Outsourcing is the classic sex-in-the-fifth-form topic: everybody is talking about it, but virtually nobody is doing it. Now consultants Celent Communications have looked three fund managers which have actually done it: PIMCO, Barclays Global Investor, and the asset management group within Union Planters Bank.
In a new report, Asset Management Case Studies-Anatomy of Three Outsourcing Deals, Celent explores how the three firms decided to outsource, how they chose their providers, how they planned the transition, and what operational and strategic benefits they have enjoyed so far.
If Celent is right, and two in five fund managers are considering outsourcing back- and middle office operations and IT functions, the document will attract a wide readership. With the market downturn and intensified competition for assets, investment managers are looking to gain operational efficiencies, explains the consultancy. It identifies three significant benefits: lower overhead costs, increased productivity, and risk reduction.
“By outsourcing, asset managers can focus on higher-value activities including product and market development, distribution, and client service, while transferring commodity back- and middle-office functions to experts who can conduct these operations more economically,” says Pamela Brewster, a senior analyst at Celent and the author of the report. “In terms of technology, outsourcing also ensures continued maintenance and upgrades and eliminates large, up-front capital outlays.”
Along with the case studies, the report provides insights into the factors spurring asset managers’ interest in outsourcing; the benefits derived from outsourcing; the various providers in the market, and a checklist for assessing an outsourcing arrangement. The report also explores whether it is advantageous to be a first-mover in this area and whether outsourcing is a fad or long-term trend in the industry.
“With growing competitive pressures in the industry, we think it’s only a matter of when, not if, outsourcing will become a common phenomena,” adds Brewster. “The only question will be which activities to outsource and which to keep in-house.”