After much speculation, Accenture has revealed its first client for its Managed Reference Data Service (MRDS) outsourcing solution in hedge fund Citadel Investment Group. Additional clients are expected to follow in the coming months.
Citadel, with $12 billion under management, has signed a 10-year agreement to outsource “key aspects” of its data management processes. This includes reference data consolidation, validation and enhancement.
Although Citadel is the charter client for MRDS, it will still benefit from economies of scale – the essential selling point of outsourcing solutions that comes from many clients leveraging a single platform rather than each managing their own onsite solution. This is because the Accenture business unit has secured significant investment – approximately $100 million – from senior management, says Pat Tsien, partner. This will enable it to run with operating losses until the venture builds up the required ‘liquidity’ in customers, to ensure it can offer scale and related returns for clients “from day one”.
Citadel was not available for comment, but Tom Miglis, Citadel’s chief information officer, said in a statement, “(Accenture’s) global presence and commitment to this business will further enhance our ability to research and analyse investment opportunities and improve our trade processing capabilities.”
Bill Cline, partner at Accenture, says Miglis sees the wisdom of expending the company’s energies where they can differeniate. “Instead of the current picture of spending 90% of their time cleansing commoditised data and only 10% on proprietary data where value can be found, this should be flipped around.” Although Citadel will be saving costs, Cline says this is not a cost play, but rather an initiative to improve the quality and timeliness of the data.
MRDS will support Citadel’s incoming reference data feeds from multiple sources including data vendors, corporate actions vendors, exchanges and other commercial and public sources. The system is due to go live in October.
Accenture’s MRDS is based upon Asset Control’s data management platform, which is handling the data sourcing and integration aspects of the service. Asset Control’s AC Plus has already been deployed at Citadel for data management and Accenture was helping with the installation. This deal appears to be a natural extension.
Around the core Asset Control engine, Accenture has invested time and money in “building up additional functions such as administration, permissioning and entitlements”. Major development work has also gone into developing Asset Control’s architecture to handle a many-to-one infrastructure, which it was not initially set up for, says Cline. “This is no small job,” he adds. Much of this work has been carried out in Accenture’s Madrid solutions center.
Cline says, however, that it doesn’t have to be Asset Control at the client site, but could for example be Goldensource, something which Goldensource’s president and CEO Mike Meriton has also hinted at.
The MRDS solution integrates data across global equities, fixed income and derivatives covering pricing, fundamental data, and corporate actions. It is ready to go with feeds from 12 data vendors “out of the box”. One vendor may possibly become an exclusive provider, although Accenture declined to comment or characterise the vendor.
Says Cline, “We are ramping up on the data side. We aim to cover just under one million securities by mid 2006. And we are looking for ways to be creative with the content providers to see if there are any deals that can be offered via MRDS for their clients that could benefit the vendors and us. Choosing not to resell data ourselves was a good move as we are not a threat of disintermediation to the vendors.”
Says Tsien, “Data is the key enabler of the transformation that financial institutions need to make to achieve higher performance and meet regulatory requirements. We’re providing a ‘right-time’ data infrastructure to help support this.”
Accenture also adds a high level and breadth of support for the outsourcing solution. As Tsien says, “We use our network of delivery centers, which are around 45 in total, all of which follow the same processes and operate on the same score cards. We have three hubs, in Toronto, London and Shanghai.”
It is offering three levels of service. The first basic level provides automated cleansing of data where exceptions are raised but not addressed. This is usually for data that is not so important to the institution, for example instruments that are not actively traded. The second level is for data that is of greater interest than the first level in which the institution may or may not hold a position. Here some manual cleansing is performed and SLAs have stringent delivery times. The third level is for actively-traded securities where customers typically have a large position in them. Here, outside of manual cleansing of exceptions, even if automated cleansing has been performed and rules are met “we may go a step further and review some instruments manually”.
For cleansing, Accenture’s teams cover 15 languages, which helps when sourcing data globally. The consulting firm also provides out-of-the-box rules that can then be tailored for each business area.
For such a large-scale sale, senior management support is essential. Cline says that Accenture already has that access to c-level executives.
MRDS is quickly turning into a flagship product for Accenture’s Capital Markets Practice. Tsien says that it is the most successful division within the practice with a significant pipeline. While Accenture typically rolls out products in one location first, MRDS is being rolled out globally, such is the optimism for the space.
And Accenture has bigger ideas. Says Cline, “This is a pragmatic first step in data management, but it is just the beginning. We see an expansive view of data management which is bigger than just reference data processing. There is a logical progression. We need to be looking downstream at systems integration, and ways that we can enrich the data and how it is used.” A modular approach may be to introduce such services as MRDS for securities, MRDS for risk (market first and then credit and operational risk), and MRDS for counterparty data.
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