We all feel the urge to get in shape now that summer’s on the way. However, this isn’t always straight forward, and often the best results come when you’re working with a personal trainer, dietician or physio. This trend continues into the financial markets, where every participant works hard to be leaner, fitter and more competitive. Firms are reducing costs and increasing efficiency by using managed services to provision, maintain and future-proof their IT infrastructure. We surveyed over 100 Front and Back office executives at the recent TradeTech expo in Paris to hear their views on allocating resources, calling in the experts and getting fit for the summer.
Thomson Reuter’s Cost of Compliance 2014 whitepaper underlines something that most of us working in the industry have known for a while: “Working in an ever-changing regulatory environment has become the norm for financial services firms around the world.”[i] This has placed increasing pressure on traders and IT departments to collaborate, and adopt agile solutions to increase peak performance across the workflow.
When we surveyed the cross-asset attendees at last year’s London TradeTech event, we discovered that bridging the gap between traders and IT was considered a significant challenge. This year, as TradeTech moved to Paris and shifted focus to concentrate on equities, the results were quite different. Over 70% of traders polled said that their IT department understood their technology needs, and 60% have seen moderate or significant changes to their compliance technology. This may be due to the fact that equities is high-frequency and exchange-traded, necessarily requiring a higher level of dialogue between Front and Back offices compared to other asset classes.
However, firms are increasingly taking a hybrid approach that combines their own internal expertise with third-party solutions and consultancy, much like employing a personal trainer instead of going it alone. In a recent report Deloitte made it clear that provisioning new technology through a managed service has become a key part of IT departments’ ability to adapt to the new regulatory requirements. They see “adopting new technologies and partnering with nontraditional players”[ii] as powerful tools for building towards success.
Our survey findings support this: Over half (52%) of the Back office executives we spoke to are spending more to support compliance-related requirements than they were last year. However, as building bespoke solutions is often undesirable (they’re high-cost and high-risk, with unpredictable maintenance costs as regulations evolve), IT departments are frequently looking to adopt dependable third-party solutions that will keep their firms trim, agile and ahead of the competition.
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Over 50% of IT executives are spending 10%-25% of their budget on managed services, and a full 30% have ringfenced 25%-50% for third-party solutions. As Gartner reports, “while banks are still buying basic services in infrastructure outsourcing, they are moving up in the value chain by engaging outsourcers for more complex business process outsourcing.”
By employing these service providers to provision the new technology, IT executives are insulating their firms from the cost and risk of building bespoke solutions. They are also building a degree of certainty into their budgets by placing the responsibility for ensuring that technology is compliant with the providers. As such, firms can process a single predictable service invoice, instead of spiralling maintenance and upgrade costs as requirements evolve.
So, by blending their internal talents with external resources, firms can be confident that they’ll see those unwanted pounds melt away. By partnering with providers to deliver outcome-based services, firms ensure they are in control and able to select the best-in-class trainer to suit their changing needs. Importantly, these experts become responsible for ensuring these firms reach their fitness goals. Ultimately, managed service providers have become an established part of the IT landscape. It’s clear that, for the majority of the IT executives we spoke to, they’ll play an important role in keeping firms fit, healthy and agile enough to stay ahead of the market.
 Market Trends: Banking, Worldwide, 2014, Gartner p.11
[i] Cost of Compliance 2014, Thomson Reuters p.8
[ii] 2014 Banking Industry Outlook, Deloitte p.12