Within the investment management industry there is a key theme doing more with less as margins have declined by 12% . There is a need to do more in terms of regulation, transparency and the management of risk. There is a requirement to do less - in terms of reducing costs and ensuring more efficient use of systems and resources, DST Global Solutions are working with clients on three areas - challenging the assumptions on which the operating model has been established, second, refining processes and practices and thirdly seeking out initiatives that provide small term savings. Arun Sarwal discusses.
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Transcript
Transcript
At DST Global Solutions, what we’re seeing in the Investment Management Industry is a key theme which is doing more with less. The operating margins of the investment industry over the course of last year, on average have declined by around 12% and this is supported by a number of surveys that have been done in the industry. Doing more, the need to do more in terms of regulation, in terms of transparency of information (to the stakeholders) and much more rigorous risk management. Less and clearly reduced costs. Also more efficient systems and processes. All equalling the utilisation of resources more effectively. But how does this translate into practice?
We’re working with our clients on 3 areas:
- Challenging the assumptions on which the operating models have been based.
- Refining processes and practices.
- Seeking out initiatives and ideas that provide short term savings.
So how does on challenge the assumption on which the operating model is built?
There are two areas where I can give you examples. The first one is focusing on the areas that give competitive advantage. There are various processes and applications that could be deployed on an ASP or a SAS basis without compromising the competitiveness of the company. Client reporting, risk, performance measurement- are examples of that. The second one is challenging the assumptions regarding proprietarily systems. Most areas of the industry are well endowed with applications for third party providers. I would suggest that is another area where looking at appropriate and relevant applications would make sense. The net consequence of that would be reduced cost, but more importantly being applications that are deployed across the industry means that they have an element of future proofing to maintain their alignment with the developments. So whilst getting cost efficiency, one is also getting both scalability and the strategic path going forward.
So how can clients go about refining the operating model?
Traditionally organisations have grown across locations and choices have been made location by location on systems. The net result of that is multiple systems and applications across a global footprint of an organisation. Whilst one can understand the need for that in the fund accounting arena where jurisdictional necessity demands that, there are other areas like performance measurement where the way its done across the globe is consistent. Therefore having multiple systems is not a necessity and in fact leads to multiple sets of teams to support it and multiple vendor relationships. But most importantly multiple data stores leading to challenges of consistency and the challenges thereafter of aggregating that information. So really one needs to ask the question – are there systems across the organisation that can be deployed on a global basis?
So how does one go about identifying initiatives for short term gains and savings?
Start by categorising the spend on IT, both applications and services. Identify multiple providers of similar capability. The duplication and overlaps, looking for consolidation is an obvious place to start. But not only that- look further afield. Look at service elements as well. There are a number of activities that have always been done inhouse, but there may be alternative ways of achieving the same end. We’re working with one of our larger clients where their mission critical application has been supported by an operational team inhouse. They’ve questioned the need for that and working with them we’ve come up with a very attractive proposition. We can provide that service on an outsource basis and it lead to 2 key benefits for them.
Firstly they overcome the challenge of maintaining the level of experience for that pool of resources. Secondly, given that we have a global group of people experienced in supporting that application, they will also have the opportunity to alleviate any challenges that will come for seasonality and the peaks and troughs as a result.
In summary what is the key theme in attempting to more with less?
Its all about challenging the status quo . This exposes the assumptions on which the business and the operating model were built. Many of which may no longer be valid, given the change in the environment. Investment business in the industry is very fast moving and one needs to adapt and change inline with the environment. Whether that’s regulatory, fiscal or economic. As Darwin once said- it’s not the strongest species that survives, it’s the one that’s most adaptable.
At DST Global Solutions we have restated our focus as being about optimising investment businesses and doing that on an ongoing basis, bearing in mind that the only constant is change.
