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SimCorp StrategyLab Operations Survey Shows Legacy Systems Hinder Investment Growth

  • Nielsen survey conducted for SimCorp StrategyLab reveals that legacy investment management systems are under stress
  • Firms running older systems need to invest more to do the same

SimCorp StrategyLab, a private research institution sponsored by SimCorp and headed by Ingo Walter, Professor at the Stern School of Business, New York University, today released the results of its Global Investment Management Cost of Operations Survey, conducted by the Nielsen Company in 2012. The study found that buy-side firms running legacy systems need to spend more in maintenance costs versus state-of-the-art systems that can scale and adjust with growth.

Surveying 125 respondents in Europe, North America and APAC, the SimCorp StrategyLab study polled executives at a range of fund companies, including fund managers, pension funds, asset managers and insurance companies. The survey primarily focused on the cost of IT operations and the spending differences between firms running on a patchwork of older, custom-built solutions (legacy systems) versus those with state-of-the-art IT platforms. Based on the results, the SimCorp StrategyLab study indicates that as client and market demands intensify, state-of-the-art investment management systems result in a lower cost of operations over time versus retaining a legacy system.

Primary findings included:

  • Increased cost burden of legacy systems: Legacy system respondents spend a higher proportion of budget (39% vs. 36%) on internal staff and external consultants than state-of-the-art system respondents.
  • Legacy systems require increased IT operations budgets: Over half (56%) of legacy system respondents are increasing their overall IT budgets versus 60% of state-of-the-art system respondents who intend to maintain or decrease IT operations spend.
  • Investing more to do the same: A net total of 43% of legacy system respondents intend to increase IT spend versus only 27% for state-of-the-art system respondents.

The SimCorp StrategyLab report concludes that in a cutthroat market, investment managers need to apply the resources they have to help generate alpha and meet client demand. Allocating resource and investment in manual workarounds and inefficient processes may hinder buy-side growth. The study suggests that investment managers running on legacy systems should act now or risk losing market share to competitors who may be better equipped to capture the advantage.

Professor Walter, President of SimCorp StrategyLab, comments, “For any business, knowing the critical value of maintaining systems versus investing in state-of-the-art technology for future growth is imperative. These dual objectives are even more important in the investment management industry where performance and cost are integrally tied to IT, particularly in light of increasing regulatory pressures. The SimCorp StrategyLab study reinforces that buy-side firms who rely on legacy systems are exposed to ‘creeping underinvestment’ and may face greater costs and obstacles to growth down the road. Those firms with state-of-the-art IT systems can measurably gain a competitive advantage and be better prepared for market growth.”