George Rosenberger, Managing Director and Head of ConnEx, ConvergEx Group’s outsourced FIX connectivity solution looks at the benefits of outsourcing technology.
Today, FIX connectivity is a critical component of how the buy side communicates with the sell side. Communication is a necessary cost of doing business; however, outsourcing FIX connectivity to a firm that specialises in it can help clients grow their business. Outsourcing is important for a variety of reasons. First, it allows firms to concentrate on their core competencies such as trading or research. Outsourcing FIX connectivity also provides cost-saving opportunities as well. Savings can come through eliminating circuits, routers, data centres, power, system upgrades – the list is endless in terms of possible opportunities for clients.
It’s not all about cost savings though. Traditionally, clients experience a higher service level when dealing with third parties versus internal resources. Increased service levels help broker-dealers ultimately better service their end clients.
The conversion period
We work very closely with our clients, planning for and implementing the initial conversion. Collaborating with our clients, we determine the optimal conversion strategy for their specific connectivity needs. We ask questions and listen to our clients. Listening is part of what we do best. What are their expectations for the conversion? Do they want to control the process or do they want us to do it for them? Is there certain logic that they want to follow? Do they want to look at it from a cost-savings perspective or from a client-impact perspective? Without good communication, the conversion process could be a very stressful time for clients.
At first we typically see our clients being relatively reserved when it comes to the account conversion. Once they see how easy the process is, they typically want to expedite the remainder of the connections in order to realise the full benefits of outsourcing with us. Benefits may include additional cost savings, increased efficiencies, an uptick in service/monitoring tools, etc… Clients suddenly have access to a robust toolset that they typically wouldn’t have had in the past. We give our clients transparency into their connectivity activity, highlighting who is actively trading, who is not trading, how they’re trading and what they’re trading. It’s a big upgrade for them.
The need to outsource vs. what can be outsourced
Outsourcing is still growing and that growth is being served by a variety of things. One is certainly cost savings, but we are also seeing trends that emphasise the quality of service that clients receive from their providers. Firms realise that through the right vendor, they have increased flexibility and scale that can help them grow their business and book revenue faster from their end clients.
“At first we typically see our clients being relatively reserved when it comes to the account conversion. Once they see how easy the process is, they typically want to expedite the remainder of the connections in order to realise the full benefits of outsourcing…”
When it comes to what to outsource, there’s really no limit other than your imagination. We’ve had clients where we’ve completed simple assignments for them like automating an internal process, but we’ve also designed complex solutions for clients such as advanced monitoring tools for internal trading systems. Perhaps it’s an internal “pain point” that they’ve been wanting to automate for a while but haven’t due to budgetary constraints, lack of headcount, lack of transparency or lack of skill set.
Delineations between build and buy are blurring
Everybody is struggling to maintain whatever market share they have and they’re trying to grow in a shrinking environment. The challenge that most firms face is; how do they grow when they’ve had to cut key resources just to maintain some baseline of profitability? That’s where outsourcing can really add value; by delivering customised solutions through expertise and scale. We don’t deliver the same cookie-cutter software and support tools that everybody else does because in today’s environment those tools are not adequate and clients expect a higher level of service and they also expect immediate results as well as notification when issues occur.
We’re trying to build tools that provide differentiation versus what their peer group has today; something that really creates value for one broker-dealer versus another. Being able to get products delivered quickly, and having something that meets all of the clients’ needs is a big bonus today. When you’re dealing with in-house development, typically you have finite resources and a team with a broad skill set. Outsourcing to a firm that specialises in FIX connectivity offers an in-depth understanding of connectivity-related challenges and also offers creative solutions that might otherwise go unrealised.
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When you’re working with someone internally, it’s often very difficult to have them hit certain service levels and meet certain time commitments because other priorities always surface that shift resources. By outsourcing, firms almost guarantee that they’ll have dedicated resources for a client’s initiative and hit their agreed upon deadlines.
Creating trust
The biggest challenge that vendors have is creating organisational trust. Clients depend upon vendors to provide quality solutions at a good price point and they’re expecting solutions to be resilient. We make sure that our clients are educated and trained on our systems. We walk them through our layers of resiliency and failover until they are comfortable with us and can trust us with their client connectivity.
Once a vendor has established a trusted relationship with a client, either through outsourcing of their FIX and/or the outsourcing of their risk management and they see the value and expansive skill set, they then see you as more of an overall solutions provider — a vendor that can be tasked with even the most complex product and service development projects.
Differentiating providers
There is a big difference between outsourcing providers, and that’s where clients really have to do their homework. Just to say that outsourcing is the magic bullet is not an accurate statement. Clients have to really trust their outsourcing partner, understand their capabilities and verify that they have a proven track record with clients. Has the company had any problems with outages? How do they respond to those outages? Do they keep clients in the loop? Is client exposure minimised?
We are an open book and advise our prospects to do their due diligence. We want them to see everything from the infrastructure to the personnel here. We want to make sure from an organisational trust perspective that “right out of the gate” clients have a high degree of confidence that outsourcing with us is a better solution than what they currently have in place.
Our sophisticated model and flexible technology allows firms to quickly execute tasks and implement services that would normally take them much, much longer. We have spent years investing in the right technology and the right talent to address clients’ concerns and create efficiencies. It would cost a lot of money for a firm to implement solutions on their own without the expertise and commitment that we’ve made to our products and services. Ultimately working with an experienced and reputable technology and service provider, clients are able to realise results much quicker and effectively.
