Outsourcing and the Evolving Client-Vendor Relationship

Antony Slee, Regional Sales Director

As the information age transitions into the age of insight, financial services companies and investment organisations are shifting how data is consumed by the business. Consequently, the traditional role of the vendor is changing significantly.

Recently, Eagle participated in a panel at TSAM Europe 2016 in which we explored how stronger and more resilient third-party partnerships are resulting from the growing movement of asset managers who outsource or co-source their data management functions. During this discussion, one particular comment stood out. A panelist described the evolving focus for investment managers—from data, to information, to knowledge, to insight—concluding that there is now a push to go one step further by deriving business value from that insight. This progression, from simply focusing on data to value-driving insight, perfectly captures what we are seeing at Eagle.

Delivering value

This focus on value has seen a shift away from cost being the leading driver for firms when considering how best to manage their data. Of course, vendors need to provide cost effective solutions but the conversations we at Eagle have with our clients have moved far beyond the transactional “this price for these products.” The dialogue today is often more focused on outlining the specific problems clients are looking to solve and the accompanying business goals they want to achieve. Even at the earliest stages of a relationship, clients want to see the value the vendor can deliver to the organisation in enabling them to meet their goals.

The panel then explored the subject further, discussing specific examples of value, with one of the prevailing objectives from asset managers today being greater agility in order to readily pursue new opportunities. When it comes to vendor selection, therefore, organisations are looking for technology and software to support these efforts either by freeing up resources internally—to focus on different value-adding areas of the business—or by providing tools that can deliver new insights, support growth and enable the rapid adoption of new products.

In order to satisfy this requirement, vendors should be able to reflect this need for agility by being adaptable themselves. Offering more flexible deployment options, software that can be employed by business users and managed services that aim to absorb the more rote functions for clients, some vendors are doing just that.

Outsourcing, whether it is the provision of hosted solutions via the cloud or comprehensive outsourcing of the middle office, is an obvious way firms have become more agile, particularly since 2008. However, the perception among many is that operational outsourcing is a binary decision—you either do it in totality or do not do it at all. In fact, many vendors have been guilty of perpetuating this perception by offering a limited selection of deployment options. The fact is that the most effective solution, and the one that best fits the client’s strategic and operational needs, may be to outsource certain functions or processes while retaining others in-house.

Vendor evaluation

This move towards outsourcing has led to a change in how vendors are evaluated—and now the entire packaged solution has become more important, particularly as clients assess how their needs may change as their business grows. While the “tick-box” element of an RFP is still alive and well, clients are increasingly looking at “softer” factors as part of the procurement process. One way this has manifested is in the growth of proof of concepts (PoC) in the selection process. This exercise measures the vendor’s capability to deliver against the requirements of the project in order to provide a more nuanced understanding of how the solution will meet the client’s specific needs.

Furthermore, firms are paying closer attention to the credentials of the vendor itself, with firms more than ever looking to build long-term relationships. Vendor selection is increasingly being viewed with a five- to ten-year horizon. Solution providers now need to satisfy questions about their ability to not only support but also match the growth ambitions of the client, about their commitment to R&D and whether, frankly, they will be around for that length of time. These types of questions have taken greater prominence following the consolidation efforts across the vendor universe in recent years.

The vendor also has an elevated role to play in helping the Chief Operating Officer (COO) sell the solution internally. The COO may not necessarily understand all the benefits the new solution will deliver instead focusing firmly on delivering against core objectives. As a result, the ancillary benefits of a new solution can often be overlooked. The vendor, having the experience of other implementations, can help articulate the additional value in order to give the COO as much support as possible when making the case to the executive committee. Solution providers also have a role to play in setting expectations and determining deliverables. If the executive committee is looking for results six months into a multi-year transformation, the vendor needs to focus on areas that will add the most value in the shortest time and set deliverables against those. The solution provider should be well placed to advise on this as well as to appreciate those demands.

Delivering a ‘return on relationship’

As investment firms look to do more with both their data and technology, the fates of vendors and clients are increasingly intertwined. With such a focus on vendors’ ability to not only provide solutions and delivery options but also demonstrable value from their use, clients’ expectations are higher than ever. As a result, vendors are being asked to demonstrate more than the traditional return on investment, but rather a more expansive return on relationship.

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