Externalise: using specialists to reduce operational risk and cost of operations

Triggered by the current market environment, asset managers are beginning to focus greater attention on their IT infrastructures in their constant undertaking to mitigate operational risk, find long-term cost savings and position themselves for sustainable future growth. Looking for solutions, there might be reasons to look beyond the organisation.
by Karl Dait, Reporter

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SimCorp’s research among major asset management firms has identified a number of common and unavoidable challenges due to the waves of change that continuously break over the global asset management industry. Yet, if professionally handled, there is scope to reduce risk and save cost in dealing with them.

OPERATING MODEL AND UPGRADES

Best practice suggests that periodic reviews of the overall IT operating model are both necessary and worthwhile. Deriving directly from the needs of the business, the key question is: “Is our IT model fit for purpose?” which leads to further questions such as, “Will it be adequate to meet our needs in the short, medium and long terms?” Asset managers uniformly state that they continually aim to reduce operational risk and fixed costs, flatten the cost curve over the life of the operating model and weatherproof the organisation’s IT capability in light of new requirements from the marketplace, and at the same time support future growth opportunities. These include, among other things, new regulations, reporting requirements or the ever-growing list of new client demands. The solutions to these questions typically include outsourcing of particular functions, whether near-shoring or off-shoring them, in order to gain best value from internal staff and systems by allowing them to concentrate on the core competencies of the organisation. Hope-fully, this will produce a robust, scalable IT operating environment capable of expanding and running a more focused business.

Addressing the risk and total cost of operations inevitably requires examination of the upgrade process. Most IT platforms need periodic upgrades and, in many cases, annual upgrades. Whether clients carry out such upgrades themselves or involve partners, there will always be significant risk and cost. It can, however, be difficult, if not impossible, to identify and monitor these factors.

For example, during an upgrade procedure, internal or external IT staff are likely to be deployed for some time, and this cost can easily be calculated. However, calculating the cost when others in the non-operational parts of the organisation are involved on an informal but time-consuming basis can be a less straight-forward task. At the same time, faulty or incomplete upgrades put the daily business at risk and can entail additional costs if a system or capability is inoperative, even for a short period.

Asset managers say that where upgrades fail, it is largely due to faulty planning and testing or because automated upgrade procedures are not in place. Moreover, because upgrades are relatively few and far between as compared with routine daily, weekly or monthly periodic IT functions, staff involved may lack the recent experience, which means that extra time is required to relearn the procedures, and this often represents a significant hidden cost.I

Implementation Services	Project Management	Best Practice Solution Implementation
Transition and Operational Services	Validation and Testing	Release and Deployment	Incident Management	Support
Educational Services	Training	SimCorp Certification

Figure 1: SimCorp now offers a range of new transition and operational services to help asset managers mitigate operation risk, manage costs and position them for future growth

INCIDENT AND PROBLEM MANAGEMENT

Also, in the context of limiting operational risk and total system cost, enterprise system users say that encountering particular problems or out-of-the-ordinary incidents is a concern to them. Again, the overarching issue is the availability of suitably experienced staff, whether in-house or at the outsourcing partner, to fix the problem. The time taken to sort problems out using available help desk resources can be costly in terms of downtime or when particular aspects of system capabilities are inoperative. Initially, the threat derives from not knowing when the problem will be solved and when the system will be up and running again, and this impacts efficiency, entails costs, and causes stress for all parties involved. The mission-critical importance of an asset manager’s central data repository means that it is vital to have able technicians on site who can quick-fix one-off incidents. Practically, however, an asset management business does not necessarily need to retain specialised and expensive in-house resources in case a random, unlikely event should occur.

IN-HOUSE STAFF OFTEN UNLIKELY TO GAIN INCIDENT MANAGEMENT EXPERIENCE

Another result of incidents and problems taking place comparatively rarely is that in-house staff do not gain adequate incident management experience from operating their systems on a regular basis. Consequently, maintaining skills at a suitable level to be able to respond quickly and efficiently can be difficult. Again, this requires experimentation and a relearning process, even for well-qualified staff, which can be long, frustrating and ultimately costly.

The challenge that asset managers are facing is to define how to maintain a high degree of stability and continuity on their system platforms, which is critical to the overall running of the enterprise. At the same time, the expense of retaining in-house resources is not necessarily the most cost-effective means of addressing these needs. The result is that the lifecycle cost of running the platform is difficult to reduce, given the fixed costs of hardware and in-house personnel.

SIMCORP SERVICES

In light of the challenges facing asset management firms, SimCorp has launched a series of new service offerings under the name of ‘Transitional and Operational Services’ to supplement its traditional implementation and educational services with the aim of harnessing SimCorp’s very own and broad experience in maintaining and operating its product, SimCorp Dimension. To address asset managers’ concerns, the new services will allow asset managers to take advantage of literally 100’s of years of collective experience in maintaining and operating SimCorp Dimension and will help asset managers mitigate risk, manage costs and provide a solid platform for future growth.

The new services offer asset managers experienced systems professionals from SimCorp to help address the less frequent and more complex tasks involved in maintaining and operating their SimCorp Dimension installation. SimCorp offers well-trained staff who provide high-quality and targeted assistance in a range of disciplines that will ensure improved system quality, greater availability and more efficient problem resolution, all contributing to lowering operational risk and allowing asset managers to focus on the day-to-day business.

REDUCE RISK AND COST OF MAINTENANCE

The new services also give asset managers the opportunity to significantly reduce and manage costs in relation to maintaining and operating their SimCorp Dimension installation. SimCorp’s consultants only work with SimCorp Dimension and are able to use their pro-prietary knowledge gained from years of SimCorp Dimension development experience or the intimate knowledge of many of SimCorp’s other clients in order to plan and deploy high-quality system upgrades or to quickly assess, analyse and resolve issues. Additionally, asset managers will have the opportunity to redeploy key staff to more mission-critical business areas or to reassign costs from being fixed to variable in nature, which has an immediate impact on the bottom line.

Finally, with all the efficiencies gained from a more stable and reliable systems maintenance and operations environment, asset managers can assign their resources to and direct their focus on areas that will help support and position the business for future growth such as acquiring new clients, supporting new product lines or expanding into new geographies. (For more information on SimCorp Transition and Operational Services, see Figure 2.) The mitigation of operational risk and overall cost management of maintenance, operation and ongoing care of the SimCorp Dimension platform remains the priority of SimCorp Services. The services have been developed on the basis of input from a number of major financial institutions and are designed to help SimCorp Dimension clients position for future growth. In this context, the broad experience that SimCorp can bring to these tasks plays a critical role.

SimCorp Transition and Operational Services fall into three categories
1. Validation and testing These services enable clients to call on SimCorp’s highly qualified consultants to assist in planning and executing the testing and validation of a SimCorp Dimension installation following an upgrade, patch or re-configuration. In essence, they add their expertise, as well as a range of automated processes, to in-house staff, ensuring that processes are highly optimised. The right test methods are used, the procedures are right the first time and less time is wasted, consequently saving resources and reducing the risk of outages due to system failures.	– SimCorp provides certified consultants in particular events, for example, to substitute an absent critical member of in-house staff. – SimCorp provides consultants to staff, train and implement the asset manager’s own support desk in the immediate post-upgrade phase when most concerns arise, for example from other members of staff unfamiliar with the upgraded system. – SimCorp offers the second alternative but on a permanent basis. A SimCorp consultant joins the asset manager’s support team. – The financial institution has the opportunity to outsource its first-level support entirely to SimCorp. The cost savings here in terms of in-house overhead are evident, while even greater benefits derive from the wealth of knowledge and experience that SimCorp’s consultants accrue from constantly working in the field of problem-solving in SimCorp Dimension matters.
2. Release and deployment In this case, SimCorp Dimension consultants take over the entire upgrade process, including planning, project management, preparation, technical upgrade and testing within a strictly controlled budget. The result is that the upgrading is carried out more efficiently and within previously agreed cost parameters. This reduces the call on internal resources and upgrade-related risk and saves time.
3. Incident and problem These services address the SimCorp Dimension clients’ challenge of how to deal with one-off events efficiently and can operate in four different ways:

Figure 1: SimCorp Transition and Operational Services