A modular offering makes sense in conducting gradual and controlled outsourcing arrangements.
Whether or not to outsource all or part of an operating chain is a very tough decision to make. Especially, as few offerings allow asset managers and asset owners to do so step-by-step in a differentiated manner based on the operations that they actually want to outsource or keep in-house.
Adjusting to constraints and client choices
Modularity makes perfect sense here. Some investment firms want to hold onto parts of their value chain that they believe are part of their history and their DNA. Others want to hold onto some of their long-standing service providers in their operating chain, such as data providers, trading desks, etc.
That’s why a services platform must offer real flexibility in “modular” services and address client needs, whether in major strategic decisions entailing in-depth changes in their value chain or mere operating adjustments within a constrained framework (a complex legacy IT system, for example).
a services platform must offer real flexibility in “modular” services and address all client needs.
whether in major strategic decisions entailing in-depth changes in their value chain or mere operating adjustments within a constrained framework (a complex legacy IT system, for example).
In real-world terms, a client must be able to choose those services that it wants to outsource (data management, post-trade operations, position-keeping, portfolio analysis and optimisation, risk and compliance, order trading, etc.), but also while retaining flexibility on implementing the services that it selects. This flexibility allows the client to outsource the service, keep it in-house, or retain one of their long-standing external service providers.
Outsourcing gradually, with complete peace of mind
Outsourcing everything at once can cause major operating disruptions. In addition to project risk, internal obstacles may emerge if client teams lack confidence in the service provider, its tools or its level of expertise. Outsourcing doesn’t mean just switching systems; it also means changing ways of working.
Outsourcing certain tasks gradually also means managing risk by taking the time to test one’s service provider and build a long-standing relationship
Paradoxically, moving ahead gradually often means moving ahead faster. For a service provider, being able to demonstrate to the client one’s know-how on shorter-term projects makes it possible to roll out some features more rapidly. And for our client, rolling them out gradually can, in some cases, facilitate the management of change.
Another major advantage is in working with a subcontractor that is, itself, an investment firm. In outsourcing or delegating all or part of its operating chain, speaking a common language with one’s service provider is invaluable, as that service provider will be fully aware of sector challenges and the operating issues of its manager or asset owner clients, including regulatory , increased appetite for ESG, etc., and all the new developments that these entail.
One more advantage of modularity – gradual outsourcing smooths out costs over time and forestalls project shock.
Setting the cursor right on a case-by-case basis is essential
Some clients must deal with the legacy of complex IT systems and successive, almost inextricable legacy tools. In this case, modularity runs into intertwined systems, and partial switching would entail costlier operating risks than simply switching out the entire system. In such a case, block outsourcing looks like the better route.
Other possible obstacles: internal processes and business-line perimeters. These can be an issue when employee responsibilities are insufficiently documented or overlap into several areas, as is sometimes the case at smaller companies. “Line-item” outsourcing to “shadow” external operating teams can itself create issues. But with proper guidance, such processes can be rapidly streamlined via optimised outsourcing.
At Ostrum Services, over the past 10 years we have developed a proprietary, open-architecture services platform. Until now, this platform has been reserved for our in-house clients, but we are now making it available to asset owners and investment management firms. Regardless of our clients’ configuration, our platform’s very high degree of modularity allows us to guide them in optimising the perimeter of activities that are outsourced to us (or not) and to determine, at their side, the most suitable pace for implementing the outsourcing arrangement.
Our ultimate goal? For our clients to enhance their operating performance and the quality of their financial management by devoting their expert resources to their core business, so they can provide full service to their own clients.
To go Further
02/01/2021 viewsArticle InsightGuillaume Abel, Head of Development, takes a look at the challenges faced by today’s investors – bot ...