Resources for an Evolving Market
As investment firms navigate headwinds from different directions, they seek resources to withstand, recover from, and grow through challenges.
This drive for resilience is fueling a growing trend toward outsourcing. Deloitte's 2024 Investment Management Outlook survey, which surveyed 600 senior investment management executives, found that in the next 12 to 18 months, 29 percent of firms plan to outsource front-office processes, 23 percent will outsource middle-office operations, and 28% will outsource back-office functions.
In stark contrast, only around 5 percent of survey respondents indicated that their firm plans on pursuing a "build" strategy for front-, middle-, and back-office processes.
This research echoes our experience: Increasingly, investment managers are leveraging outsourced and co-sourced services to extend their capacity and add capabilities across technology and operational functions.
This blog post takes a deeper dive into the trends that are driving demand for these services and highlights examples of how firms put vendor services to use to create resiliency in their organizations.
Range of Vendor Services to Help Your Investment Firm Succeed
Vendor services should act as an extension of your team, helping you manage everything from critical everyday business processes to servers and applications.
Software vendors offer different outsourced and co-sourced services for different needs. SS&C’s Eze services provide:
Managed Services
Investment firms often use managed services to increase efficiency in their day-to-day operations. Our managed services team can handle the essential but routine daily and monthly operational processes for your firm.
Strategic Services
Many firms employ our strategic services when they experience specific obstacles or undertake new opportunities. Firms use strategic services to supplement short- or long-term resource constraints, optimize their use of technology, or meet a particular business or operational challenge.
Managed Applications
As firms move away from managing technology on-site, they increasingly ask us about managed applications. These holistically managed applications mean we provide both hosting infrastructure and the expert services to manage it.
Regardless of what services you choose, it is critical that, along with knowledge of your technology platform, your vendor's services team has experience with your investment strategies and fund structure.
Here is a closer look at how some investment firms use these services in their organizations.
Challenges with Profitability Put Focus on Outsourcing
In recent years, achieving profitability has become increasingly challenging for investment firms.
In Deloitte's survey, only 10 percent of respondents said they expect significantly better revenue prospects in the coming year, compared to 20 percent and 30 percent of respondents who said so last year and the year before.
To protect their profitability, investment firms need resources that enhance their operational flexibility. These resources should help firms to streamline and reduce costs while ensuring future growth is not compromised.
Managed services help firms achieve these goals.
A firm can outsource its important but routine front-, middle-, and back-office processes using managed services. In doing so, the firm optimizes manual processes that require human capital while freeing up their employees' time to focus on revenue-generating activities.
Managed services can adapt to the evolving needs of an investment firm. Whether the firm needs to scale up or down, they can adjust their level of services accordingly, ensuring they always have the level of support they need.
Expert Support for Expanding Asset Classes
Diversification has become an essential strategy for investment firms as they seek to navigate headwinds and meet investor expectations.
But if a firm’s operation cannot adapt to the new processes, regulations, and workflows introduced onboarding new assets and strategies, they risk losing the potential opportunity that comes with that investment.
A strong strategic services team, comprised of subject matter experts with diverse experience across various asset classes, is a key resource for firms as they diversify their investments. These knowledgeable service teams play a pivotal role in successfully integrating new asset classes into the firm's operations.
By collaborating with strategic services, firms gain confidence that their operations have the adaptability needed to keep pace with new investment strategies.
IT Resources in Short Supply
In another report, Deloitte finds that as organizations recognize the importance of technical talent in their success, demand for these resources continues to rise, leading to a shortage of IT professionals.
For firms that have invested resources in maintaining, fixing, and upgrading their on-premises technology, this shortage of IT talent comes with significant risks of downtime or disruption in operations.
To avoid the risk and expense associated with running their own IT environment, more and more firms are moving away from managing their own servers and using their vendor’s managed applications to not only host infrastructure but also manage it.
Managed applications eliminate key person risk associated with hiring and managing internal IT resources. Instead, firms get access to a deep bench of experts who ensure the firm is keeping up with the latest technologies and trends and the complexities of today’s operational landscape.
Employee Satisfaction & Productivity
The first quarter of 2024 saw the continuation of a troubling trend: employee engagement continued to decline, reaching its lowest level in more than a decade, according to Gallup.
Employee engagement is a significant measure of the wellbeing of investment firms’ employees and their operation. That’s because engagement is linked to vital outcomes such as productivity, employee retention, quality of work, and profitability.
The solution to keeping employees motivated and engaged – and performing at the highest level – may come from an unlikely place: outsourcing.
According to NextOne Staffing, when done right, outsourcing can contribute to higher employee engagement.
Their research shows that outsourcing allows employees to focus on developing their core competencies, leading to growth opportunities and wellbeing for the employee and improved outcomes for the company.
When a firm frees their employees from routine tasks through outsourcing, these employees can focus their expertise on more rewarding work – like adding value for clients and differentiating the firm from the competition.
Further, a firm’s use of services can be scaled up and down depending on the firm’s needs. This scalability of services gives employees a sense of consistency in their work, particularly when the firm is busy, helping to manage stress and improve engagement.
A Vital Resource for Achieving Resiliency
Vendor services are increasingly important in helping investment firms face today's market challenges and prepare for tomorrow's opportunities.
SS&C’s Eze solutions have helped over 1,900 firms get the most out of their investment operations in all market scenarios. With this experience, our services teams are equipped to help firms adapt to changing times.
Whether optimizing an investment firm's processes, advising on best practices, or resolving issues promptly, our tenured service and support teams bring their vast knowledge and perspective to each client we work with. Their expertise, combined with our feature-rich Eze solutions, helps firms achieve the resilience they need to succeed.
