Ignites Video Part 2: How Middle-Office Outsourcing Has Evolved

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 Part Two of this conversation with Ignites include:

Ignites: “Now, middle-office outsourcing, firms tried it a few years ago. Didn’t have always the best experience with it. But I’ve heard that the service providers have really made some efforts in the past few years to enhance their offerings. Is that the case, and how are they better now?”

Tom Secaur: “I think the service providers themselves would admit that a few years back, it was fairly immature; it was a fairly immature market, and it’s getting there. And I think we are seeing an evolution with the service providers themselves. It’s much more viable than it was three, four, five years ago, even two years ago. The platforms themselves are being augmented with additional technologies as the functions themselves move kind of higher up the food chain, if you will. They’re moving into areas which I think a few years back they wouldn’t even have been a candidate to be outsourced. I’ve referenced client reporting in the past, performance measurement, fee billing, getting the better handle around the data management aspects. All of those areas are areas where the service provider has made tremendous investments over the past few years in providing a better service to the investment manager.”

Ignites: “Speaking about service and some of the potential opportunities and pitfalls about going with an outsourcing provider, how important is it to look at the actual service portion back to your front office, your back office, and is that a potential pitfall in implementing middle-office outsourcing?”

Tom Secaur: “I think it is. I think it’s arguably that the single biggest aspect that you need to look at. It’s a pitfall because oftentimes the investment managers, they view outsourcing as just moving their headache to the service provider. You can’t look at it that way. This is a partnership. Most of the contracts are three, five years plus. You’re not just outsourcing your headache. You are jumping in with both feet, working in a partner-type relationship with the service provider. You’re going to be working hand in hand with them. “So what they haven’t done in the past, and I think they are getting there, is they haven’t looked at and said OK, this is our current state technology model. This is our current state operational model. This is our current state information delivery model. They are all going to change as you move over to the service provider. So the investment manager really needs to understand that this is an investment in the service provider and vice versa. They really need to make sure that they look at that future state model across all three facets and cater to that realm.”