In asset management, the current technological transformations are vast. CTOs are actively looking to simplify their application architectures to eliminate all unnecessary replication of data and the resultant need for data movement, reconciliation and validation. This is certainly a cost-driven initiative, but also relates to risk and business agility, as firms try to remain relevant in a rapidly changing market.
While nobody suggests that a complex investment business will run on a single platform in the near term, there is a significant trend towards rationalization of systems by moving to a limited number of multi-solution platforms that provide support across multiple business functions, products and asset classes.
This macro trend goes hand in hand with the more heavily discussed themes around standardization of architecture and applications across business lines and geographies, and of course the acceleration of shifting to managed Cloud-based IT infrastructures.
IT departments in asset management firms, now more than ever, need to maintain competitive technological capabilities with limited resources.
Traditional build versus buy decisions are, for the most part, already answered before the analysis is started. Individual firms generally no longer have the human capital to entertain competing with maturing global fintech platforms, which have superior scale, R&D capabilities and agility.
Asset managers must move away from implementing costly and overly complex architectures that are difficult both to manage and change. Some asset managers have become overly dependent for technological advancement on administrators who struggle to maintain the pace of innovation that will match that of fintech firms.
A notable development in Gen 3 outsourcing models is that they are increasingly technology driven with a focus on data, collaboration and hardened oversight and backup NAV capabilities.
These trends are driving a lot of focus on a new operating paradigm to remove friction and contain the costs for asset managers.