2008 will be the year when we see how serious firms are about reference data. This is a phrase I’ve borrowed from a leading industry observer because I think it aptly sums up the general thinking of those involved in reference data as the new year kicks off.
Without wishing to be unnecessarily gloomy, the massive write-downs being reported by the world’s biggest banks and the lay-offs they have already led to do not augur well, and during every discussion of the progress being made in the reference data space in the run-up to the end of 2007 and since the beginning of 2008, the elephant in the room has been the fall-out of sub-prime. Will the uncertainty in the markets dampen firms’ appetite to invest in improving their data and data management capabilities?
Are chief data officers, enterprise data management strategies and a devotion to the minutiae of accurate reference data the preserve of booming markets, or can dedication to this cause endure a short-term or even longer-term downturn? Writing as one who battled for several years after the dot com bubble burst to advocate the cause of STP to a readership no less sold on the benefits of middle and back office process improvement but cut off at the knees when it came to actually spending any money on it, I could be forgiven I think for being slightly pessimistic about the prospect for ongoing commitment to reference data.
However, the good news is that while the origins of the current industry focus on data management do in part lie in the area of STP and trade processing efficiency, since those early days in which poor reference data was identified as a key cause of trade failure, a realisation has taken place that reference data is a far more mission critical component of firms’ infrastructures even than that. Indeed, we owe the very creation of chief data officers and the formulation of EDM strategies to that realisation – that without consistent reference data, not just for instruments but for counterparties, it is impossible to ensure that risk management, regulatory compliance and even revenue-generating front office activities are up to snuff.
Anecdotally, we hear that while firms are scrutinising the projects they have under way with a view to slashing costs, they are leaving their data projects untouched – and this is obviously very encouraging. Doubtless there will be greater pressure to demonstrate tangible business benefits from investment in data and data management, but that pressure has been there all along, hence the focus of bodies like the EDM Council on metrics.
It has always been challenging to build a business case for the esoteric activity of data management, and it might get harder still, but the industry has been putting in place the necessary tools for this job for some time. If industry participants’ budgets do get tighter, then it will be down to the supply side of the market to be clever in its response to this contraction. This will mean playing up some of the innovation already under way in terms of delivering cost-effective service-driven technology solutions, including ASP and software as a service, and the packaging of data in a way that is tailored to clients’ needs and enables them to pay only for what they want and actually use.
But this is standard practice in an industry that is maturing, and if the data and data management system suppliers are serious about reference data, should be a fairly logical way to proceed whatever happens in the economy more broadly. A-Team certainly remains serious about reference data – never more so, as you’ll see when you check out our new online resource at ReferenceDataReview.com!