By Steve Young, CEO, Citisoft
“The shepherd drives the wolf from the sheep, for which the sheep thanks the shepherd as his liberator, while the wolf denounces him for the same act as the destroyer of liberty. Plainly, the sheep and the wolf are not agreed upon a definition of liberty. ”
– Abraham Lincoln
What defines a market? The structure of a well-functioning market is defined by the theory of perfect competition, but as we all know, well-functioning markets in the real world are never perfect. Nevertheless, some basic structural characteristics are clear: many small buyers and sellers; buyers and sellers have equal access to information; and products are comparable. In simple terms, a defined market should have defined solutions to that market’s needs, and a healthy mix of vendors to provide those solutions.
In the case of data management in the UK, there are one or two vendors that absolutely dominate the market, there is very little true competition and the products are for the most part incomparable. And as is the case with so many areas of investment management technology, in data management it is predominantly product flexibility and very effective marketing as opposed to truly innovative software that have accounted for large slices of market share. The most successful products on the market are the most adaptable and can address multiple problems.
As a consequence, many of the ‘data management solutions’ that have been deployed by investment managers are in fact tactical systems that address one functional problem, as opposed to a genuine strategic solution that addresses an enterprise-wide issue.
Indeed, many vendors have moved into the data management ‘market’ through the development of a tactical system that serves a need in middle-office functions such as performance or reporting. In these instances, the data management element of the system is often little more than fairly basic data extraction, cleansing or aggregation. As a result, almost any vendor can claim to provide some form of data management within their software. The problem is that it is very easy to claim that you can provide a service in a market that has become almost impossible to define. This confusion obviously benefits the vendors more than the asset management clients.
And this is the crux of the problem. Across the investment management industry, there is no single agreed definition of what the term ‘data management’ actually refers to. It means many things to many people, depending on for example whether they are in the front, middle or back office; head of IT, a client relationship manager or head of an equities desk; or employed by a custodian or a small wealth manager and so on. To some people it refers to reference data, while to others it means market data, client data, performance data, compliance-related data, structured and unstructured data or a myriad of other alternatives. My view is that ‘data management market’ is a generic term for a lot of different markets – not merely market sectors that benefit from clear demarcation in the eyes of the buyer.
The confusion around data management even extends beyond our own industry. ‘Big Data’ is a good example, where the term means one thing in investment management circles but something very different in other industries such as online retailing or Internet dating, where unstructured data has a significant role.
Within investment management circles, data management needs to be more focused on who are the manufacturers of the data, who are the consumers and an examination of the data usage within the organisation at a holistic level. In this way it will shift from being predominantly a tactical issue to one that strikes at the very heart of investment operations.
In the future perhaps the industry will move away from using the term ‘data management ‘toward words or descriptors that are much more specific. And I will have to think of more inventive titles for my blog….