Taking the long view

We spoke with Kevin Sullivan, Chief Technology Officer of Eagle Investment Systems LLC, a leading provider of investment management technology solutions to the global financial institution market, about the trends occurring in this market and the impact on technology decisions.

CXO. What are some trends you are seeing in the financial institution marketplace?
Many of the traditional issues continue to challenge today’s global financial institutions, such as compliance and regulatory pressures, the demand for increased revenue growth, faster time to market with products, and of course the focus on managing costs. From a pure investment management systems perspective, organisations are re-examining their system infrastructure, particularly around platform integration and core back-office systems as they strive to eliminate system redundancy and achieve markedly improved data standards across their enterprise. And, the good news for vendors, including Eagle, is that organisations are committing significant budget dollars to system replacement. But they are definitely spending more strategically as opposed to solving system issues with a tactical approach. Firms are looking long-term at their systems infrastructure and making strategic decisions that support long-term business objectives.

CXO. How have changes in the financial services landscape impacted the challenges facing organisations and their requirements for technology?
There are several dimensions impacting this. First, mergers and acquisitions continue to frequent the industry. These activities create opportunities and challenges, particularly around system integration and consolidation as firms strive to leverage all the benefits of a merger or acquisition. Achieving a unified platform that supports multiple lines of business and one that helps to manage multiple functions of a business from a central location, continue to influence buyer behaviour. Second, new investment instruments are constantly emerging. Investment solutions need to be adaptable to assist firms in bringing these instruments online. Today, organisations struggle to go to market quickly as legacy systems lack required flexibility. Thirdly, the increased demand for information continues. Whether it’s in-house management reports or client information deliverables, no longer is once a month or even once a day enough. People want real-time information, when they want it, to help them with their investment decisions.

CXO. What types of solutions are these trends translating into?
There are several themes we are seeing in the market. First, data remains at the core of the investment management process. This parlays into several types of solutions. Historically, an organisation’s data was focused around its accounting system. Today, the creation of a data centre/hub continues to gain momentum. This enables an organisation to centrally manage its data in support of its overall operations. So, solutions around reference data management, data hub/warehouse, data marts, etc. are increasing in demand. These ‘data-centric’ solutions help an organisation to streamline their operation by eliminating redundant data management processes that ultimately help to reduce risks and associated costs.

Second, as I mentioned previously, with budgets opening up, organisations are re-examining legacy systems as they reach the end of their lifecycle. So, we’re seeing a rise in firms looking to replace their investment accounting system(s) for example. However, whereas in the past an organisation might approach this from a specific market segment perspective, say mutual funds or insurance, firms are taking a more holistic approach and looking for a solution that supports multiple lines of business on a single platform. Again, centralisation of processing and reducing redundant systems remain key concepts here.

Lastly, regardless of the system search, there have been tremendous advancements in technology over the last decade. And, for many existing systems, they have just run their course. For an organisation to be flexible and adaptable and change with the ever-changing market, newer, scalable, open systems are required to help them achieve their business objectives.

CXO. Centralisation appears to be a major theme, what particular requirements or challenges do organisations in the investment management sector face when it comes to managing data centrally?
All of our customers seem to have one thing in common and that is they need to be able to publish investment information for both internal and external consumption. In order to have that ability, they require many different types of market data, both transactional and operational to support their investment process. To successfully deliver data to all audiences, an integrated environment underpinned by a framework that supports an organisation’s specific information processes is critical. This is where the data centre/hub concept is particularly relevant.

Large financial services companies understand the value of centralising common tasks. Specialisation provides economies of scale, quality control and risk management benefits.

Eagle products are designed for the special needs of these central data management groups. For example, our Security Reference Manager product is designed for the group that manages security reference data for the benefit of the entire organisation.

The manufacturing process of getting reference data, transaction data, and policy data into an environment, and then managing the flow of that data throughout an organisation is what we do best and where our clients are focusing much of their data projects on. Employing a data-centric model, which places a data hub/warehouse as a central component to its platform, allows organisations to manage and store information without disruption to its operational processes.

Essentially, there are two main things that differentiate Eagle in this space; our product manufacturing group has an innovative workforce and integrated quality control modelling capabilities for tracking data – from its inception as raw data all the way through to a finished delivered product. The biggest challenge with this is the quality control aspect of the data management process. It is easy to get overwhelmed by the sheer amount of data that flows through most financial organisations. However, a data-centric platform facilitates the process by streamlining the workflows so that data is distilled into useful information that can be made available to an operation’s various data users.

CXO. How would you sum up the benefits of a data-centric model versus a silo approach?
The main advantage lies in the consistency of information this type of model provides as it brings together all investment data to be homogenised and applied at a consistent level of quality across an organisation. Also, it inherently involves fewer steps in the process, and we all know that eliminating steps helps to decrease errors and in general improves reliability. Furthermore, you can control the timing of data processes better, because you’re not dealing with sequential processes anymore and can, therefore, do more things in parallel. You also have the ability to build a separation between your processing requirement and your distribution requirement. Because all the data is brought together on a single plate, you can distribute it out to the organisation on an avenue basis, while keeping it managed centrally, available and consistent.

CXO. Where are organisations seeing the ROI come from? Is it purely financial or are there other, less quantifiable benefits of software solutions such as your own?
There is certainly an economic benefit because the fewer steps in the process and the fewer products you have in the mix, the lower the costs. There is also the dimension of liability and risk of errors that can occur due to inconsistency that would otherwise exist between two departments using two totally different approaches to do the same thing. And there’s the headcount factor. When multiple systems or vendor relationships are managed decentrally, staff is required to maintain these systems and relationships. By employing a centrally managed operational model, it would seem logical that there would be inherent cost savings from a pure staffing perspective.

CXO. How have financial institutions traditionally approached their IT strategies and where have they gone wrong?
Historically a trend of the past was approaching a business problem with a tactical solution that may not take into account the ability to leverage a solution across an enterprise. For example rather than a single platform to support a business’ accounting requirements, individual solutions were implemented to support each line of business. Another example that we see is a decentralized approach to managing data vendors. A second pitfall is on the implementation side of things. Not having the appropriate resources allocated or dedicated to the project, conducting proper requirements analysis up front can cause delivery timeframes to be pushed out, or deliverables to be inaccurately developed – costly on several levels – time and bottom line costs.

CXO. Are organisations leveraging in-house resources or purchasing vendor-developed solutions?
The decision to build or buy has historically been based on three criteria, relative cost, time and functional capabilities. In the past few years, we have seen customers take a longer view. Most are now considering a couple new dimensions in the evaluation, long-term support and adaptability.

Long-term support costs associated with a build approach can dwarf the initial cost of construction. Staff turnover can leave the internal support group without sufficient knowledge of the system to make modifications required by changes in the market or the business operation.

Build solutions tend to emphasise the immediate functional requirements of the business and de-emphasise the architectural structure needed for long-term support. Vendor products put more emphasis on the architecture because it is needed to support the diverse needs of multiple customers. Architecture is the framework that makes a product adaptable. Financial services applications need to be adaptable to support changes in the market and the business that are inevitable. The Eagle framework is the most adaptable product architecture available today. Our meta-data and rule layers allow customers to adapt processing quickly at the point of use.

From a pure system or software development standpoint, most firms we interact with tend to leverage a vendor to provide a solution. Now this can be a licensed and installed solution or an ASP or outsourced model, which we have seen an increased interest in over the last 12-18 months. Regardless of the model, any solution will be, and more importantly should be, closely managed by a client to ensure integration or transition from one system to another seamlessly. In our experience, successful system deployment hinges upon both organisations having senior management involvement and a team that is dedicated and committed to the project. Setting clear and measurable milestones and setting expectations in advance is also critical to achieving a successful project.

CXO. What consideration is given to the ease and cost of implementation of solutions such as your own? Is this a major priority for potential customers and, if so, how do you address their concerns?
Implementation time and cost is a factor for any financial institution. From Eagle’s perspective, our years of experience have enabled us to develop implementation best practices. We’ve developed certification programs for our employees to further ensure our team has an in-depth knowledge of our products and practices. Lastly, we employ centres of excellence within our product team to provide a deeper level of expertise on a particular subject matter. For example, for converting data or for different interfaces there are area specialists in the company that can help those responsible for implementation to get through those types of questions and strategies more efficiently than they could otherwise on their own.

CXO. Where would you like to see the technology go next – do you have plans for further development of the functionality, etc?
The evolution of technology is perpetual. However, it seems to me, we are in a period of unusual technology acceleration. It is unusual in that it is the consumer market that is driving technology today. The convergence of commercial and consumer technology to a common set of digital standards has created an opportunity for businesses to take advantage of commodity technology components to improve the content and quality of information created for internal and external consumption. Not all companies recognize the potential.

I still see some financial service companies using 30 year-old applications based on proprietary, closed architectures to support their business. I don’t see anyone in the consumer world using 30 year-old technology to listen to music or watch video.

The commercial market can benefit from the open software used throughout the internet. Increased storage capacity needed for music and video storage provides businesses with the capability to store more information online for a longer period of time at significantly lower cost.

Eagle provides financial services applications that benefit from the opportunities provided by these technology improvements. Our products operate on open, industry standard databases, networks and web servers. Our products are accessible from anywhere in the world using a standard browser. Our investment information manufacturing processes creates a wide array of information that can be published on our web servers.

We will continue to expand the investment information categories and the content of each information category.

From a product standpoint, we anticipate continued acceleration of data requirements beyond the traditional reference data elements, the introduction of new instrument capabilities, as well as customized data marts for more readily available information – to name a few.

From an industry perspective, I think the themes we’ve discussed will remain. I do think organisations will continue to explore outsourcing options along with off-shoring non core functions and will be more willing to tackle the replacement of legacy systems to support a streamlined systems infrastructure.

In profile:
Eagle Investment Systems, a Mellon Financial Company, is a global provider of financial services technology. Eagle’s web-based systems automate internal systems to support STP requirements of money managers, mutual funds, hedge funds, brokers, plan sponsors, banks, corporate trusts, and insurance companies. The company’s data-centric platform supports the full investment process while offering specific solutions for reference data management, portfolio management, investment accounting, performance measurement, attribution and AIMR/GIPS compliance, as well as reporting. Eagle can deliver your solution in-house or via Eagle ACCESS, its ASP service.