On Tuesday, we release our 2016 outlook, Sweet Sixteen—16 Trends that Are Shaking Up Asset Management Technology and Operations in 2016. If you’re short on time, we broke down four of the most-talked about trends that we believe will influence the industry in the coming year below.
Download Sweet Sixteen—16 Trends for 2016
Advent. PORTIA. SunGard. DST. Equipos. CADIS. Wall Street Office. thinkFolio. Varden. QED. Bonaire. What do these names have in common? The answer should be pretty easy if you are a regular reader of our blog pieces or a student of the FinTech space. They were all once formidable companies and/or software products in the buy side asset management technology world, prior to being targeted and acquired by their new, respective parent companies. In some cases, the acquirer has invested back into the product, and the current version of the product continues to gain market share and move aggressively forward
in their target market(s). In other cases, the acquisitions were blatant market share grabs of
software products that had long since moved into the “cash cow” phase of their existence. Regardless of how you view these acquisitions, it’s hard to make the case that the run on vendors in our space is a positive development. The consolidation over the past 3-5 years has left the industry with precious few choices with which to entrust functions vital to their business—OMS, Portfolio Accounting, Middle Office Outsourcing, and Client Reporting have all been impacted. There are a few functional areas in which we are seeing new entrants—Enterprise Data Management comes to mind—however that is the exception and not the rule. In most cases, we simply have not seen viable newcomers take the place of those cash cows that have been acquired and ‘milked’ by their new parent.
Since the financial crisis, the speed at which governing bodies have rolled out new regulation
has not slowed and we don’t foresee the pace letting up any time soon. Solvency II, MiFID II,
money fund rules, liquidity disclosures, and derivatives trading rules (just to name a few) have
had a significant impact on investment managers, service providers, and technology vendors. To borrow a quote from a client’s senior executive, “compliance is driving the ship.”
Being nimble enough to proactively address new regulations will become a focus in 2016. Unfortunately, it is a significant challenge for smaller managers to absorb the operational
and technology costs of compliance as stress on margins and profitability grows in a tumultuous global market. We expect these managers with resource limitations to look externally to help them address and meet regulatory requirements.
Despite the growing challenges of a complex regulatory landscape, most of us would agree that maintaining investor trust is paramount to our collective success. While adapting to new
regulation is costly, it will ultimately help us achieve transparency and rebuild trust.
Technology disruption is top of mind when considering our rapidly changing world and the many industries that are being transformed. Few businesses have emerged unscathed once the disruptors hit—hoteling, television, cars, newspapers, retail, and music have been turned upside-down overnight. Depending on what you read, Financial Services is up next; or at least, that’s what several talking heads (or serial bloggers) want you to believe. At Citisoft, we’re a bit more balanced (or skeptical). Maybe it’s the fact that most of our clients are still tethered to their Blackberry’s (against their will); maybe it’s because every time we map out a current state workflow, the data is often moved from Point A to Point B in much the same fashion as it was 20 years ago; or maybe it’s the simple fact that the saturated regulatory-driven marketplace forces the industry to move at a glacial pace.
Despite the fact that our industry is a notoriously slow adopter of bleeding edge technology, that doesn’t mean that investments aren’t being made. In fact, we have had multiple conversations of late with some of the largest vendors and service providers in our space and
they are bullish on disruption in the short-term, primarily as it pertains to big data analytics and its push into the front office. Is this the second coming of Uber, Airbnb or Netflix? No, but it is certainly noteworthy for our industry. The fact that multiple solutions providers are
spending time with Silicon Valley-based firms, hiring data scientists, and investing in “think tanks” with the likes of Stanford, MIT, Harvard, and Cal Berkeley, certainly portends that a change is coming. FinTech is changing, certainly – we’re sure you’ll hear quite a bit in the coming months about blockchain, machine learning, cloud-based services, reference data
consolidation and the like. Looking ahead to 2016, our money is on the continued transformation of data-driven solutions across the asset management lifecycle, and a continued convergence of the front and middle office.
If you’ve been in the asset management industry for any length of time (let’s call it 10+ years), you’ve seen a sea of change not only in the vendor products and service providers that cater to the space, but also in the deployment options and solution models utilized by the major players in the market. It wasn’t all that long ago that the major question was “buy” or “build”. These days, the question is not so simple. Depending on the business function being considered, solution options may include outsourcing, managed services, SaaS, PaaS, onshore/offshore, cloud-based solutions or a hybrid combination of these models.
It certainly appears that the trend towards the cloud and its cousins (read: outsourcing, SaaS,
PaaS) will continue to usurp the installed software market; a 2014 CEB TowerGroup report maintains that 71% of firms intend to adopt cloud-based solutions or increase its usage by 2017. This doesn’t mean that the adoption of all things cloud and managed services is without its challenges – there are still concerns around data security, compliance, and integration challenges often associated with the full embrace of the cloud. However, we believe that these hurdles will be overcome in time; the massive benefits are too hard to ignore. The reduction of application hosting overhead and maintenance, increased scalability, and a lower cost of ownership are all feathers in the cap for going down the cloud
based computing path. Those vendors or service providers that are not investing heavily in making these deployment options a reality will soon go the way of the dinosaur.