Survey shows that legacy systems hinder competitiveness, market agility and compromise the pursuit of alpha
The issues discovered in the survey findings suggest a disparity between technology investments made in the front- and back-offices. According to Alex Tabb, COO of TABB Group, "The tendency for firms to invest more heavily in front-office technology than back-office platforms has created an ‘operational disconnect’ between the need to get into new products to drive alpha generation and the actual ability to do so. Whether you are a buy-side trader or a sell-side market maker, you need to be able to move in and out of markets and strategies deliberately and with agility. The fact that 57% report that their current back office systems do not support new market entry without the need for workarounds is troublesome, especially considering all the attention that has been given to the dangers of managing complex processes on spreadsheets.”
Key survey findings include:
- 56% indicated that their firms experience either significant or serious levels of pain as a result of legacy technology in the system infrastructure.
- 88% of respondents still rely on Excel spreadsheets to manage some front-, middle- or back-office processes. Spreadsheets create several versions of the truth and as a consequence, the integrity of the data being relied upon for business strategies and management decisions is not sound enough.
- 57% report that their current back-office systems do not support new market entry without the need for workarounds.
- 75% are currently unable to process newer, more complex securities like swap functions without having to perform multi-step manual interventions, thereby increasing error rates.
- 70% rely on investment accounting systems that only refresh front-office systems overnight, increasing the importance of the need for an IBOR which provides up-to-the minute data across all asset classes.
"An overreliance on manual interventions, especially when it comes to processing increasingly complex investment instruments, introduces systemic challenges that sooner or later will have to be dealt with,” explains David Kubersky, Managing Director of SimCorp North America. "Firms that operate with a short term, 'wait and see' perspective when it comes to adopting a state-of-art investment management system are running the risk of becoming legacy themselves if the system infrastructure in place cannot support the growth initiatives of the organization.”