Outsourcing – The Struggle Over Control

April 4, 2013

iStock_000019289272XSmall[1]A few weeks ago I had the opportunity to attend TSAM UK.  It was a great day of discussions about the most important issues facing the asset management industry.  After attending a number of sessions, I started realizing that the topic of outsourcing was a common thread throughout many of the discussions.

As asset managers continue to work through the market recovery, continuous regulatory pressures and outdated or inefficient in-house technology, the move to outsourcing has become a more common component of their overall business strategy.  But with more use of outsourcing services, companies are continuing to struggle with how much control they can and should give up when they partner with an outsourcing provider.

The question of control has become an important element in making the outsourcing decision.  Whether your company already employs an outsourcing strategy or you are considering whether to use an outsourcing solution, there are some key questions you should be asking:

  • Who owns your data?
  • How much control do you have over your data?
  • How easy/difficult is it to change vendors and transfer data?
  • Can you have ready access to your data in the case of a failure on the part of the provider?

As you move into an outsourcing relationship, you need to realize – you may outsource the job but the responsibility for your client data stays with you.  So how do you benefit from the advantages of outsourcing while maintaining some level of control?

Many asset managers are striking this balance by using systems such as SS&C PORTIA to shadow their accounts.  Keeping a shadow book of records in-house creates an extra level of assurance and confidence for you and your clients.  It gives you the control over data and information should there be a failure of some sort on the part of the outsourcing provider. In addition, having a shadow book helps you keep the provider honest, allowing you to verify that the information the provider is sending is accurate.

The trend toward outsourcing will continue to grow. The cost and efficiency advantages provide a great benefit to companies of all sizes.  But in the end, you can outsource some of the tasks but you cannot outsource your responsibility to your clients.  That is what your organization is built on.

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