Investment managers traditionally develop custom internal technology or implement multiple vendor solutions to manage their investments. Historically, these were the only products that could provide mature products across all mission-critical parts of the business. They were supported by a costly technology teams trained to support very specific use cases. These solutions were expensive and tend to decays as soon as they were implemented.
The advent of web-hosted solutions changed the landscape. Custom-developed applications can now be delivered via third-party-managed platforms. This is software-as-a-service (SaaS). “SaaS” solutions provide constant upgrades and innovation, are paid monthly, and require little upfront investment, implementation costs or hardware needs.
The concept of “software as a service” has been around for decades, and it is easy to understand the appeal from both a provider’s and user’s perspective. Vendors can generate recurring revenue from subscription fees for the software and services they provide, and reinvesting revenue in the technology, applications, and features of the software. Users can access their data from anywhere – from any computer in any region – without having to worry if they are using the latest version of the software or if their licensing fees are up to date. Users further enjoy technology that is always at the forefront of changing industry needs.
Where there’s been less discussion is what other benefits the flexible service model can bring to financial organizations. This gets to the “service” part of software as a service. Pension funds and other institutional investors require investment and risk monitoring systems that meet a multitude of regulatory and other requirements. The requirements are only increasing but the funds capacity to handle these requests frequently are not.
Staffing for internal technology is also a challenge for users. Often, in house technologists become the “key man” keeping systems running. Custom use cases create ad-hoc patches and coding that later prevents upgrades. And if key technology staff leave, the glue that holds a system together often leave with them. Users of in-house technology lose out too – developing non-transferable fluency on idiosyncratic systems.
We find that managers and institutional investors underestimate how much a system costs to maintain (in terms of data and technology support) and the need to adapt and evolve its services for the specific issues of their funds. This means there’s another cost that software-only vendors forget to include – these are the man-hours, either internal or external – that come from maintaining and adapting a system.
The engagement and usage of your solution is a measure of how integrated your solution is into the workflow of rank and file employees. Analytics solutions are great, but if only a small set of data scientists use them, then they are easily replaced. Conversely, large numbers of employees use solutions such CRMs and market data tools, so replacing such solutions would mean retraining huge numbers of people. Further, when multiple divisions are contributing to a single system, the entire firm benefits from the availability of shared knowledge.
The Service portion of SaaS further means that support staff are always up-to-date on software usage- both actual and potential client use cases. And can advise on how to make the most of available tools, reports, and resources.
True SaaS models incorporate these elements. They are more than just software licenses, they give customers the ability to solve their problems today and in the future. They grow and evolve with the market, giving customers the ability to react to changes as soon as or right after they happen. They perform seamlessly, as part of a robust ecosystem of business software solutions, and not just as a separate entity
This is a true software as a service.
ABOUT VIDRIO FINANCIAL
Vidrio is the first technology enabled service for allocators - providing software and data services to institutional investors globally. Vidrio’s data aggregation and analytics help solve complex fund management problems, improve operational efficiency and reduce risk for multi-asset-class portfolio investors. Our clients are the world’s premier allocators to external managers.