Global Operating Models and Outsourcing
| Date: | July 2010 |
| Author: | James Hockley |
| Price: | £5000 to non-members of the Investit Intelligence Member service |
The global financial crisis of 2008 - 2009 fundamentally changed the dynamic for the investment management business. Operating margins for investment management firms have fallen to an all time low. Regulators are introducing ever more onerous and wide ranging requirements. Much of the investor base has lost faith. As we write this report in mid 2010, the mood of the industry is cautiously optimistic. Most firms in the industry have plans for growth, but this growth needs to be supported by a much more cost effective operating model, if investment management firms are to build profits.
Many firms have followed a fragmented approach to building operating models, which are specific to locations and asset classes, resulting in disparate systems and multiple third party providers. Many operating models are too complex for the business they support, and such models may not be sustainable.
Firms are seeking to rationalise and simplify their current operating models to position themselves for further expansion and growth. Trends already evident include the rationalisation of applications, consolidation of operational functions, increasing use of third party providers, and rationalisation of those providers. However, for many firms much more needs to be done.
Investment management firms will increasingly functionalise their operations so that they become suitable for offshoring or outsourcing. Large investment managers, and mainstream service providers, have critical mass to effectively offshore functions for economic and service benefit. However, many investment management firms are unlikely to have enough scale to make offshoring viable and a better route for them may well be outsourcing. As investment management firms seek to rationalise and standardise their model on a global basis they can look to the outsource providers to support these needs. Most outsource providers have not yet developed a platform that can deliver a consistent service across the full range of services on a multi-region basis. There is significant opportunity awaiting those that do so.
Finally, this report provides a framework to assist investment managers with the design, solutioning and sourcing of their operating models. By following a disciplined design and implementation strategy, we believe firms can deliver a more simplified operating model that will be more cost effective to build and maintain. It will also improve an investment manager’s ability to manage risk on an enterprise basis and meet regulatory requirements; and enhance investment process efficiency and client service delivery. A simplified and rationalised operating model will provide affordable support for the growth demands that firms will face over the next 10 years increasing the competitiveness of those firms.
Table of contents
| Management Summary | 1 |
||
1 |
Introduction | 3 |
|
1.1 |
Objectives and scope of the research | 4 |
|
1.2 |
Methodology | 5 |
|
1.3 |
Business context: Why were firms globalising? | 6 |
|
1.4 |
Current context post 2008 - 2009 | 7 |
|
2 |
Global Operating Models Today | 11 |
|
2.1 |
What is a global operating model? | 11 |
|
2.2 |
Global operating models and variations | 12 |
|
2.3 |
A simple model | 13 |
|
2.4 |
Limitations and evolutions | 14 |
|
2.5 |
Offshoring and outsourcing landscape | 19 |
|
2.5 |
Complexity and sustainability | 24 |
|
3 |
Complexity Factors – Deconstruct to Reconstruct | 26 |
|
3.1 |
Factors that create complexity | 27 |
|
3.2 |
Deconstructing complexity drivers | 31 |
|
3.3 |
Satisfying business strategy | 35 |
|
4 |
Reducing the Complexity – Observed Trends | 36 |
|
4.1 |
Complexity of current operating models | 37 |
|
4.2 |
Current trends – Investit observations | 39 |
|
4.3 |
Trends in outsourcing | 42 |
|
4.4 |
Offshoring and outsourcing challenges | 46 |
|
4.5 |
Governing the model | 50 |
|
5 |
Global Operating Models – A Recipe For Success | 54 |
|
5.1 |
Understanding your business drivers | 55 |
|
5.2 |
Building the model framework and parameters | 58 |
|
5.3 |
Evaluating the sourcing options | 62 |
|
5.4 |
Creating a sourcing and solutioning process | 64 |
|
5.5 |
Determining ripeness for outsourcing | 66 |
|
5.6 |
Implementing and operating the model | 68 |
|
6 |
Conclusions | 74 |
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