The focus of data management projects may change along with the questions around achieving business buy in, but the answers about the benefits and practical considerations remain the same, says Danielle Newland, product manager of data management solutions at Eagle Investment Systems. What has changed, however, is the level of interest around outsourcing and application service provider (ASP) solutions in the current market. According to Newland, 50% of the vendor’s pipeline is coming from the ASP side of the business; thus backing up the predictions made by her colleague John Lehner last year.
Lehner, who was promoted from president to chief executive of the vendor at the end of last year, predicted that 2009 would be a good year for its ASP offering and it seems he was right. At the start of last year, the vendor was getting 30% of its new business from clients opting for its hosted ASP offerings and this year that number has increased to around 50%. Newland reckons that the uptick in interest around ASP is down to the appeal of vendors taking on the project risk and being held to a certain level of service due to strict service level agreements (SLAs), even in the process of an upgrade.
This move to outsourced models has also been noted by other vendors recently, including rival Netik, and seems indicative of a wider trend within the industry to bring down costs and increase efficiencies by focusing on core parts of the business rather than more commoditised areas such as data management.
Eagle’s position as vendor that is supported by a parent bank also instils confidence in customers that the vendor will be around for the long term, contends Newland. As noted by Lehner last year, there has been a nervousness on the part of clients when signing up for solutions from relatively new vendors on the block. There is a general focus on assessing vendor risk as part of the decision-making process, including examining the financial stability, profitability and sustainability of the vendor in question.
“The development experience we have in servicing the data management needs of our parent bank also gives us valuable insight into the requirements of our outsourcing clients,” she explains. The ties between the bank and the vendor are certainly close: the chairman of the vendor arm who was previously CEO, Lou Maiuri, is now also global head of outsourcing for BNY Mellon Asset Servicing.
Although the outsourcing model is gaining in popularity, Newland cautions that it must be handled with care: “The headaches caused by data management will never go away if you try to push the problems away and ignore them by passing them onto a vendor partner. There needs to be a close relationship between the outsourcer and the client.”
This echoes a number of statements made by asset managers at last week’s TSAM conference, during which Hans Lux, enterprise data architect at UBS Global Asset Management, and Shannon Walker, IT architect at Deutsche Bank, both stressed the importance of working together with vendor partners rather than delegating all responsibility to them. Clients are more aware than ever before of the risks involved in getting outsourcing wrong and given the intense focus on risk management in the market, their concerns are well founded. Partnership, collaboration and communication are seemingly the vendor buzzwords at the moment to restore confidence in this sector.
The imposition of a governance model for data is a success factor in any data management programme, according to Newland. “There is a need for incentives to be introduced to tie individuals to the data as a business asset and vendors cannot come up with these. It is up to firms to establish accountability and ownership of the data by bringing the right people to the table,” she explains.
Another key area of focus is standardisation and Eagle is watching some of the progress towards achieving this, such as the work of the EDM Council, with interest, says Newland. The utility model in particular could potentially have significant implications for the vendor space in the long term, but for now the attention on the data management space is proving to be a positive force, she explains. “The business won’t stop and slow down to wait for standards and this is why vendors are being called in to clean up back offices,” she adds.
However, there remains some degree of reticence in the market to get fully into large data management projects, as the industry waits on tenterhooks for the barrage of regulation on its way, she notes. “For example, in the US there needs to be more discussion and actions taken around international financial reporting standards (IFRS), but this has yet to take off,” Newland concludes.