OUTSOURCING – PARTNERING FOR PROSPERITY
Outsourcing in Financial Services is now long-established but what are the trends in the marketplace and what do organisations need to be aware of when considering outsourcing their core infrastructure? In the third part of our series exploring what FS organisations need to do to survive and thrive, John Yonker, CEO, Simplitium, stresses the need to work closely in partnership with trusted service providers.
Although technology outsourcing has long been an established option for FS institutions, a large amount of FS IT infrastructure remains hosted in-house. Identifying resource, hiring and retaining expertise to manage and maintain technology infrastructure is vital yet can often prove very expensive. Having sufficient capacity to successfully handle these projects in-house can prove elusive. Increasingly, as pressure to reduce costs shows no sign of abating, institutions are seeking technology partners who can provide business understanding and technology expertise to deliver modern, reliable, robust and cost-effective solutions. The search is on for trusted providers who can ensure the operations side of an institution’s business runs efficiently, can manage client data securely, and are able to adapt to rapidly evolving requirements.
It seems highly likely that interest in technology outsourcing from FS institutions will continue to accelerate as they look for new solutions in the areas of regulatory compliance, big data and advanced analytics, and cybersecurity. In parallel, infrastructure services have also evolved incorporating new technologies such as cloud, AI, blockchain and robotics. An underlying focus on cybersecurity pervades everything as providers need to earn clients’ trust by demonstrating they are both reliable and responsive. Institutions trying to understand and implement solutions on their own face a significant challenge.
Increasingly, as pressure to reduce costs shows no sign of abating, institutions are seeking technology partners who can provide business understanding and technology expertise to deliver modern, reliable, robust and cost-effective solutions.
The outsourcing service provider market itself has seen a burst of new entrants providing competition to the traditional larger firms. For example, as the focus on data becomes ever more critical, Quid assists companies in interrogating large pools of unstructured data using innovative pattern recognition, data visualisation and machine learning methodologies. Companies can combine their own data with thousands of data sources on the Quid platform. Incorta offers real-time big data analytics without the need for big data warehouses. Development of secure, real-time analytics applications, which would typically take 4-10 weeks, is reduced to days with query times being measured in seconds even when analysing massive datasets.
At the heart of the FS outsourcing trend is the rise of institutions using cloud solutions, despite concerns over data security. Institutions are naturally deeply concerned that their client’s data is being handled securely. Irrespective, a recent study for Reuters1 estimated large global banks may save in the region of 25% by 2019 on technology infrastructure costs by deploying cloud solutions. Unsurprisingly, this sort of potential saving is extremely attractive. 2017 saw a landmark deal between IBM and Lloyds Banking Group involving a 10-year contract being signed worth £1.3 billion for cloud services.
Outsourcing will increasingly be a key pillar in any institution’s strategy that wishes to lower costs, ensure service levels remain unaffected and keep up with the constantly evolving financial services environment.
The case for adopting an outsourced approach seems ever clearer - FS organisations can focus on their core business and, crucially, on innovation, whilst achieving cost-savings and efficiency gains. This means they are better-positioned in an increasingly competitive global marketplace. Innovation is key for growth and competitive differentiation. In 2017, the world’s 1000 largest corporate R&D spenders invested over $700bn in innovation2. In 2018, Citigroup alone planned to invest $8bn on IT projects. However, tighter margins have impacted the amount of funding available for investment in innovation which only heightens the importance of optimising operations to release invaluable funds.
Outsourcing will increasingly be a key pillar in any institution’s strategy that wishes to lower costs, ensure service levels remain unaffected and keep up with the constantly evolving financial services environment. The emergence and proliferation of new technologies means that FS organisations may have to engage with a range of providers rather than just opting for one as they seek to gain access to best-in-class solutions and services. Identifying and managing a trusted multi-provider environment and working with boutique companies will create further challenges for FS organisations with an emphasis on flexible commercial models and a highly collaborative approach – relationships and carefully choosing technology partners that can be trusted will be key.
About John Yonker:
John Yonker was appointed to chief executive of Simplitium in September 2018. Prior to joining the firm in 2016, John’s background was in Equities technology. During his 9 years at Credit Suisse (New York / London / Singapore / Hong Kong), he progressed to regional management positions for European and Asia Equities IT Trading and Execution. John then spent 4 years at Macquarie (Hong Kong) as regional Asia IT Operations manager before completing an MBA at HEC Paris (entrepreneurship specialisation) . Upon graduation, he joined Simplitium to develop Simplitium’s insurance service (ModEx) and thereafter filled the role of COO.