The one-two punch of overwhelming regulatory change and rapidly rising customer expectations is putting tremendous pressure on the operating models of financial markets firms.
While they’re grappling with client demands, firms are facing a steep surge in regulation—Dodd-Frank, Basel II, Larger Trader Reporting, Fatca, Cost Basis Reporting, and European Market Infrastructure Regulation (Emir).
That’s producing a spike in demand for managed services based on cloud or other outsourcing models.
Spending for cloud computing in capital markets will grow worldwide to $2.8 billion in 2013, according to research firm Celent.
Shifting projects and applications to the cloud helps reduce costs by reducing excess capacity, speeds up deployment times by leveraging existing infrastructure, and provide scalable capacity for new projects.
Broadridge Financial Solutions, itself a major provider of managed services to financial markets firms, has outsourced its own IT infrastructure to IBM, enabling it better help client enhance operations and business models.
“We have an agreement with IBM to do provide a managed service for certain of our components, such as back-office trade and settlement,” said Mark Schlesinger, chief information officer at Broadridge Financial Solutions. “It helps us to fulfill a key part of our value proposition, which is that internally-developed and managed solutions are not the only or necessarily the best way to create greater agility and best-of-breed operational capabilities.”
During the 10-year IT services agreement, IBM will provide infrastructure services to Broadridge including data center, data center operations and network support.
IBM will manage the sophisticated technology requirements for Broadridge's financial markets clients, from enhanced information security controls to advanced performance, as well as advances in infrastructure strategic solutions.
Collaborative sourcing approaches can take many forms—from traditional outsourcing to cloud solutions to mututalized processes shared across the entire industry.
“As cost pressures and regulatory requirements continue to challenge financial institutions’ and corporations’ ability to grow revenue, they are looking to trusted outsourcing providers for additional managed services,” said Kalpesh Master, managing partner for managed services at SunGard’s global services business. “This is particularly true in relation to back-office functions, as well as areas that do not contribute directly to revenues but were previously considered too risky to outsource.”
The Business Process-as-a-Service (BPaaS) model enables firms to leverage a utility model that serves multiple companies, provides economies of scale and supports an efficient end-to-end business process.
Firms will continue to seek software solutions delivered on a Software-as-as-Service basis, so they can select software components in the cloud to create a single, customized solution, said Master.
Firms will look for outsourcing providers that can offer cloud computing to help more quickly prototype and develop applications,” he said.
Options, an IT services provider, offers three type of cloud services: Core, a set of basic IT services such as e-mail and telephony; Momentum, a managed hosting service for front-, middle-and back-office applications; and Velocity, a direct market access service for low-latency trading application.
The company is reporting a spike in demand for Core from startup hedge funds and prop trading firms that have been spun off from banks as a result of the Volcker Rule.
Through its Momentum service, Options provides hosting for a variety of service providers such as Advent Software (portfolio management), Misys Sophis (risk management), and Eze Castle Software (order management system).
