On December 9, RIMES Global Head of Product Strategy, Andrew Barnett, participated in an FTF Exchange podcast, answering questions around the evolution of data management in financial sector firms. What follows is a summary of the main topics raised in the discussion.
Why is the tide turning against enterprise-wide data management solutions and data warehouses?
The change taking place in the market can be seen in the increasing number of request for proposals (RFPs) that ask for hosted or cloud-based services rather than on-premises technology.
This increase reflects a new maturity in the market. The challenges of good data management have been topical for a number of years, but IT and data teams have failed to see the benefits they hoped for from Extract Transform Load (ETL) tools, Enterprise Data Management (EDM) systems or data warehouses, and have won few plaudits from the business.
Additionally, firms are finding that their on-premises technologies are failing to give them the agility they require to respond to today’s pressures – from COVID-related market volatility to fee compression.
How does data become imprisoned by an EDM system?
There are three key issues: people, policies and platforms. Platforms relate to inflexible enterprise technology that may once have been fit-for-purpose, but which has now outlived its usefulness. Policies can imprison data when internal governance is too strict, or where external data license stipulations are overly restrictive. In the latter instance, firms will often err on the side of caution, so data that could be used more extensively is locked away. Finally, people are subject to policy and platform limitations, and when not enabled with self-service capabilities, they can struggle to find data.
As a result of these limitations opportunities are missed. Firms today face a constant stream of pressures that with the right data approach can be redefined as opportunities. For instance, regulatory compliance is often seen as a cost base. However, if firms take a more expansive, data-centric approach to compliance they can build a regulatory capability that can be used time and again to adapt to the regulatory environment as it evolves. Similarly, firms see the value of using new data sources to generate insights and differentiate, but this can only be done if the right technology and policies are in place.
If firms move away from legacy approaches, what should they do with their existing investments in EDM, ETL and data warehouses?
The business case for retiring technology is difficult to make. The cost of turning off old systems is high, and the process of transitioning to new systems disruptive, not least for clients. It’s therefore important to map the total cost of ownership (TCO) of existing technology investments. Many firms will have had three or four failed attempts at setting up a central data management capability, and all of these investments need to be factored in along with licensing costs.
Once the TCO is clear, it’s easier to build a strategy around how you can turn off old systems and understand what the true cost of the transition will be. It’s worth bearing in mind that you will also be able to hang on to some of your existing investments. For example, a firm may wish to keep the Extract and Load elements of ETL, while giving the Transform part to a specialist third party that can execute it better. Similarly, data warehouses may still be useful as a data endpoint, only don’t put it in the middle of your data flow where it will slow things down.
What’s the breaking point for most firms when it comes to moving away from EDM systems?
The point comes when they realize that they’ve been doing the same thing again and again while expecting a different outcome. If firms have documented their past attempts at building a central data function, they will know the cost. They will also see that they’re facing a whole raft of new challenges that demand a different approach; things like fee pressure, increasing regulatory requirements, the need to differentiate products quickly and the need to manage fast growing data volumes.
Often these critical drivers are missed out in the business case for data management transformation. Yet they must be included if the business case is to stack up.
Is it counterintuitive for firms to move data management for the enterprise outside the enterprise?
It’s now clear that the cloud is more scalable, resilient and secure than on-premises data centers. It’s also worth remembering that firms have long outsourced middle and back office functions, which from an intellectual property standpoint are much more sensitive than operational data management. We’re even seeing some firms outsource their trading for certain specialist areas.
Operational data management is foundational to any firm, but it’s not core. Once firms have made this realization, they should seek out a provider that can deliver modern, next-generation, scalable and multitenant technology. They then need to “look under the hood” to ensure that the partner can deliver the right combination of technology and people, and that they’re continually looking to evolve the service.
Click here to listen to the full podcast.
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