Beyond traditional outsourcing: the new strategic partnership imperative 

In this article, we share insights from two industry veterans with decades of combined experience in investment operations and technology.  

Sarah Simmonds, Senior Partner at the Asset & Wealth Management practice at Alpha FMC, North America and Keith Haberlin, Managing Director, Head of Business Services Sales at SimCorp, reflect on the critical inflection point the industry faces today. Their analysis reveals how current middle and back-office outsourcing strategies will fundamentally reshape competitive positioning in the years ahead.

“The fact that 40% of mid-tier managers are considering changing their current service provider, or outsourcing operations signals a decisive industry pivot toward transformation," notes Simmonds. This trend validates Alpha FMC's modernization analysis, revealing how firms are strategically responding to fee compression, escalating costs, and the need for advanced technologies without making heavy capital investments.

Yet Simmonds cautions that the 35% dissatisfaction rate serves as a critical warning sign. She explains that in the first outsourcing arrangements, many firms simply transferred their existing processes to providers. This effectively reduced their workload, but often resulted in a diminished experience when these processes operated across disconnected technology stacks.

Building on these insights, Haberlin confirms the significance of both the outsourcing trend and the corresponding dissatisfaction, noting that these patterns align with broader market dynamics. "The 40% figure validates what we're consistently observing in our client engagements," he explains. 

"Firms are making deliberate strategic decisions to focus on their true differentiators while forming partnerships with specialists who can provide the technology and service platforms essential for evolution and scale." He notes that nearly all transformation discussions with buy-side firms today carry a more thoughtful tone. They consistently center around three critical questions: first, what their future technology platform should be; second, who should be operating it; and third, how they can achieve a seamless operating model with less integration/break points.  

To reassure clients that the next wave of outsourcing solutions can deliver on their promises, both Haberlin and Simmonds emphasize that we must learn from past failures and apply those lessons deliberately to new models. 

Haberlin is empathic about the central importance of the Investment Book of Record (IBOR). He argues it should remain owned by the client and be able to survive any future changes in the provider.

However, to get the full benefit of the IBOR, clients and providers should operate on the same shared platform. "This enables real-time updates as events are processed by the provider instead of waiting for batch processes to run and files to be transmitted," explains Haberlin. The benefits of a shared platform also extend into oversight and query resolution, which become significantly easier when both parties have access to the same underlying system.

“Haberlin’s focus on a single multi-asset class IBOR as a core element aligns perfectly with what our survey data is telling us,” adds Simmonds. “We're seeing firms urgently adopt new approaches to outsourcing, with 66% either already operating a full Enterprise Platform model (39%) or planning to transition to one within three years (27%). This shift recognizes that shared technology platforms between clients and service providers are essential for successful outsourcing relationships.” 

“Beyond technology, our survey reveals that successful outsourcing requires evolving from transactional vendor relationships into genuine strategic partnerships,” notes Simmonds. Respondents clearly prioritize quality and consistency (70%), oversight and control (67%), and alignment with group strategy (48%) above pure cost savings when evaluating outsourcing arrangements. This shift represents a significant maturation in the industry's approach to outsourcing—viewing it not simply as a cost-cutting measure, but as a strategic extension of capabilities.

"The regulatory agenda is increasingly holding firms and individuals accountable for outsourced services, making the ability to control provider services and fulfil oversight responsibilities more critical than ever," adds Haberlin. "Shared platforms offer another significant advantage: full transparency into operational processes coupled with real-time engagement on technology and data matters."

Haberlin also emphasizes another crucial strategic element: the discipline to critically evaluate customization. "In this collaborative framework, both client and provider must be ruthless in questioning whether a given custom process is truly differentiating the client's business, and if it isn’t, opt for the efficiency benefits of standard processes," he states.  

In this evolved model, service providers become specialized business experts rather than mere process handlers. With domain knowledge in asset servicing, brokerage, custody and other complex areas like alternatives and derivatives, they enhance strategic capabilities instead of simply executing transactions. The result is a collaborative approach to service delivery that transcends traditional KPIs and SLAs to create mutual value through aligned goals and incentives.  

The Alpha FMC Global Operations Survey reveals the investment management industry at a decisive turning point. With 41% of firms citing manual processes as their top operational pain point and prioritizing efficiency, automation, and harnessing the power of data, the industry's direction is clear. Firms must concentrate resources where they truly differentiate while partnering with providers who can deliver innovative technology, data management and service platforms that seamlessly extend their teams' capabilities.

"The success formula is becoming clear," Simmonds concludes. "Shared technology platforms, real-time data integration, and standardized non-differentiating processes are non-negotiable. Organizations embracing these principles now won't just achieve operational efficiency—they'll build an adaptable foundation that lets them seize opportunities when they arise in a complex market environment.” 

¹ Global Operations Survey
Operations in the Global Asset Management & Asset Owners Industry
Alpha FMC Industry Survey Findings 2nd Annual Edition, Summer 2024