Are managed services coming of age as providers of front-office trading capabilities? Certainly some of the trends we are seeing suggest they are. It was not so long ago when investment banks and other sell-side trading rooms were able to push the managed services debate into the long-grass, citing control, security and competitive advantage as paramount considerations in continued outright IT ownership. The fact that profits and margins were also extraordinarily healthy meant that cost factors rarely came into the equation.
But that all changed pretty dramatically post-2008 as revenues slumped, IT costs rose sharply – primarily as new regulatory drivers and other external impositions demanded change – and a severe increase in capital requirements all took a heavy toll on margins across the industry. New business models were firmly back on the agenda.
Cost was the clear driver as talk swirled around SaaS, IaaS and other “pay-as-you-go” capabilities, as well as the ubiquitous cloud capabilities and the “buy-not-build” lobby started to get increased traction. But while reducing TCO is clearly still an important factor, much wider advantages were beginning to be understood as the providers of the now positioned “managed services” added more sophistication to their armoury.
By addressing concerns around security, connectivity, latency and multi-asset class trading and reporting, the adoption of managed services was growing. The ability of large or small organisations to now take off-the-shelf packages that could be both customised and scaled to deliver integrated and efficient delivery from pre to post-trade activities means it is now taken much more seriously.
But what does the next step hold? There is still considerable industry debate about the adoption of third-party management of many critical services and, while acceptance is growing, many are still concerned about security vulnerabilities or the potential for service disruption. It is why it will have a central presence in our Summit next month.
Therefore, be sure to attend our inaugural Intelligent Trading Summit – successor to A-Team’s acclaimed Low-Latency Summits – which kicks off in London on March 4. Apart from the Managed Services debate, it has an action-packed programme of presentations and panel discussions around (among many other areas) the convergence of Analytics, driven by Big Fast Data, to initiate the best trades, and all executed with Low Latency!
Nevertheless, the ability of managed services to deliver agility and flexibility, and not just talk about it, while also enabling the implementation of more innovative approaches to risk management controls and real-time client reporting has certainly opened eyes previously aloof from the debate. It is clear that the adoption can not only play a major part in controlling TCO, but it can also help drive competitive advantages.
At a time when the cost and time burdens of implementing regulatory impositions have been threatening to stifle innovation, it seems many now believe managed services are the answer to freeing up IT expenditure for some of the “smarter” initiatives that can make a difference where it counts – with customers.
In fact many converts now extend their reliance on manages services to previous taboo areas such as Direct Market Access, Order Management Systems, Algo Trading and more. The thin client is getting slimmer by the day.
So where cost was the main driver to get managed services back into the discussion, many recognise that it is now much more important.
We will therefore be looking for fresh insight on the subject from both IT vendor suppliers and IT professional end-users to examine the pros and cons of adopting managed services. But it seems that it is increasingly difficult to answer whether it makes sense to build these capabilities in-house anymore? We look forward to you joining us on March 4 to make your own mind up.