The eurozone crisis, the Cloud and the crossroads for asset managers
The eurozone crisis, the Cloud and the crossroads for asset managers
By Neil Smyth, Technology Director, StatPro Group
With Italy and the eurozone close to what many industry commentators see as a tipping point for the European economy - and asset inflows on a downward trend - its time for asset managers to cut their cloth accordingly. That includes replacing expensive installed investment management software with Cloud-based analytics that deliver the latest functionality at a fraction of the cost.
The migration of systems to the Cloud is the first instance in the investment management industry where technology has actually reduced costs. Until now, every new technology always carried a higher tariff than the previous one – and this fact has not gone unnoticed. Custodians, banks and vendors are moving to the Cloud.
The reality is, if an asset manager wishes to acquire the latest functionality, it will have to move to Cloud computing because it is clear that software providers will not develop under the old technology for much longer. In the next three years, all the major vendors will have shifted to Cloud computing because it costs less for them to develop and maintain applications. This is the future for the investment management industry. Indeed, it is no different to firms refusing to switch from the fax to email 20 years ago.
Yet investment managers cannot at a stroke migrate to the Cloud all of the functionality that they have been accustomed to using through installed applications for the last ten years. It takes time to migrate some of that capability and to make it flexible. Additionally, with every selection process, it is likely that investment managers will have to decide between 100 percent coverage on an installed basis and a Cloud-based system without the bells and whistles.
However, the reduction in asset inflows due to a bear market means that the focus for most asset managers is currently on retaining existing clients and reducing costs. Buyers need to decide where they are going to commit their money for the next five years (the typical license period). Do they consider an installation that may have little or no investment sustaining it before the five years are over, or do they entrust a less expensive Cloud-based solution where there are functionality deficiencies today, but where frequent new releases are rapidly closing the gap with installations?
This crossroads in systems selection leaves investment managers in a difficult position. It’s not an easy decision and the repercussions will last for at least five years. With a deepening crisis in the eurozone, it’s a decision that all asset managers and private banks should take sooner rather than later.
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