The flexible deployment of technology using cloud-delivered solutions and hosted services is, in many ways, levelling the playing field with asset management. Historically, using the best systems in large, sophisticated IT architectures to support complex trading strategies was the preserve of the biggest managers.
But in many ways, the rapid evolution of cloud technology has revolutionised what is now possible, with smaller managers equally able to avail of industrial-strength technology without having to worry about how to pay for it all. Advances in cloud delivery access and security are giving asset managers, regardless of size, the opportunity to leverage the latest mission-critical technology tools and analytics from third-party specialists.
This shift from in-house system deployment to outsourced cloud-based solutions has been a key feature of the asset management industry.
“Larger managers have a lot of systems and a lot of legacy issues and they may want to do something new but without having to consider the knock-on effects to existing systems and architecture,” says Roger Woolman (pictured), Business Development Director, Asset Management & Alternatives at SS&C Advent. “If you have a cloud-based system that sits in place like an overlay, and which allows you to introduce a new system on top of the existing IT architecture, then it doesn’t necessarily have to be on premise. It could be a private cloud solution or an outsourced managed service which is also hosted.”
Woolman says that a phased approach is advisable when moving to the cloud. This requires a cultural shift within the organisation to fully exploit the benefits. This phased or ‘hybrid cloud’ approach involves starting with those IT systems that best make sense to be in the cloud and which are relatively easy to integrate. Then, over time, more systems can be migrated to the cloud as part of a long-term strategy.
Some asset managers opt for a wholly on-premise deployment of in-house developed or third party technology solutions; or some combination of both. This model has long been favoured by the largest investment firms thanks to the control and customisation benefits it affords.
However, the cost to implement and maintain this type of infrastructure, and employ the IT staff to support it, has been beyond the budgets of many small and mid-size asset managers. This is why, in Woolman’s view, the ongoing development of cloud delivered technology solutions and hosted services is a game-changer.
“That said, you’ve got to be able to deliver timely information, because that’s often when managers would seek to develop something in-house in the first place. They still want access to their underlying systems, they are just doing so in a different way, via the private cloud environment,” he says.
One can think of cloud deployment evolution in a similar way to software solutions. Years ago, just as it increasingly made less sense for managers to build their own software, and led to increased use of third party software providers, similar conversations now take place in terms of software deployment. And, to some extent, the outsourcing of automated daily tasks such as reconciliations and middle-office tasks.
“Why would you build software when you’re not in the business of building software? We’ve extended that logic to cloud services. If you want to solve something quickly, the private cloud allows people to act more quickly without having to jump through a lot of IT hoops.
“Today, firms have much greater choice and flexibility in how they structure their technology and operational environments,” comments Woolman.
There are numerous advantages to using cloud-deployed technology. They include: business responsiveness; reduced total cost of ownership; greater flexibility to increase capacity as the business grows; expanded accessibility, and more time for employees to focus on core, value-added activities.
With cloud technologies, firms no longer face a significant upfront and ongoing in-house infrastructure and system maintenance burden. Instead, they get on-tap scalability, reliability and operational flexibility, with faster system deployment, simplified maintenance and upgrade processes, guaranteed business continuity and disaster recovery, and a lower total cost of ownership.
The business continuity point is actually key. Institutional investors are looking closely at BC plans before allocating to managers, seeking assurances that if a major event (terrorism or natural catastrophe) prevented them from getting to the office, it would still be business as usual. Those who continue to rely solely on on-premise system architectures cannot necessarily provide that assurance.
Also, when a firm uses cloud-deployed software they can concentrate on things like the security aspects.
“If there’s less for them to do in terms of managing that environment they can concentrate on core tasks, in terms of servicing investors and making sound investment decisions, rather than having to think as much about operational considerations. It adds value if you’ve got a secure offering in a private cloud,” says Woolman.
He says that system agility is key to harnessing the full potential of the cloud, as is system consolidation. The rationalisation and simplification of multiple connected IT systems is a step towards that agility, as is the method of deployment/hosting. “The goal here is business responsiveness, supported by that system approach,” adds Woolman.
Oftentimes, firms take a policy-based approach as they move software off premise and into the cloud. In some cases, managers end up changing vendors because their current software doesn’t have the requisite functionality to be hosted in the cloud.
“We take these things for granted and assume it is a simple process of moving software from one place to another. But it’s not as straightforward as that. It depends what the architecture looks like and what the on-premise deployment looks like. Some solutions aren’t naturally suited to the cloud.
“In terms of outsourcing, we also handle regulatory reporting through a dedicated portal that clients can use as a one-stop-shop for all of their regulatory reporting needs. It’s hosted and can be accessed from anywhere. There are various deployment methods and flexibility when outsourcing and regulation is an excellent example; it’s always evolving and there’s always new regulation for compliance teams to keep up to date with.
“Another piece we see outsourced a lot is the middle-office reconciliation piece,” says Woolman.
Regardless of what software solutions are used to support middle- and back-office services, the key to everything is flexible deployment. Each manager’s operational and investment needs will vary. Some will want to maintain all their technology and operational capabilities on-premise, while others seek some degree of cloud-delivered technology and/or co-sourced or outsourced operational services.
This a la carte approach suits firms who are in the process of moving across to cloud deployment.
When asked what future innovation he would like to see, Woolman concludes:
“The cloud needs to be fully exploited to lead to a self-servicing culture. This will require both innovation of applications and systems but also innovation in business. Ultimately the cloud is playing a supporting role that should lead to new ways of doing business.”