Financial firms remain at a familiar crossroads when it comes to the technology they implement: build something proprietary in-house or buy in a solution from sector specialists.
However, highlighted no more so than on this very blog, one of the things that differentiates the current position of financial services industry is the sheer amount of regulatory change taking place. On what sometimes feels like a daily basis, regulators change rules, adapt them, tweak them and, in some cases, create entirely new rules by which the entire industry must react and adapt to – or face the consequences.
For in-house technologists at these firms this presents a problem. Just like the Dodo, proprietary solutions must evolve to the changing landscape around them or face extinction. A Darwinist evaluation of in-house teams will reveal a graveyard of solutions which simply couldn’t stand the pace of the industry in which we work. Too often, the frequency of market, regulatory and client driven change adapt too quickly for such solutions to keep pace.
This situation, combined with the current and sweeping pace of change within capital markets is prompting many firms to now look more closely at the viability of their current operations at an application level.
The keyword here is future proofing. A great deal of IT and resource investment is spent on overly complex and expensive systems to address this issue. All too often such systems have been built in house are no longer fit for purpose and usually uneconomical and time consuming to maintain and expand as new instruments come on board, as trading volumes increase and as factors change with the acquisition of new business lines.
So what’s the alternative? A vendor supported and maintained commercial product. But before diving into the vendor space, ask yourself what such a product must look like.
Obviously anything you implement must cover what today’s requirements – but your proprietary solutions are built with these requirements in mind. The question is, what might the future look like? For example, what asset classes might you be trading or what regulatory changes are coming into view on the horizon.
Stare into your crystal ball for a moment, you’ll need something that can integrate seamlessly and easily with a broad array of applications across your firm, scalable enough to meet current business needs and future performance requirements – which will differ according to the various consuming business units.
The industry is constantly evolving – if you’re technology isn’t prepared to do the same then you face a Dodo-esque future.