Asset Managers: Knowing When It Makes Sense to Re-platform

Today, asset managers are grappling with a multitude of challenges driven by evolving client expectations, growing prominence of private assets, responsible integration of generative AI into their operations, and the relentless pace of change. Amidst these dynamics, we are observing a tendency among asset managers to bypass thorough due diligence efforts and hastily adopt solutions like re-platforming.? Unfortunately, this approach often leads to costly implementations that exacerbate their initial predicament. While re-platforming can be a viable strategy, it is crucial to conduct comprehensive due diligence. Failing to do so may result in short-term cost savings being outweighed by strategic misalignment or failure to address the underlying challenges at hand.

What Asset Managers Should Think About

Before deciding to re-platform, asset managers should consider the following:

1.?????? Strategic Vision - What is the strategic vision of your organization? What are your business drivers for change? What is the value proposition you are trying to achieve with re-platforming?

2.?????? Fundamental Reasons - What are the root causes of the challenges you are trying to address by re-platforming? Will the new platform effectively address these challenges or introduce further complexities that require resolution?

3.?????? Current Platform - Are you maximizing your current platform’s capabilities? Have you assessed its potential extendibility to address gaps in functionality, scalability, and so forth?

4.?????? Business Case for Change - What is the business case for re-platforming? Will you, and when will you have a positive return on this investment?

5.?????? Ability to Transform - Are you capable of making this change? Do you have the internal resources and bandwidth, and skillsets required to successfully implement and support transformation for the duration? Have you thought about change and the impact to your people? Is sufficient funding available for the immediate program and any potential delays? Have you considered all-in costs aside from platform licensing fees and professional services (e.g., integration development, training)?

Asset managers spending the up-front time to answer these questions, are entering into transformation eyes wide open and better positioned for successful outcomes. They will have chosen the right solution and understand the rigor required to get over the finish line. This results in a stronger asset management firm positioned to grow and scale according to their strategic vision.

Challenges Warranting Re-Platforming

Re-platforming is transformative which can be intriguing enough on its own. Most commonly, we see some combination of “old,” “complex,” “limiting,” and “expensive” as descriptors in every business case associated with re-platforming efforts as evidenced below:

1.?????? Complex Ecosystem – Any combination of vendor and proprietary platforms performing similar functions, and/or one-off functions adds complexity to the ecosystem. This requires maintaining many integration points, coordinating system upgrades which typically are not on the same upgrade schedule, then conducting thorough integration testing when functionality of one system changes. This results in an ecosystem that is constantly introducing change and risk to operations aside from the expense of having to maintain a larger technology team to manage the efforts.

2.?????? Platform Limitations to Addressing Evolving Business Needs – Saying “no” to your investment team when they need to trade a new asset type to meet their portfolio strategy is not a friendly conversation. Combine the “no” with shortening time to market norms for new products and asset types, add in ever changing regulatory requirements, and Excel as a back-pocket platform to complete the organizational chaos. If your platform or ecosystem of platforms are unable to support automation, flexibility and scale up, change is necessary.

3.?????? Outdated Technology – Using technology that does not integrate to a modern tech stack that soon will not be supported by industry vendors. Change when you can take control rather than react to it and make a desperate decision. Supporting business needs and faster / more fluid upgrades require cloud-enabled technologies. It is easier to integrate and maintain that integration, brings a better user experience, and enables a firm’s ability to automate using tooling and AI.

4.?????? High Costs to Retaining the Current Platform – Simply put, the ‘best-in-breed model’ is characterized by multiple systems and a higher cost to serve. Consider the costs of platform maintenance, licensing fees, ongoing support, and continual renegotiation of vendor terms.

Transformation via re-platforming can solve many challenges, but it is not a silver bullet and must be assessed on a case-by-case basis to ensure a good decision for your asset management firm. If re-platforming is not for you, what is the alternative?

When to Consider Alternatives to Platform Change

In our experience, there are scenarios where it makes sense to consider alternatives to replacing technology which can yield outcomes aligned to your strategic vision such as the following:

1.?????? Failing to maximize all the core capabilities of your current platforms. Asset managers should assess the extendibility of deployed technology in their ecosystem to determine if they are optimally using their platform. If you are only using a portion of the modules or capabilities that your vendor has at its disposal, consider expanding usage through your existing vendor rather than a wholesale change. Collaborate with your vendor(s) to ensure you have a current understanding of their capabilities and roadmap then evaluate for fit to your strategic vision.

2.?????? The root causes of your issues are data-related, rather than a vendor capability. Often what may seem like a technology issue, a deep dive investigation uncovers data as the real culprit. Rather than solve for the wrong problem, resolving the root cause would result in a data-related remedy. Define your data strategy, enhance enterprise data management, and data governance to improve data quality.

3.?????? Outsourcing to a third party. In certain instances, it may be better for your business to outsource a specific function, such as trade management, collateral management, or technology infrastructure support, rather than bring in a platform to keep this function in-house. This can be especially helpful if the function you outsource is not additive to your firm’s core competencies and allows you to focus your resources, money, and effort in areas more valuable to your business strategy.

Due diligence on these alternatives could save your organization from a multi-year and high-cost re-platforming effort that in the end may not be the investment you hoped.

In closing, we urge asset managers to carefully evaluate the decision to re-platform in response to the challenges they face. While the temptation to quickly adopt innovative solutions may arise, it is essential to thoroughly assess the obstacles hindering their strategic vision and then determine if re-platforming is warranted. Asset managers should take a holistic view, considering long-term goals, client demands, regulatory compliance, and the business case for re-platforming. By asking the right questions and considering all options, asset managers can make informed decisions that drive their organization forward in a strategic and effective way.

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