The Mounting Migration to Standardization

As organizations gravitate away from highly customized legacy accounting systems and many systems arrive at their end-of-life, Eagle’s Mathieu Benoit highlights several best practices for firms ready to embrace the agility of an open platform

Mathieu Benoit, Consulting Lead

Almost as certain as death and taxes, accounting regulations impacting asset managers will remain in a state of perpetual motion. In Canada, for instance, the next phase of IFRS implementation introduces what KPMG billed in a recent white paper as an “unprecedented level of change”—affecting everything from how financial institutions classify and measure assets to how they account for hedging instruments. The paper, “Ready? Or Not: The Next Phase of IFRS,” also highlights that it is not just the regulations that are changing, but that the more demanding landscape is even forcing organizations to rethink their philosophy around technology altogether. At Eagle, we have seen this translate into a pronounced shift in client preferences from legacy accounting systems to more standardized platforms that offer both agility and the ability to keep up with today’s business needs.

In the past, asset managers generally had little choice but to build highly customized accounting systems. Though this allowed Chief Information Officers to tailor the technology and software capabilities to the unique needs of the back office, it often required running additional systems like Excel in parallel or applying other workarounds to “fill in the gaps.” In turn, these workarounds increased both risk and technology costs related to the management of data and enterprise security.

Fast forward ten years, however, and not only has the number of financial products and asset classes grown considerably in size and sophistication, but also so has the number of complementary applications that are often tied into the accounting system. Adding greater complexity, for many, an accounting system is not solely an accounting system—it can double as a client reporting system, an analytics engine or even a makeshift data warehouse. And while these custom-built systems may produce the required outputs on a day-to-day basis, a new challenge often arises anytime a change is required, whether it is new regulations, a new investment strategy, or even an acquisition. Today, the price of past customizations and workarounds is often measured in units of time and complexity. Time management is also important when processing daily activities, Eagles’ exception-based system helps users to be efficient and effective.

In many ways, the technical debt stemming from customization is what is driving so many asset managers to replace legacy systems. There will almost always be some level of customization but by pivoting to a more standardized platform like Eagle, asset managers are increasingly choosing to start with a clean slate. This allows organizations to more easily absorb new innovations and capabilities. More importantly, it also simplifies the support model, which further positions firms to benefit from industry best practices. Having a trusted 3rd party, such as Eagle, develop and invest in new technology, helps asset managers to leverage industry best practices and avoid having to run a large IT organization.

Orchestrating the Migration

While standardization certainly simplifies most implementations, the transition from a customized model is perhaps the closest many of us will ever come to performing open heart surgery. This is why new system conversions require both thorough planning and flexibility. For instance, if the highest order goal is to instill agility into the back office, creating new workarounds as part of an implementation cuts against the original objective. This is why it is so important to maintain focus on key principles as organizations define and then pursue their goal of a new system. Key principles include:

Define Your Objective Explicitly…

Organizations must identify exactly what it is that they want from the new system. This is why the proof of concept—and what we often see as a model office—is such a foundational component of system selection and the beginning stages of implementation. These exercises ensure the system aligns with the needs of the organization and allow teams to understand how best to envision a new system and operating model before jumping into the larger project.

…While Staying Flexible

At the same time, without understanding why, many organizations automatically try to replicate existing processes and workflows. A new platform presents an opportunity to rethink operational processes and workflows, using new technologies to take advantage of operational efficiencies. This should be a consideration during the earliest stages and communicated to the key constituencies to set expectations and gain buy-in ahead of the conversion.

Embrace Agility

When determining a schedule for implementation, deadlines and milestones are absolutely critical to keep the project progressing. But organizations should not lose sight of the fact that the ultimate objective is deliver the highest quality system possible. If a “go-live” date is scheduled for 18 months after a project begins, a lot can happen between the proof of concept work and the ultimate conversion. Whether it is the introduction of new technology or a strategy change from the front office, it typically serves the organization and actually saves time to stay flexible and factor these new considerations into the initial implementation. Eagle’s approach is to allow for planning to be revisited throughout the project and also foster organizational transparency in order to achieve success in these complex types of projects.

It’s Still All About the Data

It probably seems like a cliché, but data quality remains at the center of every successful conversion. This is why it is so important to create a comprehensive checklist that maps out all of the vendors providing data, how the data is used across the organization, and any potential gaps that may exist. Having the right data management solution with the appropriate policies and controls helps to support the governance model that has been implemented.

We will often suggest that clients go through multiple mock conversions to ensure the data appears as it should. In this ideal state, when the new system is set for parallel adoption, the reward will be a streamlined platform free from any discrepancies necessitating quick fixes and workarounds. It is also not lost on anyone that data quality will only become more critical as organizations look to automate certain back-office functions.

The ongoing move from legacy systems to open, standardized platforms may seem foreign to asset managers who often cite their proprietary investment process or unique quantitative tools among their key differentiators. Yet, the competitive landscape has forced even the largest asset managers to reconsider where their core competencies reside. As the shift to agile platforms that help organizations absorb new capabilities and create new back-office efficiencies truly takes off, the work Eagle has put into building technology that supports these needs will ensure clients are able to redeploy their capital to areas where it can make the greatest difference.

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