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A-Team Analysis: A New Dawn for Managed Reference Data Services?

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The enterprise data management (EDM) systems marketplace has entered a new phase, as a rash of recent corporate activity and a general maturing of the providers and their offerings is enabling speedier implementations and faster returns, engendering new confidence in the value of EDM projects. The managed data services proposition has also been injected with a new lease of life, as the shortcomings in execution of outsourcing strategies by putative providers in the past are addressed.

These were the messages coming loud and clear from the assembled EDM vendors at Swift’s Sibos conference in Boston earlier this month – where the subject of EDM was even honoured with a slot in the main conference session. But is this a true reflection of the EDM industry, or just so much spin?

It’s certainly true that despite some recent consolidation in the space, new providers continue to enter into it, notably of course Reuters with its new Enterprise Platform proposition, envisaged as bringing together real-time and reference data in a single infrastructure.

EDM heavyweight Asset Control was also taking advantage of its presence at Sibos to spread the message that true enterprise data strategies encompass not just middle and back office data needs but the front office as well. Its CEO Phil Lynch (who took over from Ger Rosenkamp when Fidelity Ventures bought the vendor and simultaneously acquired TAP earlier this year, said he is moving the company “in a new direction”, which will be “less just middle and back office focused”. “The front office can very easily relate to something like low latency technology,” he said. “They understand that if they put this infrastructure in place, they can trade more frequently. We need to educate the front office that they don’t have to have a bottleneck when it comes to getting into a new asset class, for example. Low latency infrastructure will become commoditised, so why are they so focused on that, and not equally focused on putting in place an environment that will easily enable them to get into new markets? The front office needs to be engaged directly with data management, so they understand that sourcing data is on the critical path for them to enter new markets.”

An enterprise data approach does not necessarily imply enterprise sales. “Because we are owned by Fidelity Ventures we can now have a longer term view – we don’t have to get all the money up front,” he said. “So we are moving from enterprise sales to a ‘land and expand’ strategy.” This theme of needing to demonstrate tangible value from a data management implementation in short order was echoed throughout the Sibos event.

Over on the GoldenSource stand, its CEO Mike Meriton was also talking of a “new buyer” for its EDM solutions – in the shape of the “office of the CFO”. This function needs EDM systems to gain a holistic view of “exposure, positions, transactions and counterparty linkages”, he told Reference Data Review. The validity of this view was endorsed during the Sibos EDM session by David Goldberg, executive director and global head of data management at UBS AG Investment Bank, who told delegates: “If data management is technology-led or compliance-led, it becomes a technology programme or a compliance programme. We’ve aligned into the CFO’s office – looking across the enterprise.”

GoldenSource’s other main push is behind its “Powered by” programme – under which it is seeking partners (so far including Broadridge and IBM Securities Industry Services) keen to build outsourced data management propositions based on its solutions. This programme has “great momentum in Q4”, according to Meriton. “We are picking partners whose DNA is outsourcing,” he said, “who can get solutions for clients up and running quickly and cheaply.” This speed of implementation is crucial, he contended: earlier efforts to get managed reference data services off the ground had suffered because the implementations were too bespoke.

Rich Stumm, vice president, securities processing solutions, US at Broadridge, who is spearheading its managed reference data service based on the GoldenSource technology – also in attendance at the show – told Reference Data Review that while “the managed reference data services business is not without its challenges”, Broadridge continues “to believe that going forward most enterprise data management implementations will be based around managed reference data services”.

This model can help to overcome a major impediment to successful EDM implementations explored during the conference session – data ownership and internal politics, he contended. “The outsourcing model can help to address the problems around data ownership which we know are inhibitors to EDM programmes; if all departments in a firm are using a neutral third-party provided centralised data repository, this can help to overcome the political challenges associated with the ownership of data,” Stumm said.

Giving an update on Broadridge’s plan to extend its managed data services to cover counterparty as well as instrument data, Stumm said: “For counterparty data, we are currently going through a similar process to that we went through to determine our choice of data management system: determining whether we want to build or buy the capability and doing due diligence on counterparty data sources. We are aiming to have a counterparty data service ready around the middle of 2008.”

Regarding that build or buy decision – CounterpartyLink is known to be “listening” to offers at the moment – Stumm said “rather than wanting to position ourselves as an originator of data, our current thinking is that we would prefer to provide a service that scrubs other sources of counterparty data to provide the golden record for our clients”.

So despite the well-publicised problems of some of the providers that have targeted the space, are managed data services really the way forward? Lynch said Asset Control – the system on which Accenture had been trying to build a managed data proposition – has “rebuilt” its relationship with the consulting firm, “more on the systems integration side”. “That’s the more core part of their business,” he said. “They’ve built a practice around Asset Control.” For his money, the data management vendors may not be best placed to offer managed services. “We thought outsourcing of data management would be the second phase of maturity,” he continued. “The first phase is to centralise, then you can start looking at what’s commoditised and what can be outsourced.” But he added: “Outsourcing looks like a data business to me. Data vendors are more natural providers of outsourcing services than data management vendors.”

Managed data services may or may not be on the point of a revival – the test will be for some of these emerging propositions to win deals and take them through to fruition – but what seems certain is that firms are minded to approach the prospect in bite-sized chunks, rather than as an all-or-nothing proposition. As Janet Crowley, president of SunGard’s data management solutions FAME and referencePoint, told Reference Data Review: “We have a number of different firms we are working with to put together a plan that makes sense. Firms are certainly taking a more cautious approach to outsourcing, starting with small parts of the function and then building it out. If they can see early successes, it makes them more comfortable about the idea.”

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