In what sense do SmartStream and Fidessa compete?

The FT reports that SmartStream's bookbuilding for its IPO is not going quite as well as hoped, and that it probably won't be reaching the £300 million figure it said earlier this month it wanted to raise.

This isn't particularly surprising given the state of the markets and potential decreases in IT budgets among the banks that SmartStream sells to. It probably won't concern SmartStream management too much, as fundraising wasn't their main goal. But it will mean private equity investor TA Associates gets less return on the part of it 80% stake it's selling as part of the IPO.

What is surprising about the FT report is the quote from an analyst at IS Research: “Below £200m SmartStream is starting to look very good value, particularly when you consider that at the bottom of the current range it is coming at a significant discount to its closest competitor, Fidessa.”

My first reaction was, "What? - does this analyst not understand the difference between front office trading applications, and middle-and back-office reconciliation/STP?".

More reasonably, I then considered that perhaps the analyst was suggesting they would be competing in the sense of both being large UK listed financial technology companies vying for investor attention.

But given Chris Skinner's latest blog about analysts giving soundbites to press when they don't know what they're talking about, I'm not so sure.