Banc of America Securities is putting its money where its mouth is by signing up as the first client for SunGard’s Managed Data Service, and effectively endorsing the outsourcing model for reference data management.
BAS had previously indicated its support for outsourcing services by becoming a charter member of SunGard’s data management advisory panel (Reference Data Review, November 2004). Now, it is taking the plunge by handing over key data management functions to the company.
The deal covers primarily equities and fixed income data, specifically pricing, terms and conditions and securities identifiers. It encompasses data collection currently from five vendors including Reuters (EJV and DataScope), FT Interactive Data and others, a list that is likely to grow. The data will then be cleansed, formatted, enriched and stored by SunGard, which will also be offering support and managing distribution.
SunGard’s referencePoint managed data service will feed BAS’s internal Atlas data management platform, itself based on the data model of FTI – now GoldenSource. This traces its history back to earlier, somewhat unsupported data management efforts within the firm, where FTI was employed to support BAS’s GRD database for consolidated reference data, although the BAS group managing it had the tough job of trying to sell the idea to each business group (Reference Data Review, February 2002). This effort was merged into the larger Atlas effort.
Under the new arrangement, the cleansed data from SunGard will be used to support various downstream applications within BAS including trading, order management, risk management and back office processing systems.
For Banc of America Securities, its reference data team headed by managing director Roseann Palmieri, and strategy for a dedicated, centralised data management infrastructure are relatively new. The fresh strategic approach it has taken appears to have resulted in an evaluation of where the value lies within the data management operation, and the apparent conclusion that it is not within the basic data sourcing, cleansing and management functions.
By outsourcing these functions, BAS is free to focus on more valuable aspects of operations, and other additional business areas. As Steve Santini, managing director of Global Equities Technology at BAS, says, “Partnering with SunGard to enhance the data in our processing systems leaves us well-positioned to further expand our business initiatives and … leverage their expertise.”
Part of the appeal for BAS in using an outsourced solution is the potential economies of scale that are likely to come if or when other financial institutions begin to leverage the same managed data platform.
The basis for such outsourced solutions is the recognition of the huge redundancy and duplication of effort that occurs in the data management cycle. The same tasks of sourcing data, integrating it, managing ongoing format changes, cleansing and managing exceptions, are all basic functions offering little opportunity to add value, and are all repeated across every financial institution. Outsourcing protagonists believe that if several firms consolidated these tasks by leveraging the services of an experienced third-party data management company, they would save significant costs, improve operational efficiencies and free themselves to focus on their core business. And, through economies of scale, as more firms come on board, the same costs become further diluted among participants.
As BAS’s Palmieri says, “We anticipate referencePoint Managed Data Service will help to accelerate our time to market at a lower cost, and will help to provide ongoing efficiency and scalability as more financial institutions adopt the referencePoint service.”
Although outsourcing has been the subject of some debate recently in the reference data arena, there has been little evidence of activity to date. Traditionally conservative in nature, many financial institutions are hesitant to be the first to take the leap of handing over key operational functions to a third-party in an as-yet unproven model. The concerns over risk, reliability, security and potential threat to manpower, are potential barriers to such a model.
The BAS news, however, provides a much-needed early adopter for SunGard, which will no doubt be hoping that this deal may pave the way for additional companies to sign up. SunGard’s Data Management Systems group was formed based on its earlier acquisition of Fame Information Services, which provided it with a jumpstart into the data management space.
SunGard is operating in a space also targeted by other consulting firms, including Accenture (Reference Data Review, November 2004), Capco (Reference Data Review, October 2004) and IBM (RDR, January 2004), all of whom are keen to pitch outsourced data management solutions.
Perhaps outsourcing is an idea whose time is coming. Indeed, in a survey by A-Team (publishers of Reference Data Review), 95 percent of data managers indicated a willingness to consider outsourcing for basic data management functions, so long as the business case could be proven. The survey will be published this month, so watch this space.