Open platform: keeping up with market maturity

By Dario Cintioli
Published on: August 01, 2011, Waters

In the competitive world of software provision to the financial services industry, when adding new functionality ceases to be a major differentiating factor, software vendors push to lower the costs of supporting the product.

At the same time, revenues from training decline because users are less willing to pay for it. Developers strive to improve the ease of learning and speed of use by adding wizards, macros, on-screen instructions, templates, and other performance-support features—solutions that require up-front development costs but will hopefully be offset by lower support costs.

Market Maturity
In addition to this drive to push down costs, market maturity is also reflected in demand for more integrated products. As a market matures, the number of features provided by vendors that once were considered additional extras become standard.

Take the automobile industry as an example: If you looked at it 20 years ago, consumers were buying radios and speakers separately and installing both themselves. Even as recently as two years ago, consumers were still buying separate satellite navigation systems and deploying them. Today, integration in the car market has reached a level whereby you can find everything in a Fiat 500 that you would find in a Ferrari. The Ferrari looks flashier, of course, but many of the extras that once set it apart have become standard across the industry.

One area of the financial market is moving in a similar direction. Within investment management technology, there has been a dramatic push for integration in recent years as the market matures.

Traditionally, an investment manager would need to buy one performance and attribution system, one risk system, one system for asset allocation, one system for research, as well as find a vendor of the data required to calculate risk and performance. Asset managers increasingly want to have all their portfolio analytics integrated.

The expectation is for today’s systems to be low-cost, and feature a simple user experience, rapid implementation, all the necessary pricing and benchmark data, and offer access via the web.

It should be noted that data is a key component of an integrated solution—benchmark data, prices, risk numbers, accruals for bonds, corporate actions and so on. The big challenge for integrated solutions providers is to incorporate all the required data into one system. Therefore, a need exists to provide data coverage in addition to functionality coverage. Functionality and data coverage remain a challenge today, but it’s also true to say that the industry is evolving at an amazing speed to develop intra-asset class and functionality coverage.

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