Read this article and learn about
- Why firms are now looking at their front office system strategy
- The business drivers for change
- The operational benefits of change
- The types of solutions that are being considered and why
By consolidating applications and integrating data services, firms could increase data visibility and transparency, reduce system complexity and risk, increase operational efficiency, and reduce costs.
Fewer systems means fewer software upgrades, simpler data integration, less manual intervention, and better data transparency—all of which have the potential to lower operational costs and risks. System consolidation may also translate into lower data acquisition costs thanks to fewer platforms, fewer users, and fewer requests for data from data providers. Finally, an integrated front-middle office, middle-back office, or front-to-back office could improve a firm’s response time when it comes to regulatory compliance, or bringing new investments and products to market.
In some ways, it feels like the asset management industry has been here before. Large vendors are offering firms a single integrated platform that could decrease their technological footprint, reduce system complexity, decrease risk, and lower operational costs.
Two things make this latest move toward system consolidation different from the mainframe era of the 1980s:
In this era of consolidation and cost compression, vendor choice becomes critically important. Firms are making bigger bets on fewer service providers—so while there might be lower risk on the technology stack, there could be higher risk on the vendor side. If your vendor stumbles, your firm could suffer the consequences.
Before making the leap, consider these four key questions:
History shows that the cycles between centralized versus decentralized, and best-of-breed versus integrated, are likely to continue to ebb and flow. As soon as the pendulum swings too far in one direction, there is likely to be an industry or business driver demanding a reverse reaction. We do know that growth spurs innovation and innovation requires agility, so over-consolidation could run the risk of limiting business speed and agility in reacting to change.
System consolidation is more than an IT exercise. It requires a well-conceived business strategy, operating model changes, and ongoing metrics tracking over time to confirm results are not only achieved, but maintained. There’s a business case to be made for consolidation; many asset management firms have chosen to make the move for greater governance and control. But leap too soon - and consolidation could come at a price.
Dan Pitchenik is a Managing Director at Accenture and leads the company’s North America Capital Markets practice. He advises leading investment banks and investment management firms on their most important initiatives, working across revenue producing divisions, operations and technology. For many years, Dan has led transformational initiatives within the industry including operating model restructuring, post-merger integration, IT strategies, risk management and product-based growth strategies.
Jeremy Hurwitz is a Managing Director at Accenture and previously InvestTech Systems Consulting's CEO and Founder. Jeremy has over 25 years of experience in asset management and investment technology working with institutional investment organizations. He has extensive knowledge across a wide range of investment business models, technology platforms and architecture services. In the past 15 years, Jeremy has become a thought leader in Enterprise Data Management (EDM) and has led many global strategic EDM transformation programs, including the implementation and optimization of the leading EDM vendors’ platforms and services.