The buy-versus-build debate is everlasting, but industry sentiment seems to be leaning towards the former – with caveats. Adding on to off-the-shelf products may be the way forward, allowing firms to customise their offerings and differentiate from others. Read on for more of TradeTech’s discussion on the topic.
Although choosing to buy rather than build won’t fulfil all of a firm’s required functionalities, industry sentiment seems to suggest that it’s a more economically worthwhile choice than building systems in-house. Multi-asset OEMSs want, of course, the best functionalities, Oskar Wantola, head of listed execution technology at Man Group, affirmed. This is more efficiently achieved by using an off-the-shelf model and adapting it to fit specific needs. The focus should stay on value-add in these cases, Kevin Convington, chief consulting officer at Adaptive, said, with third parties relied on to do the heavy lifting that new systems require.
In order to adopt this approach, there needs to be more standardisation between vendors and technology, Wantola continued. The gap between buy and build needs to be reduced, with clients able to build on top of bought-in models.
Currently, there is not enough flexibility in OEMSs to allow for additional tools to be created on top of existing platforms, Daniel Stauning, head of trading at Nykredit Asset Management, said. Interoperability is key, and as Medan Gabbay, chief revenue officer at
Quod Financial, stated, “vendors do not operate in isolation”. As such, the lack of collaboration across the industry needs to be addressed. Gabbay advocated for asset managers to consider what their goal for change is and determine target workflows before constructing best-of-breed solutions through vendor collaboration. A similar sentiment was held for asset managers considering adopting multi-asset OEMSs; the most important thing to do is to speak to others in the industry, panellists agreed, working together to enhance the industry as a whole.
This may raise questions of differentiation – how can clients or vendors stand out if they’re working in tandem?
Wantola went on to emphasise the benefits of coding capabilities across companies, with Python being used across Man Group to build between EMSs and OMSs. The functionalities this unlocks cannot be accessed through a rule-based approach, he explained. Andrew Kovacs, director of product, EMEA, at Charles River, agreed that the future of OEMS systems is coding. He added that Charles River wants clients to lead discussions when it comes to making systems as flexible and interoperable as possible, an opinion that Gabbay and Kovacs shared.
Vendors cannot innovate without client input, Gabbay added, emphasising the symbiotic relationship between provider and client. It’s important for a firm’s long-term strategy to be established from the outset, speakers agreed, particularly given the fact that OEMSs are expected to last for several years. “The relationship goes beyond vendor and supplier,” Convington stated; there needs to be a strong sense of trust from the get-go.
Quintus Kilbourn, head of equities at Absa, agreed that establishing these long-term relationships is crucial, in part because changing vendors is an arduous and expensive process.
With regulatory and compliance costs on the rise, buying rather than building becomes even more appealing, reducing pressure on the IT budget. “Regulatory change could be an opportunity or a challenge,” Kilbourn noted, with those who have their finger on the pulse able to take advantage of upcoming changes. On the other hand, though, if regulations aren’t exactly what teams anticipate then they may have to reassess their approaches. Either way, leaving space in the budget for new developments is vital.
When bluntly asked whether buy or build was the best way forwards, ‘buy’ emerged as a clear winner. “Build sounds great on paper, but it’s a lot of work,” said Kovacs. It was agreed that buy should always be the first choice, with build used to enhance these existing services.
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