Ignites Video Part 1: Key Considerations in the Outsourcing Debate

Tom Secaur, Citisoft Inc.'s COO, speaks with Ignites on the investment operations outsourcing market, its drivers, and the considerations required when evaluating outsourcing suitability. You can find the video here (subsciption required).

Highlight's of the conversation include:

Ignites: “So in terms of outsourcing, what is the biggest driver of firms to at least look at outsourcing?”

Tom Secaur:  “Well, I think there’s multiple drivers. I don’t think there’s any one that you could just say OK, we need to outsource because of cost, let’s say. I mean, cost is obviously a driver. But you also have to look at the technology itself, look at the platforms that you’re running. Can you gain some efficiencies from a technology standpoint by looking at that as a driver? Efficiency from a pure operational standpoint, I think you should look at that and see if you can gain some efficiencies by outsourcing middle office, whether it’s the full middle office or whether you look at something called “component outsourcing” where you might offload some of your transaction services or go to more of an à la carte menu where you look at differentiators such as client reporting, fee billing, performance measurement, all of which are being outsourced in today’s market.”

Ignites: “So you work with investment companies all the time about thinking about outsourcing. What makes an investment manager a good candidate for outsourcing the middle office?”

Tom Secaur:  “That’s a good question. It’s not right for everybody. I’ve had service providers tell me that in off-the-record conversations, if you will. It isn’t necessarily right for everybody. But I think the investment managers these days are doing themselves a disservice to not at least take a look at it. As I mentioned before, whether it was a component outsourcing play or whether you’re going to look at it from a full middle office standpoint.

“Cost, first and foremost, is something that the firms are going to take a look at. Again, it’s not always cheaper to outsource. I think you need to take a look at that. And what we are seeing is the investment managers take an inward look at their head count, where are they performing their operations. Sometimes they are in high cost centers that may not be the best option going forward. They need to take a look at are they equipped for the regulatory changes coming down the pike. They need to look at are they prepared to go into markets where they haven’t played before, and service providers can help provide leverage in those cases.”