As a quick glance at Wikipedia will tell you, in folklore, a bullet cast from silver is often the only weapon that is effective against a werewolf, witch, or other monsters. For many firms, the monster they face is the cost of managing the ever-increasing breadth and depth of market data and analytics required to fulfill their client mandates. Our RIMES Survey 2018 seems to suggest that there is no silver bullet to kill this beast, only a variety of different approaches to subdue its appetite.
Managed Data Services – Slaying the Cost Monster
The RIMES Survey 2018 showed that managing costs is still the most important data priority for investment firms this year, and in fact, has been consistently in the top three since RIMES started conducting these surveys in 2013. The other two contenders have been data quality and data governance. Arguably, both are just other ways of controlling costs.
The problem with the cost monster is that it often thrives when firms set their sights on a growth strategy. New markets, new clients, new mandates inevitably result in increased data costs, not only from the data itself, but from the resources and systems required to manage it. Our survey showed firms are adopting a wide range of different weapons to fight costs, with most combining two or three, but many four or five which must surely add more cost. Popular options included rationalizing operating models, rationalizing market data vendors, centralizing data sourcing/distribution, and outsourcing data management.
Outsourcing Data Management to Reduce Risk & Cut Costs
In the investment world there’s another monster in the room: Risk. Attempts to cut costs frequently mean taking on more risk. Cutting suppliers, light touch Q&A, reliance on a few key employees or avoiding system upgrades for another year, will result in increased risk. A cavalier attitude to risk can mean falling foul of local regulators, leading to public censure and hefty fines – not ideal for attracting new investors.
Data usage management is a serious contender for the most effective controller of cost, and indeed the survey did show that inventory management – understanding which providers were providing the data, often in conjunction with managing licences – is commonly used. Data mapping – tracking the use of data across the company – is increasingly popular. But data usage management is a considerable operational burden when managing in-house, particularly the sourcing of data from multiple providers and, more importantly, the delivery of that data to multiple systems, each with their own data requirements.
Which leaves outsourcing data management, the last and arguably the most potent weapon left in the armoury. Outsourcing has been a popular conversation amongst the asset management community with many considering this the next phase in the evolution of data management.
With a data management service providing fit for purpose and system ready data, firms have the agility and flexibility to take on new client mandates. This increases turnover without a correlation in costs – a significant competitive advantage. With the managed service provider supporting clients with tools to monitor the service, including licence, data quality and inventory management, risk can be controlled just as efficiently as managing data in-house, but without the associated costs.