With all the hype around front-to-back outsourcing platforms, the vendor arms race to deliver the holistic outsourcing solution, and the service providers’ strategic move into the front office, it’s easy to lose sight of the numerous asset managers who are still partnered with their original middle office service provider. This is especially true of those who were early adopters of outsourcing and may be on first or second generation platforms (i.e., before the current front-to-back/vendor consolidation frenzy started to monopolize their service provider’s attention).
How are these asset managers’ operating models holding up?
Are the service providers delivering on the business objectives and drivers that guided the initial outsourcing decision?
Is the outsourcing servicing model evolving to satisfy the asset manager’s current strategic requirements?
If their needs are indeed being met, is it at a fair price?
If you are like most asset managers who have outsourced middle office services in the past 5-10 years (or longer for the early adopters), you’ve felt the growing pains of the evolving outsourced service model. You’ve also likely had to MacGyver solutions in-house to make up for gaps in services that just weren’t quite ready to meet your increasingly complex business needs. It is likely that you’ve experienced the inertia of suffering through the pain/unmet requirements of your outsourced relationship rather than considering the large-scale change effort that switching providers entails, including the onerous task of evaluating and selecting a new outsourcing solution.
But fear not, there is an option for cutting through this inertia and assessing your services contract without undertaking the full weight of an evaluation and selection effort. Citisoft’s Benchmarking Service allows asset management firms, in a relatively painless manner, to assess the scope of services and pricing of their current provider against comparable (and current) offerings in the marketplace.
If you are struggling with any of the following questions (but are not quite ready to make the leap to evaluating and selecting a new outsource provider), this service may be the right option for you.
Does my current middle office service match my current needs?
You transitioned to an outsourced model five or more years ago with some known gaps in functionality and service. Have those gaps been resolved? Has the service provider evolved with your business? Are you receiving the full scope of services to match your current investment product offerings? Investment strategy and client mandates? Asset types? Is your service provider being kept abreast of your changing business requirements, and enhancing their offering to match your evolving needs? Is your service provider relationship a true partnership?
Are you running additional systems/workarounds in-house to cover gaps in your outsourced middle office?
Am I on my service provider’s strategic operating model/application architecture?
It is highly likely that your service provider has acquired and/or implemented new technologies (e.g., accounting systems, data management platforms, asset-specific applications) since your initial transition. Are your assets being serviced on their strategic platform, ensuring you are on the most current, integrated versions of their newly acquired/enhanced applications (where the bulk of their energy and strategic spend is allocated)?
If you were a new client, would your service provider propose your current service model/application architecture?
Am I paying a fair market price?
This is a bit of a trick question. Middle office services are not a cookie cutter commodity, and therefore are not priced as such. Despite the various and oft-quoted “rules of thumb” or “industry benchmarks” that may give a generic indication of outsourcing costs, it is not easy to know if your all-in cost is appropriate for the services you are receiving. What services are in scope? How complex is your book of business? What are your transaction volumes, asset mix, account complexities, assets under management? These variables all factor into the cost of service, and the evaluation of fair market price. The evaluation of these factors should not be taken lightly when assessing whether the value received from your current provider is commensurate with your personal client experience.
Regardless of your rationale for assessing your current outsourcing relationship, or appetite for change, a benchmarking exercise will provide transparency into the appropriateness of your current scope of outsourcing services and the commercial relevance of your current outsourcing agreement.
The results of the benchmarking exercise will put your firm in a more knowledgeable position moving forward, whether the goal is renewal or renegotiation from a position of strength with your current provider or entertaining a potential provider switch. If a more thorough understanding of how your middle office outsourcing model stacks up to the current market, it may be time to reassess your service provider relationship.
Citisoft Benchmarking Services can help you painlessly assess your middle office services but is also available to help you efficiently benchmark any of your other services or software solutions. For more information on how this service might be a fit for your organization, please reach out here.