Switching your investment system: key issues to consider

By Anthony Rossi, director, institutional sales, SS&C Eze

1 August 2019

Chances are, in the course of the life of your investment firm, there will come a time to take a hard look at whether your investment system still suits your needs. In many cases, if you’re already asking yourself this question, the answer will be “no” — so you’ll need to make a switch. There are some surefire ways to find an appropriate replacement, but one of the biggest issues that comes up when considering a replacement is how difficult the implementation of a new system will be.

As one of our clients at an emerging markets equity shop has told us, “It’s a huge change, especially if it’s a rebuild of an entire system that’s very much responsible for costly errors if something doesn’t go well. As the person responsible for implementation, you dread that a minor detail will be overlooked that will put a black cloud over an entire project.”

Those are big concerns. Other issues our clients have mentioned include getting buy-in from end users on workflows, ensuring infrastructure compatibility, implementation times, and whether the system will be able to support anticipated volumes. Here are some of the key concerns we’ve heard from our customers over the years— and some questions you should be asking new vendors you are considering to make the process easier. All of these should be addressed before you make the switch:

Is the functionality as good as it seems? Will it actually fit our workflows?

Many system switch-overs start with successful demos, but there’s much work that needs to be done to ensure the system actually fits into your operational setup. Will your head trader like the new workflow? Will the portfolio manager be able to use the system?

If possible, before beginning, ask whether the vendor has handled a similar switchover before. Discuss the vendor’s experience with a variety of scenarios so you can understand their flexibility and approach to diverse setups. Ideally, your chosen system should be flexible enough to accommodate a variety of operational approaches, so you’ll be able to use the functionality out of the box, without having to customize.

Aside from setting up interfaces and ensuring the end users are comfortable, you should dig into the details here and ask the hard questions about functionality. For instance, will the way allocations are getting to brokers be any different? How? What needs to be done to ensure the new way is in line with your processes? How will the security master file be getting to your new vendor? How will the vendor ensure that data is consistent throughout all the processes?

Also, figure out whether the system is set up to handle your account rules and restrictions. You will have to spend some time building your rules into the system, but a detailed overview before the switch will help highlight any red flags and plan ahead.

Last but not least, do plan ahead. If you expect that you’ll have new strategies on the horizon that aren’t part of your workflows now, ask how your vendor will be able to handle those future needs. Will it require customizations, or is the functionality embedded within the product?

Ideally, you want to be signing on with a system that is natively configurable to adapt to your needs, but doesn’t require custom development to help you achieve your goals down the line. For instance, SS&C Eze releases software that is highly configurable across all of its platforms, so our clients can get out-of-the-box implementations tailored to their needs. This means all features will be part of a standard version, but how they are used can be tweaked to the client’s parameters. This means the client will be able to take advantage of the strong support, regular maintenance and upgrades that are part of regular service. One-off-customizations typically require a lot more maintenance on the part of the developer and the client.

How long and how difficult will it be to implement?

It’s no secret switchovers are disruptive. Working in tandem on two systems for some time can get expensive, so plan ahead and get a detailed plan from your future vendor about how long the process will take and what disruptions to expect. Ask if there is a transparent way to track your progress; for instance, we at SS&C Eze have a portal that allows clients to see how their implementations are progressing.

You should also find out about what happens if you don’t hit deadline. How will the vendor ensure timely delivery? These questions can help avoid problems before they arise.

How will this system work with our infrastructure?

One of the biggest decisions to make when you decide to switch systems is how the new platform will be hosted. For platforms like Eze Investment Suite, for instance, there are multiple flexible deployment options, from on premise hosting supported by an in-house team to a fully outsourced IT option hosted in the public cloud.

If you’ve decided to outsource your hosting, you will need to understand how those connections will impact your day-to-day business – and what will happen if connections fail. “Don’t ignore your business continuity and disaster recovery plan – start from there and work backwards,” advises one client. “All it takes is one incident where we can’t trade a stock.”

In line with infrastructure concerns is the reliability of the system. Ask your vendor how often the system is down, and what course of action is pursued to get it up and running again. This includes what happens during upgrades – is there any down time when product updates occur? If so, is there a schedule you can rely on to make adjustments ahead of time? And in cases of emergencies, what sort of support should you expect?

Lastly, make sure you have enough capacity. While it’s difficult to plan for a decade in advance, make sure you take into account scenarios where you might be adding strategies and significantly expanding volume, and then make sure your new system will be able to handle the expansion. Ideally, choose a vendor that has a lot of experience with third-party connections, devotes effort to sell-side connectivity and consistently invests in capacity. This will maximize your chances of setting up a system that will easily expand with you as your business grows.

What’s the total cost of ownership?

There’s cost of ownership, and there are fees. With the latter, you will need to get a rundown of system and support costs during the contractual process. There are many systems out there in the market that sell at a low initial cost, but then end up charging hourly for support calls, FIX connection fixes, and other everyday system handling issues. Don’t fall into this trap; we at SS&C Eze believe service is an integral part of your software package. We are transparent about additional fees you might incur in your particular situation, and believe everyone else should be as well. 

Even more important is considering the long-term cost of ownership. At the base level, consider how the new system will help you save money, versus the cost of maintenance and inefficiencies you were likely incurring with your old system. Consider any internal resources you may need to devote to maintaining the system or how it fits into any of your workflows. Do you envision any custom work that might need to be done on your end to ensure smooth interoperability? Is this something that can be addressed by the vendor’s implementation team before the go-live date? All of these factors will play into the total cost of ownership of the system.

Ideally, you want to choose a system that is well-connected, flexible, and ready to go right out of the box. Certainly, you may need to tweak interfaces, but at the base level, you want to be using existing functionality within a highly configurable platform, and minimize custom development as a workaround. Custom development is a red flag, since heavy customization almost always means you won’t be able to take advantage of any new functionality released by your vendor right away. Instead, choose a vendor that can deliver on your vision, making sure your chosen system can accommodate both current and future projected needs.

How will my day-to-day support change?

Whatever the reason you are switching systems, having great before-, during-, and after-implementation support often makes the difference to the entire transition. If you’ve chosen well, support should be a key feature of the offering by your new vendor, so ask exactly how much, when, and how you’ll be supported. Ask to meet the key members of your implementation team as soon as the contract is signed, and grill them in detail about the upcoming process.

Understand what you can expect after the system is up and running. Who will contact you about upgrades? How often do they occur and will there be any training available on the new functionality? Who do you call if there is a problem? Establish key lines of communication early, and make sure they are accessible post-launch. At Eze, our Personalized Client Experience ensures that our clients have access to their support team at any time. This, in turn, has ensured clear and open lines of communication, so our clients always have an extra pair of hands to help them resolve issues or implement new features.

Switching your investment management system is a huge undertaking. Certainly, there will be many unknowns when you embark on this process, and this can put everyone at the firm on edge. The bar on investment managers’ vendor due diligence is constantly being raised, so ask the hard questions of your potential new provider. The more informed you are before the transition, the easier it will be.

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development