The Time is Right for Hosting Services

October 31, 2012

A recent article I read suggested that upwards of 85% of all new investment management software deals include some hosting component.   While that number may or may not be entirely accurate, the trend certainly mimics what we are hearing in discussions with new prospects and long-time clients alike.   As asset management organizations are reviewing the effectiveness of their operations, looking for ways to streamline processes, better manage costs and help maintain or improve margins, they are quickly realizing that managing their technical infrastructure can be a distraction and takes resources away from focusing on their core business drivers.    But, at the same time they worry about the loss of control over their data and operation processes and the potential detrimental effect this could have on differentiating them from their competition.   

Asset managers need to have the best of both worlds, and hosting services helps to make that possible.  What is pushing the trend this way?  We have seen a few key drivers:

  1. Choice – outsourcing and outsourcing providers have evolved, offering more services and options and working more in partnership with firms.  This allows customized solutions that are better aligned with business objectives and allows the asset manager to direct how much or how little control is handed over to the service provider.
  2.  Aging technology and/or potential upgrades:  As the industry continues to slowly recover from the global recession, organizations are beginning to re-assess their technology platforms (after pushing off investment for the past few years).  Firms are continually looking for ways to become leaner and focus on core competencies and as they look at the costs of replacements or upgrades, they are realizing the ROI of ownership may not be large enough to merit the effort and resources.
  3. Regulation “mania”:  Asset managers need to comply but don’t want to spend the time and resources to constantly maintain, upgrade and test software to make sure they are in compliance.
  4. Growth in small and mid-sized investment managers:  As the economy grows many of the smaller IM’s business’ are growing too.  They need more sophisticated software solutions to compete in the market but, they may not have the infrastructure in place or may not want to build it and maintain the personnel to manage the environment.

Introducing hosting services as part of the operational infrastructure allows asset management organizations to focus on what adds value to the company and spend more time on their business not IT.  Since outsourcing service providers, like SS&C PORTIA, are in the business of managing software and the services around it, we are better positioned to manage an operations infrastructure, implement processes and workflows that provide faster and more efficient processing and usually, due to better economies of scale, can offer it at a more effective cost.  A hosting partnership lets us do what we do best, so you can do what you do best. 

With growth in the market but also a strong focus on margins and effective cost management, we see the trend towards hosting services continuing to grow.   Whether you are a small to mid-sized investment manager, with an expanding business and trying to roll out new strategic initiatives or you are a well-established large asset manager with older systems in place, if you aren’t considering a hosting solution for your future growth, you should be asking yourself why not?

-Claudine Martin, Product Marketing

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