IBM’s deal last month with Dresdner Bank of Germany seems to give some teeth to the IT services company’s approach to reference data management after talking about the segment for quite some time. The agreement also gives IBM a pricing database and management tool for risk and regulatory reporting – code-named Project Greenwich – to add to its list of product offerings.
Keith Bear, a partner in IBM’s business consulting services group, says the Dresdner deal may also represent a model for future moves into other areas of the reference data marketplace. Specifically, he says that IBM has “a strong interest in working with clients in developing similar models covering counterparty data, security master data and other data types on a global basis.”
The Dresdner deal essentially has two components. First, IBM has agreed to buy Dresdner’s market database, a static market data engine co-developed with IBM and Dutch data management software provider Asset Control that IBM will now offer to its own clients. Second, Dresdner will outsource its data management operation to IBM, a model that IBM hopes to co-opt using the newly acquired market information database.
IBM will actively seek to engage clients in similar outsourcing arrangements. Under the deal, Asset Control is expected to maintain a complementary relationship with IBM, focusing on development while IBM focuses on implementation and services. Asset Control will receive revenue from IBM in relation to the service.
A spokesperson for Asset Control says the arrangement “is an ideal application of our technology.” It’s also one that may see benefactors other than IBM make use of Asset Control’s Acdex outsourced data management capability, which went live last October after a couple of years in development. The Asset Control spokesperson says the IBM deal is not exclusive and that Asset Control has received interest from other parties about similar partnership arrangements for Acdex.
Meanwhile, Bear says that IBM will initially market the service – which will include all aspects of the system, including functionality developed specifically for Dresdner – in Germany and Europe, and then migrate to markets further afield. He says the Project Greenwich system will be aimed at banks, investment banks and asset managers seeking to apply derived, static market data for risk and regulatory reporting.
IBM is hopeful that its new static data capability will set it in good store as it moves into the segment in earnest. Bear says prospective clients will benefit from the lower costs made possible by a shared infrastructure, and from higher data quality. According to IBM, the Project Greenwich data engine “collects, archives and analyzes financial information of various kinds and processes it for risk control use by the bank.”
The system is used by the bank to support its various risk assessment operations, providing market valuations and validations. The system was developed with IBM and Asset Control over several years after Dresdner was unable to find an off-the shelf offering to meet its data quality requirements.
The Project Greenwich offering is based on Asset Control’s securities data integration platform, which was licensed to Dresdner under a deal announced in June 2001, with significant applications later developed with Dresdner. In its selection process, Dresdner cited the Asset Control platform’s ability to create real-time snapshots of complex data sets, handle large market data volume and integrate with market data and static data from multiple sources to offer complex analytics in a single repository. Among the data interfaces handled by the system are Reuters’ Triarch, Bloomberg, Telekurs Financial and Thomson Financial’s Datastream.
The outsourcing aspect of the deal will involve the transfer of 24 Dresdner employees to IBM. IBM Germany will take responsibility for “the management, development and running” of the financial market database. Dresdner will access the database to fulfill its needs of validation and risk monitoring. For Dresdner, the deal has promise of cost savings, while allowing the bank to retain valuable in-house expertise in risk valuation and management.
The IBM deal is part of the bank’s ‘New Dresdner’ pro-gramme, which focuses on core competencies. Under the programme, Dresdner recently spun off its operational risk control software to Capco.