review of the outsource market presentation by stephen pinner fsi philip painter

Review of the Outsource Market

Presentation by

Stephen Pinner FSI

Philip Painter

sumgood.com Tel: 020 7422 0063

Review of 2007 (Wealth Management)

• Many Outsource providers spent most of 2007 retaining current business

• Significant demand but limited availability

• New provider joined the market space SEI Europe first client being HSBC Wealth Managers

• Major implementation difficulties

• Main winners in 2007 were the system providers,

• Majority of Wealth Managers who reviewed in 2007 either replaced systems or in-sourced


Review of 2007 (Institutional)

• Very few new deals in 2007

• Majority of high profile deals completed in 2007 originated in 2005/6

- RBC Old Mutual

- BNP Aberdeen Asset Management

- JPM Threadneedle

- Soc Gen Pioneer / Unicredit

• Reason for lack of outsource activity

- Consolidation and integration of previous deal

- Focused on building functionality for alternative investments

• 2007 saw the end to the open cheque book sales process

• FSA embraced outsourcing in 2007 by outsourcing IT support services to Fujitsu


Review of 2007 (Off-shoring)

• Move by smaller companies with turnover less that £5 million to outsource functions offshore

• Market trend is to move full operational centres off-shore eg BNY Mellon and JP Morgan

• Emerging trend to off-shore to near shore locations Russia, the Czech Republic, Poland

• In 2007 UBS moved 750 jobs to Poland


Review of 2007 ( MiFID)

• It was felt that MiFID would stimulate the outsource market place

- Increased need to collect, consolidate and publish information

- Need for extended data storage requirements

• Greater emphasis on understanding the roles and responsibilities on the outsource providers

• Ensuring the process of due diligence is undertaken and documented

• In reality we have seen little or no impact from MiFID on the outsource market place


Predictions for 2008 (Wealth Management)

• Emergence of new outsource providers in the Private and Wealth Management space

• Wealth Managers expectations have increased and they are looking for more than a one size fits all outsource

• We see a move to component outsource

Contracts and Settlement

Technology and IT

Accounting and valuation services


Predictions for 2008 (Institutional)

• Volatile markets will force Institutions to revisit fixed cost

• Large custodians will return to the market with updated platforms which can service alternative investments as well as long only assets

• The large custodians are looking to move further up the value chain towards :

- Middle office and trade confirmation

- Performance Measurement / benchmarking

• We also see a move from the large providers into the outsource and administration of Hedge Funds


Predictions for 2008 (offshore)

• Continuing trend for more companies to use off-shore locations

• Recent survey by Deloittes estimates 180,000 UK financial service roles will be off shored to low cost centres by 2010

• The maturity of more near shore locations

Egypt

Turkey

Hungary

Russia


Outsource Case Study Lessons Learnt

• Experienced difficulties managing services in more remote location

• Issues caused by language and cultural differences

• Issues caused by time differences

• Poor management of the overall ongoing relationship

• Survey carried out in 2007 stated that 1 in 4 companies would have paid more for a higher quality outsource provider


Outsource Case studyWhat could have been done Better?

• Make sure the SLA’s are better defined and eliminate ambiguity and guesswork

• Better financial bonus/penalty framework to ensure closer alignment of service and delivery

• More robust governance structure to deal with issues as they arise

• More experienced staff to manage the relationship both internally at the client and at the outsource provider


Questions

review of the outsource market presentation by stephen pinner fsi philip painter

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