Editorial & Advertiser Disclosure Global Banking And Finance Review is an independent publisher which offers News, information, Analysis, Opinion, Press Releases, Reviews, Research reports covering various economies, industries, products, services and companies. The content available on globalbankingandfinance.com is sourced by a mixture of different methods which is not limited to content produced and supplied by various staff writers, journalists, freelancers, individuals, organizations, companies, PR agencies Sponsored Posts etc. The information available on this website is purely for educational and informational purposes only. We cannot guarantee the accuracy or applicability of any of the information provided at globalbankingandfinance.com with respect to your individual or personal circumstances. Please seek professional advice from a qualified professional before making any financial decisions. Globalbankingandfinance.com also links to various third party websites and we cannot guarantee the accuracy or applicability of the information provided by third party websites. Links from various articles on our site to third party websites are a mixture of non-sponsored links and sponsored links. Only a very small fraction of the links which point to external websites are affiliate links. Some of the links which you may click on our website may link to various products and services from our partners who may compensate us if you buy a service or product or fill a form or install an app. This will not incur additional cost to you. A very few articles on our website are sponsored posts or paid advertorials. These are marked as sponsored posts at the bottom of each post. For avoidance of any doubts and to make it easier for you to differentiate sponsored or non-sponsored articles or links, you may consider all articles on our site or all links to external websites as sponsored . Please note that some of the services or products which we talk about carry a high level of risk and may not be suitable for everyone. These may be complex services or products and we request the readers to consider this purely from an educational standpoint. The information provided on this website is general in nature. Global Banking & Finance Review expressly disclaims any liability without any limitation which may arise directly or indirectly from the use of such information.

The buy versus build conundrum in data management

By Martijn Groot, VP of Product Management, Asset Control

A large number of firms have come to realize that while in theory the in-house development of data management solutions may seem attractive as it provides a 100% match to a firm’s requirements, the reality is very different.

In fact, in-house development can cause a firm to become overly reliant on a small group of IT experts, thereby rendering themselves potentially vulnerable if those employees should leave in the future. Economics and more predictable ROI, time-to-market and avoiding the risks that come with in-house development are just some of the reasons to move to a third-party solution.

Using a third-party product allows a firm to benefit from the industry’s learning curve as products will have been battle tested and will already incorporate requirements from their peers. Apart from that, a third-party product will come with a roadmap and future releases will keep pace with market requirements. Vendors often have a roadmap of changes to their customers’ businesses as well as regulatory changes, and plan upgrades accordingly which they can roll out when necessary with minimal disruption. Conversely, in-house IT teams often work to the regulations and requirements set out for them at the time of development with little thought to the future of the software. Therefore, when the time comes to upgrade, it can be a lengthy and costly process. In many cases, an internally developed solution has to be completely replaced as it has not been architected for risen volumes or new requirements in data lineage.

The impact of a failed project of data management will be far higher than that of an end-user application: data management integrates horizontally and delivers to a range of different stakeholders downstream.  Many businesses are now realising that internally developing data infrastructure would be an inefficient use of time and resource. Apart from the cost, delivery and time-to-market risks involved, solution providers have also innovated their products over the last years to keep pace with rising volumes and provide flexible deployment options. In addition, because of standardization of data elements and formats in regulatory reporting, there is also very simply more that can be productized.

Not only do third party solutions reduce costs through improved time to market and post-project continuity, the repercussions of errors in internal applications have grown drastically. Whether post-trade, pre-trade or capital adequacy related, the data-intensity of the processes has gone up and the potential cost of inconsistent and erroneous data has risen enormously. With an increased scrutiny on data management, there is a high price to pay for data inconsistencies and errors, in the form of fines, financial losses and falling short of the competition. Fortunately, using software from external providers reduces much of the risk in these areas as the solution is tried and tested and already widely used in the industry.

The move to third-party data management systems goes hand in hand with a new perspective on the function of IT departments. First and foremost, the role of this department should be business enablement, meaning it must have a solid understanding of the business’ requirements and the infrastructure needed for the business to run at its best. Rather than creating solutions to these requirements themselves, this internal team should be pragmatic and make it a priority to source the best solution providers and ensure optimal deployment, integration and change management. Once this understanding is in place, it will be much easier to bring in external providers for these solutions.

In order to ensure the transition from in-house development runs as smoothly as possible, it is vital to have an in-depth understanding of both the business’ and business users’ requirements, not only today but for the future, to inform the choice of provider. While thinking about the future is a wise move, it is impossible to determine what will be needed from the provider in a year’s time, therefore businesses should avoid being tied down to specific data, reporting or deployment standards, for instance. Instead, it is important to determine the software’s future potential for scalability and integration with other software components, as well as if it will be costly to change or add a source into the application, for example. A data management solution should not just meet your current needs but should also be best placed to meet the expected future needs of the business.

In short, the benefits of a fully-tested third-party data management solution greatly outweigh that of an in-house solution. While you may find the idea of a fully bespoke system appealing at first thought, there is more to be lost in this approach than gained. Conversely, in the long-term, third-party products can lower costs and reduce the risk of financial penalties from data inconsistencies. Additionally, there is opportunity to benefit from external expertise and increased capabilities, while allowing your IT department to shift their priorities to business enablement to ensure your organisation is running as efficiently.