. It has the talents. There were a few years ago people telling us how? How would you do business in France? It is horrible. Well, no, it is not, you know, it is different from other countries.
But you also have good schools. You have good rules. You know, you have to be able to adapt, of course. But no, it is feasible. It is a mistake to think that you cannot do it. But it is simply that this lack of consistency makes it a bit of a coincidence when a company does well rather than something systemic.
Hiten: Yes. And that is interesting. A cultural point there around, if it does not win or does not succeed, you just carry on and move on and the system allows you to keep innovating. I think that is an interesting point. I think a tolerance for failure or just accepting, right? It is part of the course. When you are in that early stage.
Maroun: I think it is much better now we are here. You know, it used to be that it was shameful to go bankrupt. You know, today it is much better. But you know, in the US you can go bankrupt every other breakfast if you want to. And then move on and it is not a big deal.
Hiten: Excellent. Excellent. I am going to step out of the work mode a little bit. Take a step out of that.
One of the things I ask guests is to just reflect a little bit on what do they do outside of their working time. Is there a hobby or personal interest of yours that you would want to share and how that enabled you to kind of succeed in the day job that you have?
Maroun: I would say not quite a hobby, my hobbies are a little bit orthogonal to what I do. It is more a background. I think what helped me is that for my chance or the opposite, I do not know. I was born in a very small country, doomed with civil war and more, and economic crises and the like. I am from Lebanon. I lived, I studied in France, I studied in the US, and I came from this small country which is open to all its neighbors.
And I think that this gave me a taste, more than a possibility, a real taste to discover any place where I set foot and to appreciate very quickly individuals and their culture. And I think that this helped us to simply do what countries across themselves cannot really do, which is building an international environment. And we are a small company.
We are 63 nationalities within the company with very strong ties, which are the company values, but massively different backgrounds. And with pleasure that I had to discover other places coming very likely from my background, we all transported it in the company, and we have the same pleasure every we even track the nationalities, you know, and when there is a new one, we celebrate.
And I think it is fantastic because our luck is that finance is the same everywhere you know, obviously you have your odd rules in, you know, in Brazil or in certain countries in in Southeast Asia. But fundamentally, 95% of it is exactly the same, you know, and so it is transportable. And what's left is the human factor in a certain way. And to add to that, although obviously we have a passion for what we do in capital markets, the passion for people is possibly even stronger, at least for me. And I think that it is a little bit this background, which helped a lot with that.
Hiten: I love it. I think probably the power of that cannot be understated.
I often see how technologists used to be kind of second-rate citizens in some of the banks where the stars of the show were the traders, you know, giving them that belonging that identity, celebrating people probably before it was a mainstream idea, must have been a great talent magnet for you and the company. So, thank you for sharing that.
Thank you so much for being generous of your time. It has been a privilege and a pleasure to kind of go down those three decades from goldrush to where you are now thinking about the future. There are definitely few pearls of wisdom from the luxury to grow slowly, industrial risk versus financial risk, for us to all reflect on.
So, thank you for coming on. Thank you for sharing your thoughts with us and I wish you a good day
Maroun: The pleasure was mine. Thank you very much.
This transcript has been edited for clarity.