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GOODNEWS July 2013

12 Our most recent review of systems and clearing service providers came up with some interesting stats. A pattern now seems to be developing where confidence in third party outsourcing is gathering momentum. Systems and Service Providers At the time of the review, Goodacre UK identified a total of 101 credible service and system suppliers to the regulated market place. Since 2008, most of these firms have had a difficult time attracting new business following the Lehmann, banking and other financial crises. However, a number have made significant progress. During the past year or so, major new accounts have been won where user firms have recognised that better and more cost effective alternatives are available. In general terms, the number of suppliers of systems to buy side firms has remained about the same. Those selling to sell side firms however have reduced, mainly by mergers or acquisitions. The number of firms purporting to be data providers has increased slightly as has the number of firms included within the ‘Other’ category (firms which provide more specialist services such as corporate actions or CRM systems). Why Change Supplier? The factors which currently influence decisions on systems, operations and settlement, are as follows: 1. Increasing regulatory costs: This is one of the most significant factors on the basis that if you get it wrong, you are out of the game. 2. Significant amount of operational changes required to meet new legislation, regulation and rules. As the rules change, so must operational procedures. 3. Fewer corporate transactions This has meant simply that there has been less business and therefore less income. 4. ‘Dated’ systems need replacing. Many systems in the market have their origins way back in history, when mobile phones were the size of sheds and Hi Fi was much better known than Wi Fi. 5. Increasing confidence in outsourcing and ‘clouds’. We all now rely on technology and the success of Microsoft Office 365 is a solid example. Can’t get no satisfaction? Of the users we interviewed, 57% were entirely satisfied, 22% were not satisfied and 21% were looking to change suppliers. ▪ Firms providing Sell Side systems were criticised more than all other categories. ▪ Buy Side suppliers were rated more satisfactorily but were said to be expensive ▪ Reputation of Clearing firms is enhanced considerably compared to earlier surveys ▪ Fund Platforms were rated highly Outsourcing is In! An increasing number of firms said they were now or would consider clearing or outsourcing in future. Specifically, the league table of those areas where firms would consider third party processing can be summarised thus: 1. Client reporting 2. Maintenance of main company system 3. Settlement 4. Desktop support 5. Corporate Actions 6. Dealing 7. Dividend processing 8. CRM 9. Custody/Nominees Should your own firm seriously consider using an outsourcer? It’s a big question but the following pointers might help: ▪ Are your own staff subject to the same learning disciplines as required by the leading outsourcing companies? ▪ When you outsource your data centre to a colocation Is the Future Clear for the Back Office?


GOODNEWS July 2013
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