In 1992, working on Wall Street, I witnessed Citibank ask their London and New York operations to design and develop exactly the same system. In competition, in parallel. The best solution would be selected and implemented; the losing system would be discarded. The teams undertook their development in deliberate isolation. While I don’t recall the name of the winning solution now, there was considerable effort devoted on both sides of the project and ultimately, the best system won.
In the mid-1990s, I managed the selection and implementation of an investment management system (SS&C’s CAMRA in its younger days) for the Bank of Bermuda. The list of suitable systems was long, the vendors were keen—they fought hard to win our business.
Why am I reminiscing? There was a time—not so long ago—when software vendors and financial services organizations actually developed systems. They had teams of designers and developers; they spent large amounts of money; they produced products that were used, shakily at first, but subsequently very successfully. In fact, the systems we developed then are the systems being used today, particularly at service providers.
Where is that commitment to development now? I will point you to our COO Tom Secaur’s excellent blog “Vendor Consolidation = Vendor Risk.” As Tom notes, an asset manager today wanting to rework their systems and operating model is left with a seriously disappointingly short list of possibilities. If you want to buy, the list is perhaps two or three. If you want to go the service provider route, the choice is maybe four.
As I hint above, my guess is that the majority of the core systems available are probably 15 or more years old. Worse, the reduced number of options means that vendors and service providers now hold the power, not the client. Increasingly, we are seeing vendors and service providers telling clients when they will let the client undertake the implementation, i.e. the “window” in which the service provider will be able to perform the conversion with a start date and timeline set by the vendor/service provider, not by the client.
It’s a far cry from the landscape 15 years ago. Our clients are being shorted: lack of choice with regard to solutions; lack of control/choice with regard to how/when these solutions can be implemented.
Is there a chance that this picture will change? Every day we receive blogs and emails touting the fintech revolution. Billions of dollars in startup investment. Disruptive innovation. Blockchain.
Great. But when are we going to see some of this hype converted into action, with real system development that is useable by the investment management industry?
I hope it is going to be soon. If not, it will continue to be a frustrating time to be a consultant or a client in our industry.