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Reference Data Utilities Offer Cost Savings, but Challenges Remain DMS Review

Managed services and utilities can cut the cost of reference data, but to be truly effective managed services must be more flexible and utilities must address issues of data access and security.

A panel session led by A-Team Group editor-in-chief Andrew Delaney at the A-Team Group Data Management Summit in London set out to discover the advantages and challenges of managed services and utilities, starting with a definition of these data models.

Martijn Groot, director at Euroclear, said: “A managed service lifts out existing technology and hands it over to the managed service provider, while a utility provides common services for many users.” Tom Dalglish, CTO, group data at UBS, added: “Managed services run data solutions for us and utilities manage data for themselves.”

Based on these definitions, the panellists considered how and why managed services and utilities are developing. Dalglish commented: “We need to move away from all doing the same things with data. Managed business process outsourcing services are well understood, but utilities present more challenges – will they be run as monopolies and make data difficult to access, what is the vendor interest?” Steve Cheng, global head of data management at Rimes Technologies, added: “The market has moved on from lift outs. New technologies mean managed services can be more flexible than outsourcing.”

It is not only the nature of available services that is driving financial firms to third-party providers, but also cost and regulation, both of which are high on the agenda. Jonathan Clark, group head of financial services at Tech Mahindra, explained: “Cost is significant, but regulation is the number one issue. Regulations require more holistic and high quality data and that is high cost for firms, so they are trying to get data quality at a reasonable price point.”

Dalglish focussed on cost, saying: “The business case is about money. Large companies have lost the ability to change, a utility can help to reduce costs. Banks are looking at these data models to regain efficiencies they have lost internally and are difficult to rebuild.”

Cheng described the reference data utility model as being more like the satellite television model than water or electricity models, and noted that Rimes’ experience of customers is that they want to innovate, but not allow their cost base to increase.

While consensus among the panellists was that managed services and utilities can provide cost savings, they also agreed that it is not the cost of data, but the infrastructure, sources, services and people around the data that rack up the cost to an extent that is leading firms to seek lower cost solutions. Firms that opt to use a data utility can convert capital costs to expenditure and chip away at elements such as multiple data sources.

Dalglish commented: “If you can achieve savings of 30% to 35% that is good, but this is a conservative estimate and it should be possible to save more going forward.” Cheng added: “The rule of thumb is that for every £1 spent on data licences, £2 or £3 is spent on infrastructure and staff. The need is to identify those hidden costs so that the use of a managed service or utility can be justified.”

Returning to the pressure of regulation, Delaney asked the panel whether managed reference data services and utilities would be regulated in the same way as banks. While this is not happening at the moment, some panel members expect it to happen and warn that utilities may find a way around regulation by using disclaimers. Cheng said: “Forthcoming regulations are very prescriptive about data models and regulators may look at the whole data chain. This means utilities and managed services may in future be subject to the same regulatory requirements as other market participants.”

The concept of managed services and utilities is not new. Dalglish recalled an effort to set up a utility that did not take off back in 2005 and said that the moment has now come for utilities as the technology stack has improved, data is better understood and this is a good time for competition and collaboration in the market. Groot added: “Data delivery mechanisms have changed, the bar has been raised on projects and the business case for an internal service is difficult, making external services attractive.” Panellists also noted technologies such as the Internet and cloud facilitating mass customisation, and the benefit of utilities that are built for a single purpose.

With so much to offer, Delaney questioned the panel on what type of organisations will benefit from third-party utilities. Panel members said both large and small firms could benefit, with large companies reducing today’s massive data costs and small firms being able to hand off non-core reference data services. Clark added: “Firms that can benefit most are those that find it difficult to discover the cost of data, perhaps because it is managed in different departments or geographic regions. But these firms are also the hardest to convert because they don’t know their costs.”

A question from the audience about defining reference data, making it open and putting it in a utility for all to use, met a consensus response from panel members who said it is a great idea, but will not happen because there are too many vendors with vested interests in the market.

Closing with a blue skies scenario, Delaney asked how far the utility concept could go. Groot concluded: “There is a need for operational procedures and recovery planning, but utilities could go a long way as there is a lot of data in scope.”

Source: Reference Data Review, 08.10.2013.

Filed under: BPO Business Process Outsourcing, Data Management, Data Vendor, Reference Data, Standards, , , , ,

Reference Data: Tech Mahindra Details Global Data Utility Based on Acquired UBS Platform

Tech Mahindra, a business process outsourcing specialist and parent of London-based investment management technology consultancy Citisoft, has repositioned a reference data platform acquired from UBS Global Asset Management to offer an offshore reference data utility aimed at meeting market demand for lower cost, high quality data that can reduce risk and increase efficiency.

The global data utility has been introduced under the Tech Mahindra Managed Data Services brand and offers securities reference data across all asset types, reference data for corporate actions, tax information and end-of-day and intra-day validated pricing data. The utility handles data cleansing and validation, with clients buying licences to access the data.

Tech Mahindra suggests the utility differs from other offerings in the enterprise data management market as it is owned by the company and can be developed. It is also agnostic on data feeds, including 20 from vendors including SIX, Markit, Bloomberg, Thomson Reuters and DTCC.

The company’s first customer is UBS Fund Services in Luxembourg. Under the terms of a five-year services contract with UBS, Tech Mahindra will create and store golden copy data and provide multiple intra-day golden copies to the asset manager. As part of the acquisition and customer deal, Tech Mahindra, which is headquartered in Hyderabad, India, will take on some staff from UBS Global Asset Management who were working on the platform in Luxembourg, but most staff will be located in India.

As a repositioned platform, Tech Mahindra MDS already covers all time zones, markets and asset types, updates 2.5 million issuers on a daily base, receives 200,000 customer price requests and validates 75,000 prices. Some 20,000 corporate actions are checked every day, along with 1,800 tax figures. Looking forward, Tech Mahindra plans to extend these metrics and add reference data around indices and benchmarks, legal entity identifiers and clients.

While Tech Mahindra will lead sales of the service to the banking, financial services and insurance sectors, Citisoft will be able to provide consultancy as necessary. Steve Young, CEO of Citisoft, says Tech Mahindra MDS has been designed to improve data quality and drive down the total cost of data ownership, in turn reducing risk and increasing efficiency. To manage clients’ cost issues, the company has built a toolkit into the data management system that allows users to analyse the cost of owning data, including people, processes and technology. Data quality will be underpinned by service level agreements and key performance indicators will be added as more clients sign up for services and data volumes grow.

Reflecting on the data challenges faced by financial firms, Citisoft Group CEO Jonathan Clark, concludes: “Outsourcing models have evolved over time and attitudes are changing as firms acknowledge that there is a big difference between outsourcing and offshoring, and that captive outsourcing is not an efficient approach. The need is for a commercial relationship with a centralised data utility that can deliver high-quality, accurate data and a lower total cost of ownership.”

Source: Reference Data Review, 24.07.2013

Filed under: Corporate Action, Data Management, Data Vendor, Market Data, Reference Data, Standards, , , , , , , , , , , , , , , , ,

Outsourcing Reference Data Management: Cost Reduction and New Revenue Opportunities

The past 12 months has seen the emergence of new players offering Business Process Outsourcing (BPO) services for Reference Data Management. These new arrivals expand the range of options available to financial institutions for addressing the challenges of regulatory compliance, operational cost reduction and scalability.

But BPO has other benefits, and innovative adopters have benefited from using the model to create new value-added services. By catering to clients’ data management needs, these players have been able to transform what’s traditionally been considered a cost centre into a new and significant source of revenue.

This paper – from AIM Software – explores this exciting new trend, and describes how an established financial institution took advantage of BPO to turn its enterprise data management initiative into a new source of revenue and business growth.

Download the White Paper Now to Find Out More

Source: A-Team, March 2013

Filed under: Corporate Action, Data Management, Data Vendor, Library, Market Data, Reference Data, Standards, , , , , , , , , , , , , , ,

Capco Proposes the Creation of a Data Culture to Advance Data Management RDR

Financial firms are falling short on data management issues such as calculating the true cost of data, identifying the operational cost savings of improved data management and embracing social media data, but according to research by consultancy Capco, these issues can be resolved with a cross-organisational and practical approach to data management and the development of a data culture.

The business and technology consultancy’s report – ‘Why and how should you stop being an organisation that manages data and become a data management organisation’ – is based on interviews with towards 100 senior executives at European financial institutions. It considers the many approaches to data management across the industry and within individual enterprises, as well as the need to rethink data management. It states: “There is one certainty: data and its effective management can no longer be ignored.”

The report suggests an effective data management culture will include agreed best practices that are known to a whole organisation and leadership provided by a chief data officer (CDO) with a voice at board level and control of data management strategy and operational implementation.

For details on the report click here

Turning the situation around and attaching practical solutions to the data management vision of an all-encompassing data culture, Capco lists regulatory compliance, risk management, revenue increase, innovation and cost reduction as operational areas where good data management can have a measurable and positive effect on profit and loss.

Setting out how an organisation can create an effective data culture, Capco notes the need to change from being an organisation that is obliged to do a certain amount of data management, to a mandated and empowered data management organisation in which data has ongoing recognition as a key primary source. The report concludes: “Every organisation has the potential, as well as the need, to become a true data management organisation. However, the journey needs to begin now.”

Source: Reference Data Review, 24.10.2012

Filed under: Corporate Action, Data Management, Data Vendor, Market Data, Reference Data, Standards, , , , , , , , , , ,