Capco has spent the months since its acquisition late last year of Iverson Financial Services developing a services-based business offering that uses key elements of the former Iverson to complement existing and new Capco capabilities (Reference Data Review, February 2004). The company is positioning itself as a full-service reference data management provider, which it hopes will differentiate it from rivals in the eyes of its target marketplace: large financial institutions.
According to Pedrag Dizdarevic, partner and executive vice president, Capco Solutions, the new strategy will be based around four key service offerings: Managed Data Services; Professional Services; Data Solutions; and Technology Solutions. Adds Donna Faup Bailey, hired over the summer as director of business strategy and marketing for Capco Reference Data Services: “We live this space, and we put the solution together based on that.”
It appears that the Iverson acquisition played a key role in delivering the functionality Capco needed to develop its full-service strategy. The result, reckons Dizdarevic, is an approach that Capco believes is different from existing competitors and potential partners. “The whole rationale behind the Iverson acquisition was bringing on board the company’s data expertise,” he says. Capco is now using that expertise in a number of different ways with in its overall multi-service offering.
At the same time, says Dizdarevic, Capco hopes to address the service needs of large institutions as they undergo significant structural change, pushed by a range of forces, including the regulatory environment, recovery from the down market, and a more general shift toward a real-time processing environment. Each requires institutions to get their reference data houses in order.
Capco bought Iverson late last year and immediately set about incorporating the company into its operations. Iverson’s IT support was moved into Capco’s 24/7 capability, based in Bangalore, India. Dizdarevic’s team then approached Iverson’s clients so that they under-stood the strategy behind the move.
Meanwhile, to avoid potential conflicts with its service-based offerings, Capco sold off Iverson’s historical data business to Mergent, a subsidiary of Xinhua Financial. “One of the things we had worried about as we looked carefully at Iverson pre-acquisition was their historical database product,” says Dizdarevic. “We were worried because it was outside of our main business. It’s a data product; derived from capturing, cleansing, consolidating and selling data. That’s not an area we want to be in. We are a service provider, and there’s a potential conflict in offering advice about an area of the business that you yourself are involved with.”
With the data product out of the way, Capco incorporated Iverson’s business service provider (BSP)-based data cleansing capabilities into its Managed Data Services group. The Iverson services’ BSP approach jibed with Capco’s existing ASP and Business Process Outsourcing (BPO) offerings, rounding out the group’s lineup from a business model standpoint. ASP clients now can use Capco’s data management tools internally, while BPO clients use Capco analysts to analyze data using their own choice of technological tools. The Iverson BSP offerings allow Capco’s analysts to use its own technology to analyze and cleanse data on behalf of clients.
Dizdarevic says Capco also integrated Iverson’s Global Index Monitor (GIM), Global ETF Monitor (GEM) and SectorWatch – which provide tools to help clients ensure the quality of their index and exchange-traded funds data, sourced from a variety of providers – into its Data Solutions group. The services effectively collect data from these sources, cleanse it and check the constituencies, and then supply the processed information to clients in a standardized format.
At the same time, says Dizdarevic, Capco was able to cross-sell the Iverson services into its existing client base on a global basis. Finally, it used existing client relationships to garner feedback on proposals for new services based around the Iverson capabilities. As a result, Capco expects to launch a new version of Index Monitor in the coming months, and to bring to market a series of other services that package various aspects of its offerings in different ways, including some XML-based services using the ISO 15022 format, rounding out the Data Solutions group.
Within the Professional Services group, Capco has developed a so-called Migration Factory, also based in Bangalore. In its role as advisor on reference data projects for large institutions, this group discovered that many firms had not put sufficient thought into migrating their infrastructures to benefit fully from the centralized approach to reference data they were implementing. Migration Factory set out to solve this problem – and the lack of migration budgets it implies – by offering a low-cost, outsourced way of managing migrations to the new environment.
Finally, Capco has developed a Technology Solutions strategy. Under this scenario, it would team with platform providers like SunGard/Fame, Financial Technologies International, Soliton and Asset Control, and offer these as enablers for wider reference data management projects. As part of its strategy development, Capco has made several hires within the reference data area. These include Faup Bailey, formerly at J.P. Morgan, Citigroup and KPMG; Mike Norton, who has joined as regional sales manager for the West Coast, with responsibility for managing buy-side initiatives and running third-party relationships; and Sally Hinds, who will be based in the U.K. professional services area. Dizdarevic was expecting to make a U.K. business development hire at press time.
With this four-pointed offering, Capco is now pitching, primarily to COO- and CIO-level executives within major financial institutions. Dizdarevic says the message is a service-oriented one: Why bother handling all the headaches of reference data management, technology and administration yourselves, when you can have Capco take it over.
“We think it’s a unique offering,” he says. “Most others in this market space are classic outsourcing or pure technology. Then there are the data services people, the market data vendors, which are niche-based and not independent. Finally, there are the big outsourcers who have no expertise in this area and are not specialized at all.”
Dizdarevic hopes to convince senior executives that Capco’s offering is a dynamic one that meets the needs of their own changing businesses. In its basic form, he says, “outsourcing effectively freezes the solution, by isolating it from the business. As the business changes over time, the outsourced portion doesn’t.”
These executives may have learned from previous experience. Seven or eight years ago, Dizdarevic says, early reference data efforts, driven by T+1 and STP, took a piecemeal approach. As a result, there were many replica-tion issues and lots of redundancy.
“But the business today is starting to change,” says Dizdarevic. “The downturn certainly was a factor in this. But in general, the business is moving to a real-time response. Firms are improving the way they do business, and this has also been forced by regulation. If you are forced pre-trade to check things, then you need to move toward real time.”
Dizdarevic acknowledges that these changes are substantial. But he believes that when the industry finally begins to consider a business approach embracing common functions, the appetite for outsourcing will follow.
“We are pursuing major engagements,” he says. “These may be eight figures annually for large institutions. We know it will take time.” He remains confident that the proverbial penny will drop soon, perhaps as early as next year: “We do expect one to close in early 2005, just based on the quantity and depth of conversations currently underway.”