Faced with intensifying cost pressures, regulatory shifts, evolving market dynamics and rapid technological change, capital markets firms are seeing the roles of outsourcing and managed services becoming increasingly strategic. But how do they decide what to outsource and what to retain in-house? How can they preserve agility and oversight while handing over key infrastructure? And what separates a successful outsourcing strategy from one that simply shifts the problem?
These were some of the critical questions explored during a recent A-Team Group webinar, Unlocking Competitive Edge with Outsourcing and Managed Services in Trading Technology, sponsored by London Stock Exchange Group Data and Analytics.
The discussion was moderated by Mike O’Hara, Editorial Contributor at TradingTech Insight, and featured insights from Kevin Sweeney, Head of Product Management Strategy, Planning & Operations, FCAT and President of Digital Brokerage Services at Fidelity Investments; Jason West, Group Director, Head of Real-Time Integration Services at LSEG Data & Analytics; and David Berney, Buy Side Trading Consultant at Ergo Consultancy.
Strategic Drivers: From Cost to Capability
While the panellists unanimously agreed that cost control remains a key motivator – particularly for CFOs seeking to transition from CapEx to OpEx – an audience poll revealed a more nuanced perspective. Respondents identified faster innovation and time to market as the greatest potential benefit of outsourcing trading tech functions, followed by access to specialist expertise. Cost reduction ranked equal third, indicating that strategic and capability-driven considerations are taking precedence over pure financial savings.
“Scalability and agility are critical, especially with the increasing pace of innovation in areas like AI,” noted one speaker. Firms want environments that enable rapid development and deployment, without legacy tech constraints. This desire for flexibility is driving widespread adoption of cloud-based services, though the consensus was clear: cloud alone isn’t the answer. “Sometimes you need a fly swatter, not a hammer,” as one participant put it, emphasising fit-for-purpose solutions over tech evangelism.
Another major theme was focus. Outsourcing “utility” components such as FIX connectivity, data normalisation, or regulatory reporting allows firms to concentrate resources on the “secret sauce”, the proprietary capabilities that differentiate them in the market.
Risk management also came into focus. While outsourcing introduces new third-party risks, it can also reduce internal operational risk by delegating specialised functions to providers with focused expertise.
Outsourcing Scope: What Goes and What Stays
Another audience poll reflected an industry in transition: over half of attendees reported exploring outsourcing options but had not yet committed. Notably, none had outsourced core trading operations, highlighting a shared view that alpha generating functions must remain in-house.
Market data management, post-trade processing, infrastructure, and compliance tools were cited as the most viable areas for outsourcing. One speaker outlined how “nearly 90% of what people run on-premise today can be commoditised,” underscoring a shift toward managed services for non-differentiating capabilities.
But the lines aren’t always clear-cut. For example, while execution algos and smart order routers are typically guarded, firms increasingly use vendor frameworks with proprietary overlays. This hybrid model allows for specialisation without full dependency.
Building a Business Case: Beyond the Bottom Line
Building a compelling business case is rarely a straightforward exercise in simple cost comparison. Each scenario is typically bespoke, shaped by the firm’s specific challenges and strategic priorities. While cost is always a consideration, it may not be the primary driver, particularly when outsourcing can address multiple underlying issues or inefficiencies, what one panellist described as “anomalies and edge cases” that firms often just work around.
Instead, key metrics that resonate with senior stakeholders include accelerated time to market, the ability to refocus internal teams on proprietary, value-adding functions, and an honest assessment of whether a task can be performed better or more efficiently by a specialist provider. Faster innovation, improved service quality, and operational robustness often carry more strategic weight than marginal cost reductions.
The panel also cautioned against framing the case around price alone. As one contributor noted, “The objective shouldn’t be a race to zero of pricing.” In many instances, the greatest benefit of outsourcing lies not in reducing cost, but in enhancing capabilities, achieving operational resilience, and delivering superior outcomes for clients.
Partner Selection: Fit, Focus, and Foresight
All speakers stressed the importance of choosing the right provider, not just on capability but on cultural and strategic alignment. “The first question I ask is: am I important to them?” said one executive. It’s vital to determine whether your firm will be a priority, or just another client in the queue.
Due diligence should extend beyond certifications and latency metrics. References, site visits, and evaluation of team quality during proof-of-concept phases were all cited as best practices. Crucially, the relationship must persist beyond the sales pitch. “Don’t let them mark their own homework,” warned a panellist. Independent monitoring and raw data access were recommended to verify service quality and operational outcomes.
Integration and Oversight: The Glue That Holds It Together
Successful integration of outsourced services depends on a clear, collaborative process. Panellists advised structured POCs and MVPs to test fit and scalability before signing long-term contracts. Legacy systems require special attention. Modern APIs help, but alignment on business logic and data standards is essential.
Operational oversight remains a shared responsibility. Firms must implement their own performance monitoring and maintain regular executive engagement with providers. “Outsourcing is not fit-and-forget,” a speaker warned. The best outcomes occur when providers are seen as extensions of the internal team.
What Good Looks Like
Asked to define success, one speaker used a fitting metaphor: “Outsourcing should be like picking the right glove or bat. It should make you better.” The hallmarks of a well-executed strategy include: joint alignment on business goals, agility in response to market conditions, and ongoing optimisation based on shared learning.
Above all, firms must retain ownership of their transformation agendas. As the panel concluded, successful outsourcing is not just about shifting tasks, it’s about shifting mindset. Focus on what differentiates, partner for what doesn’t, and build relationships that enable evolution, not just execution.
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