Increase operational efficiency
While change is daunting for any organisation, legacy investment and data management systems pose great risks that shouldn’t be ignored. From compromised security to reduced productivity, sticking with the systems you know may seem safe, but puts your firm at potentially devastating risk.
In this article, we unpack the risks associated with legacy systems, and the benefits of adopting more modern, cloud-native solutions in your own firm. We also look at how a suitable software partner can make the move more manageable for asset managers, and the positive long-term impact that comes once firms have effectively addressed their legacy systems and the risks associated with them.
Reasons businesses continue using legacy investment and data management solutions and processes
The process of replacing legacy systems and software is often an overwhelming undertaking for asset managers, especially since these systems contain large amounts of data that can be daunting to migrate to new platforms.
What’s more, there’s sometimes a misconception that so long as legacy systems perform the tasks required to maintain day-to-day operations, there’s no need to replace them. When in the tornado of reconciliations, checklists etc it's not always easy to stop and ask if the processes we're going through every day are the most efficient.
This approach is often considered the more cost-effective route in the short term, as moving away from legacy systems usually comes with upfront investments such as implementation. However, while changing systems does require initial investment, trying to maintain legacy systems becomes much more cost-intensive (and challenging) in the long run.
The reluctance to move away from legacy systems is further compounded by the complexity of choosing a new solution. With the number of solutions available on the market, and the number of unique business requirements that need to be considered when selecting a solution, making the choice isn’t always the most straightforward process.
Key risks of using legacy investment data management solutions and processes
While changing to a new investment data management solution does require considerable time, effort and investment, in reality, the risks that come with putting off the move and sticking with legacy systems far outweigh the temporary challenges that accompany making the change. Here are just some of the risks you face when keeping legacy systems in production.
1. Increasing operating costs
Maintenance is the most obvious cost that comes with keeping legacy investment data management systems running. This can be worsened by sporadic or discontinued software updates that need to be dealt with in another way.
Additionally, the system downtime that comes as a result of old, unreliable tech that can’t remain stable in production, can bring operations to a grinding halt and waste your team’s time and your business’ budget. As former investment managers, we (unfortunately) have first-hand experience of these extremely stressful situations.
These unpredictabilities put your operations further at risk because they can negatively impact your portfolio management processes and operations workflows, which can affect your investment decisions and your risk management, which can even hinder your long-term performance.
"We were running one of the established hosted solutions, and certainly had some challenges. The software was very complex since it had grown over a long time, which made it difficult to onboard new team members and some portfolio managers even retreated back to spreadsheets in the end.
Change management was another challenge, we had to rely on external consultants to perform upgrade projects and implement new functionality. This resulted high total cost of ownership and slow delivery of enhancements, which in the end impaired our ability to provide the best return for our investors."
CEO, $6bn Asset Manager
2. Compromised work productivity
Speaking of wasting your team’s time, continued reliance on clunky legacy systems compromise your team’s productivity.
Because older investment data management systems can’t integrate with other key systems, which results in data silos and therefore, compromised data quality, they can greatly impact your team’s productivity and efficiency, leading to oversights, frustration and decreased motivation. This can be further aggravated by old implementations and configuration capabilities that doesn’t meet changing business requirements.
This inflexibility can also hinder your team's - and organisation's - ability to modernise and evolve processes to meet customer demands and remain competitive in today’s digitally-oriented environment.
3. Software integration issues
Integrating systems and software is a key requirement for the modern business, as without proper integration, teams need to manually capture, rekey and move data between tools for different processes, which is a time-consuming process. Unfortunately, most legacy systems have been designed as self-contained, standalone systems without integration capabilities, which compromises a business’ flexibility considerably.
A typical result of this lack of integration is data silos that are difficult to access across different departments, leading to fragmented, disparate systems and processes, and decreased efficiency. The opposite is an integrated investment management solution, that covers all investment workflows in one.
4. Cybersecurity
The worst-case scenario of sticking with legacy systems is that you experience a security breach and lose valuable (and even sensitive) business data, leading to potentially devastating consequences.
Security vulnerabilities arise because of slow, inefficient legacy systems that are outdated. These outdated systems are a prime target for cybercriminals on the hunt for weak points in a system to exploit.
A common misconception is that on-premise (locally installed) software is more secure and safer than the cloud. This feels intuitive, but in fact the opposite is true - the right cloud is the best option if cybersecurity is an important concern.
Continuously updated software is a key counter-measure to fend off potential attackers. Unfortunately, as we all know, long release cycles are the norm for legacy investment technology.
"With an on premise system, upgrades take a considerable amount of time and effort, and generally we upgrade annually – meaning we have to wait a long time for software improvements.
It also means we have to spend valuable resources on non-core activities such as hosting and IT maintenance. With the current cyber environment and frequency of security patching, on critical systems for us this is a manual, out of hours, process that means Production systems are unavailable. We are strategically moving to SaaS for some critical systems, so that not all our key systems are running on the same environment, so makes BCP/DR more layered – and gives us more options, and less likelihood of all systems outage."
Head of Technology, $9bn Asset Manager
Why businesses are moving to cloud-native investment management solutions and processes
In the face of the risks that come with the continued use of legacy systems, many firms are considering moving to, or have made the move to, cloud-native investment management data solutions, to leverage the vast capabilities the cloud has to offer.
Some of the benefits of cloud-native IBOR, order- and portfolio management solutions include:
- Stronger security that is continuously being improved
- Real-time and complete portfolio data that your users can trust
- Readily available scalability to meet the needs of growing businesses
- Process automation, which eliminates the risks that come with manual processes
Modern and cloud-native investment, order, portfolio and data management tools allow investment and operations teams to evaluate investment performance and risk more quickly and accurately while providing real-time reporting capabilities for more efficient decision-making. Additionally, these tools empower you team with comprehensive portfolio management and performance insights, while enabling more streamlined operations as well as pre- and post-trade compliance.
Overall, leveraging cloud-native solutions means spending less time worrying about your systems themselves, and more time enjoying the benefits that your system provides.
How to choose the best investment management software partner for your business
While you may be eager to modernise your firm’s systems and processes, hastily procuring and installing solutions, without a proper implementation and change management plan, can have the opposite effect on your business. Taking the time to understand your business and operational requirements, and then developing a sound digital transformation strategy accordingly, is the best way to ensure you adopt solutions that are suitable and can deliver not just today but also in the future.
Leveraging the expertise of an investment management software partner, both when developing and implementing your strategy, can help you ensure you start off on the right footing, and transition smoothly to your new system. The best software partner should be able to help you scope out your needs, and then provide an implementation plan that includes seamless onboarding and training, before assisting with system testing and go-live.
When you explore investment management software providers, we recommend to keep the following considerations in mind:
- Is the provider’s solution cloud-native and leveraging the full capabilities of the cloud?
- Is the solution scalable without requiring significant infrastructure changes?
- How does the provider handle software updates? Do these come with an additional fee or system downtime? Is there a cost (direct or indirect) associated with upgrades?
- If my business needs evolve and my investment and data management software needs to change accordingly, will the provider be able to support this? If so, to what extent and how can I be sure?
- What kind of post-sales support and maintenance does the provider offer? Does this come at an additional cost?
Summary
Moving to more modern systems is an inevitability for any asset or investment manager that wants to remain relevant and competitive in the market, whether out of necessity, or in the search for greater operational efficiency. An Enterprise SaaS (Software-as-a-Service) systems offer compelling capabilities that guarantee improved processes and outcomes.
With a proper plan in place, and a suitable solutions partner by your side, you’ll be well on your way to implementing an improved investment data management system, leading to a more productive firm that offers employees greater support, and clients more improved outcomes, all while saving costs in the long run.
For insightful advice on how to choose the best investment management software for your needs, download our useful guide , or reach out to our team to learn more about our solutions.
