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Buy to Build: How Providers Help Make Unique Trade Surveillance Systems Possible

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By Ollie Cadman, Chief Product Officer, Eventus.

“Buy versus Build” was a dilemma that financial institutions traditionally faced when working to create modern surveillance systems or other key elements in the risk technology stack. What groups were trying to figure out was whether purchasing products and services was more cost-effective and future-proofed than building a unique risk management infrastructure in-house. Today, driven by the cloud and API revolutions, there’s a broader array of possibilities with customizable products and services that can serve as the building blocks needed to create unique systems, replacing the traditional, build/buy decision with an integrated platform strategy; “buy to build.”

The buy or build dilemma was based on the traditional way of delivering enterprise software. Institutions had to choose between deploying a self-managed technology vertical with multi-year vendor lock-in or accepting significant ongoing investment and overhead in building their own customized solution.

If a firm chose to buy, it would be faced with a lengthy deployment and integration phase followed by continuous operational management. The upfront capital investment and any subsequent “cost of change” meant these decisions and subsequent rollouts were significant, multi-year investments with the need to demonstrate value and return on investment. This drove further internal adoption and integration that only made any future swap-out more costly and took longer. This meant a perpetual lock-in, relying entirely on vendors to meet your technical needs and competing with their other clients and priorities.

On the flip side, the decision to build meant complete control of your own destiny, but that flexibility came with a significant resource and investment overhead. The ongoing maintenance of the platform, oftentimes driven by external factors—exchange policy or platform changes, new regulatory requirements, etc.—meant your internal resources were consumed with commoditized maintenance activities and not building the new features that would help differentiate or enhance your business value. Additionally, they weren’t benefiting from the community of users outside of their organization that was contributing to building a better product for the benefit of all.

Business models were significant drivers in this buy or build decision—the functionality that a company needed being the big differentiator. Markets move fast, and business models need to move in lockstep. Vendors were often slow to adopt their technologies to meet new needs. Markets can also be complex, and niche technologies required more expertise. Over time, markets have become technologically intensive, and there’s increased competition for systems that mitigate risk for real-time trading businesses.

The buy or build conundrum was how to achieve the 80/20 rule, getting the 80% of functionality that’s common across firms but being able to apply the 20% that’s specific to your business.

A modern approach to sourcing software addresses both through the evolution of cloud services, low-code APIs, and no-code tooling. Software companies are now in the business of building platforms on which their users can configure and run their own solutions. This allows users to self-service their needs, giving much greater control, removing dependencies on long vendor lead times or hidden costs and allowing for rapid customization out of the box.

The platform model, with a set of Restful or similar APIs, also allows for simple integration and extensibility, whether that be with internal systems or through a set of off-the-shelf third-party platforms. This model allows for the simple and easy exchange of data across systems, once again reducing lead times and costs, and puts flexibility and control in the hands of clients without fear of the cost of change or multi-year vendor lock-in.

The platform strategy also extends to the desktop itself, with legacy walled garden desktop solutions being replaced with end-to-end workflows that seamlessly intertwine different applications through desktop containers and interoperability.

This is buy to build, where companies build their way to that customized 20% through off-the-shelf software platforms that embrace the modern concepts of delivering products and services to future-proof a company’s business.

Validus, for example, serves as a platform that enables the creation of multiple products. Our platform combines off-the-shelf surveillance and risk monitoring alerts with Robotic Process Automation (RPA) to enable client-specific design within off-the-shelf tools, as well as Python and Jupyter Labs environments combined with a Restful API investment for increased extensibility.

With so many vendors to choose from, the buy versus build argument is outdated, and the paradigm has shifted to buy to build. There is no longer an either-or choice, but financial institutions can have the best of both worlds by leveraging current technology. Developing cohesive partnerships is the best way to ensure that the technology evolves in a way that continues to contribute to a company’s strategy. Just like markets move fast, so does the technology that companies need to maintain their competitive edge.

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