The Big Question: What does the future operating model look like?
Four operations experts share their views on what the future holds and whether firms will be outsourcing, co-sourcing, or moving expertise back in house.
Sara Benwellposted on Tuesday, March 02, 2021
- Shirley Williams, Assistant Vice President, Financial Management Services, American Fidelity
- Rick Barnett, Vice President of Investments, Sagen
- Dennis Moore, Senior Sales Executive, SS&C Technologies
- Amanda Telhu – Sharma, Manager of Investment Accounting & Operations, Sagen
Sara Benwell: What do you think the future operating model looks like? Is it full or partial selective business process outsourcing? What innovations are coming down the track, and how are you structuring operations to meet the challenges of the future?
Shirley Williams: I would say our biggest obstacle has been outdated technology. Before five years ago, most of our systems were homegrown mainframe; since we've spent a lot of money and energy updating technology.
We've updated our general ledger, claims, and reserve systems, with still a few more to go.
We've also started doing some of our repetitive processing with AI technology and have gained a lot of efficiencies. I'm really looking forward to the future and seeing the fruits of our labour with new technology in production.
“We've also started doing some of our repetitive processing with AI technology and have gained a lot of efficiencies”
One of the things we are excited about is migrating to cloud based solutions and working on seamless communication and processes between our front office, middle office, and back office with our investment team and custodial banks.
The company has grown to a scalable size where it is easier to cost-justify and find benefits with automation so we can work smarter, not harder.
Rick Barnett: Personally, I think economies of scale is big in the market right now.
I see lots of consolidation amongst the smaller and mid-tier markets moving out of the in-house type models, to more of an outsourcing model for at least from a front office investments perspective.
“I see lots of consolidation amongst the smaller and mid-tier markets”
I see that continuing, particularly as people are looking for a broader asset classes that they're not used to managing or don't have the expertise to manage in-house.
An example would be emerging market debt or equities, where I think firms are going to be looking more from an outsourcing perspective.
Dennis Moore: First and foremost, investment managers licensing software and installing on-premise within their own environment is very rare these days, as there's been a huge shift to vendor cloud hosted solutions at a minimum.
But there's also a big trend in outsourcing all or part of their middle and back office operations.
“While cost is a consideration, firms remain hyper focused on cybersecurity”
I think a lot of investment managers are taking a hard look at what they consider to be their core competencies that should be retained internally and which functions are non-core to their business and can be outsourced to get better access to expertise, gain scalability and to free up people for more high value add functions.
As people look at the cloud, they're also evaluating public cloud providers as well as more private vendor cloud providers.
While cost is a consideration, firms remain hyper focused on cybersecurity, information security, preventing data breaches, and having the proper controls in place.
Amanda Sharma: This year was actually super challenging for us because we had to rebuild our existing operational environment. That really forced us to take that top-down approach, looking at what was core, what was not core, what do we want to keep in-house, what needs to be supported etc.
It was stripping it all apart and really looking at the entire process end-to-end and then putting together a plan and executing it.
“This year was actually super challenging for us because we had to rebuild our existing operational environment”
Ultimately, we did land on a core sourcing type model where we do have a portion of the work being outsourced, but then we also have some in-house staff.
So it's that collaborative framework then between in-house and outsourcing partners to essentially achieve the goals of the business.
So far, we've seen a lot of efficiency gains just by updating technology, revamping and just really understanding what is needed, what's core and how do we want to move forward with this transformation.