Should you outsource your operations and technology?
It’s a question hedge funds have been asking themselves for years.
For many hedge fund managers, it is no longer an issue of whether to outsource — but rather, what functions to hand off and how that can be best achieved. After all, why wouldn’t you?
À la carte
Today, outsourcing is all about choice and flexibility.
The days of rigid, one-size-fits-all offerings are gone. Instead, firms are faced with a diverse “adoption spectrum,” ranging from IT hosting to co-sourcing arrangements to full business process outsourcing.
Along that spectrum, you can put together a highly-customized combination of technology solutions and operational services that make sense for your specific business needs and objectives. It’s a case of identifying what you do best, and who can do the rest better.
Getting the right fit
This gives hedge fund firms unparalleled freedom to think more strategically about how to deploy your staff and resources.
What set up will offer the best opportunities to drive even greater efficiencies and reduce your risks, while giving you the agility to add new products, enter new markets, or scale up or down as fast-moving market conditions change? In short, how can you achieve the keenest competitive edge possible?
And as the outsourcing options have increased, the arguments in favour have become broader and more powerful. Among the more obvious are:
- Offloading time-consuming and repetitive tasks such as reconciliations, reporting and performance management to a provider that is more experienced and better equipped to handle them, enabling staff to focus on true value-adding and revenue-generating activities
- “Anytime, anywhere” access to cloud-delivered technology
- The ability to implement technology solutions quicker than with an in-house installation
- Staying current on technology with regular upgrades
- Robust business continuity and disaster recovery
Too much of a good thing?
Without doubt, this service flexibility and diversity can help hedge funds access targeted solutions that better meet their individual needs. The danger is that working with niche providers that only offer certain technology hosting capabilities, or specialize in a particular aspect of operations outsourcing could prove too restrictive as your firm grows or its needs change.
The alternative is an outsourcing provider that offers a wide range and flexible menu of technology hosting and operational services. This makes it easier to add capabilities with minimal disruption as and when the needs arise. They will likely provide more seamless issue resolution and be more cost effective too.
And it is not just about functionality. In any partnership arrangement, the quality of the relationship is key. That means working with a provider that understands your objectives and can effectively serve as an extension of your in-house team in those key areas where you need them.
Done right, what’s not to like?
For more information, read our whitepaper Technology and Operations Outsourcing.