Picked-Up Pieces: Musings in the Midst of the Pandemic

As I’ve done in previous blogs, I’ll do my best to capture some of my views and opinions on the state of our industry as we wade into our third month of virtual, remote working during the COVID pandemic. Here are my “picked-up pieces” and thoughts as I continue to adjust to my work from home environment.

Citisoft’s Next Generation Operating Model Webcast  

We recently conducted a very well attended virtual webcast with industry colleagues from BNY Mellon, Northern Trust, and State Street. It was a lively hour of content touching on the impact of COVID, the future of outsourcing, the evolution of the middle office, and some crystal ball prognostications from our panelists. It was a pleasure to host these industry experts, as it was a rare opportunity to listen to the insights from these executives that are often competing for the services of asset managers. There is no right answer when it comes to designing a fit-for-purpose operating model in our space, and the three participants all shone brightly and acquitted themselves well over the course of the webcast as they presented their approach to solving today’s operations and technology challenges.

Unicorn Projects

Pre-pandemic, I was attending a celebratory dinner and drinks (remember those days?!?) with a client after having hit a series of milestones on a multi-year, multi-phased transformation program. Our client sponsor remarked that it was a “unicorn” project, which is a term or categorization that I hadn’t quite heard in this realm. He explained that in his experience, it was truly unique to be able to put together a team of like-minded individuals that were laser-focused on a singular set of tasks. I’ve likely over-used a few idioms in my career—“it’s all about the people” and “the software works”—when describing project-based experiences. 

As far as the people, it’s really quite simple: putting together successful teams with clearly defined roles and responsibilities is integral to any successful initiative. The talent really does matter and is often the single biggest risk factor and the single biggest success factor on any project or program.

My “software works” commentary, while slightly naïve, is meant to imply that with enough analysis, planning, and testing, the software or service itself is not necessarily going to prevent you from hitting your milestones. All too often, I hear asset managers throw their slings and arrows at our vendor community and complain about a specific platform, when the majority of the blame should be placed on poorly planned implementations and a lack of care and feeding from the asset manager itself. Again, it comes down to the people, not the software in most cases.

The Arms Race Continues

As we wade further into 2020, pandemic or no pandemic, the major service providers and software vendors are not sitting still. If you’ve been paying attention to the vendor marketplace and/or reading our blogs, you likely are up to speed that there is a bit of an arms race taking place. These battles are not relegated to the front-line acquisitions, partnership announcements, and other assorted “news” made by the likes of State Street, Northern Trust, BNY Mellon, BlackRock, SimCorp, SEI, or SS&C. The race is indeed on across the asset management technology and operations landscape as the various solutions providers look to aggressively augment their offerings and move into both new functional areas and target markets.

 As we’ve stated several times in our various thought leadership media over the past few years, the perceived walls between the front and middle office are coming down rapidly―as a result, vendors historically focused on the middle and back office have moved into the front office in rapid fashion. Front-to-back offerings, as well as outsourced trading, are now very real options for firms looking to transform and streamline their operating models. Underscoring all of this is a race for talent. On a daily basis, I’m receiving LinkedIn alerts of yet another industry colleague moving from one software vendor or service provider to a competitor. Frankly, it’s a bit hard to keep track of it all, but it’s really not all that surprising. The ultimate winners of this arms race will be the firms that target and hire the best people (see above).

Outsourcing—Four-Letter Word

Citisoft’s Outlook 2020 paper touched on laying the foundation for future operations and redefining how you think about the front, middle, and back office. In the latter portion of the paper, we discuss a potential scenario in which asset managers—and potentially even the service providers that offer various forms of outsourced operating models—begin to refrain from using the (at times) dreaded word “outsourcing.” Re-thinking your operating model on a regular basis is imperative in our industry, especially given the transformative changes that are impacting many firms―increased M&A activity, continued market volatility, and the proliferation of alternative and multi-asset products are challenging most firms in these uncertain times. Prevalent business drivers specific to operating model transformation include scalability, efficiency, flexibility, and of course resiliency, the latter of which has been top of mind during the pandemic.

We have implored our asset management clients for some time now to put outsourcing solutions and services on a level playing field with more traditional software vendors, especially when it comes to middle and back office functions and services. Asset managers of all stripes (institutional, retail, asset owners) should be looking to partner with forward-looking service providers and software vendors that are moving towards cloud-based, managed service offerings, if not full-blown outsourcing solutions. Whether you choose to continue using the term “outsourcing” is up to you; I prefer to use the word “partnering” and pushing our clients and industry colleagues to re-think their challenges. At the end of the day, it’s really about finding the right solution for your firm, regardless of who is performing the critical functions that are integral to any well-run operational enterprise.

As always, I welcome your comments and always enjoy a healthy debate on any of the above.

Stay safe, stay home, stay healthy.