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| The Joy of Unbundling |
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| Written by Gert Raeves | |||||
| Wednesday, 01 November 2006 | |||||
| Software Test & Performance Magazine | |||||
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Unbundling is the biggest story in consumer behaviour of the past 15 years. Not very long ago, a holiday was always bought as a package, a mortgage always came with insurance, and you always had to have your car serviced by an official dealership if you wanted to keep your warranty intact. Times have changed: consumer choice and regulation have been responsible for driving the unbundling logic across virtually all retail and B2B markets. Any situation where individual products and services are priced as a single package deal is now widely vilified as the opposite of transparency, fair value, and consumer protection. Unbundling is a wonderfully disruptive force, challenging the cosy cliques of supplier cartels and conservative business models. It can provide new market entrants with a window of opportunity, and rewards innovation and agility. At a personal level, unbundling is also very addictive: once you have tasted the freedom of buying just the thing you value, on its own, you can never go back to accepting a single price for a bunch of products - some of which you value, and others that you do not. This also means unbundling drives fair value – which is not the same as price. If you do not value being offered a meal on your airplane journey, you will also resent not having the choice NOT to take the meal. But valuable to you or not – pre-unbundling you would have paid for it. Despite headline grabbing regulatory initiatives on unbundling (Myners and others), there is still a long way to go for the securities industry. The pricing of individual products and services is too often like the famous riddle wrapped in a mystery inside an enigma. A typical example is the supply of financial information – market and reference data for financial products: content you really really want is bundled with other content that you may not need, in a protocol of the vendor's choice which in turn gets bundled with a proprietary technical delivery mechanism. This is what you have to buy, when what you want, what you value, is just the one piece of content. Our entire industry is built on the premise that market forces will determine fair price, and that is not just true at the sharp end where financial instruments are traded, it is true at all levels of the supply chain. Market forces are a powerful thing: if the products on offer do not match the value that buyers are looking for, two things will happen. A market opportunity opens up for new entrants who offer a better match between value and product, and once it is there, resentful buyers will vote with their feet. In the same way that Ryanair's CEO famously said an airplane is 'just a bus with wings', many commercial data vendor sources would be wise to think of their products as 'just content' – full stop. It's about the data, the whole data and nothing but the data.
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