Investment management software and services group SimCorp has published a white paper outlining best practices for leaving legacy investment management systems behind and transitioning to a system that supports business strategies while controlling costs via a return on investment (ROI) analysis framework.
Entitled ‘Making the Case for Moving from a Legacy System: Seven Steps to a Solid ROI Analysis’, the paper’s author is Tom Hong, managing director at InvestTech Systems Consulting, and it is part of an ongoing series of industry thought leadership compiled and published by SimCorp.
Hong writes that “many buy-side firms are making the painful discovery that what started out as a solution providing years of adequate technology support for the business is now straining under functional shortfalls, manual workarounds and integration challenges. The technology has become outdated, costly to maintain and unreliable.”
This technology is what is described as ‘legacy IT systems’. As investment managers look to replace these failing legacy systems, firms must know in measurable terms and precise calculations why it may be in the firm’s best interests to migrate to a state-of-the-art system.
In order to build a business case focused on ROI, InvestTech outlines the following seven steps:
- Understand the problem: Identify and describe the root problems and key objectives against which a buy-side manager can measure the impact of a state-of-the art solution.
- Set up a scorecard: Identify key business metrics (KPIs) – take measure of the current state.
- Develop the parameters: Align the KPIs to the drivers behind the initiative. The main drivers might include reducing operational risk, increasing operational efficiency and supporting growth opportunities.
- Prioritise requirements: Rank overall requirements by speaking with key internal stakeholders to identify strategic impacts and opportunities.
- Assess the solution: When assessing replacement systems, score them by functional capabilities, technology platform capability, vendor relationship and operating costs.
- Gauge ROI correctly: Develop a practical summary of current-state and proposed-state costs amortized over a multi-year horizon.
- Make legacy system replacement decisions based on a 360° business case: With all the information in hand, investment managers can make the right choice in selecting a state-of-the-art system to replace failing legacy investment systems and experience measurable success.
“Leaving legacy IT behind is a large but transformational decision for investment managers,” says David Kubersky, managing director for SimCorp North America. “Building a strong and measurable business case enables operations executives to demonstrate the powerful impact that state-of-the-art IT can have on reducing cost, improving efficiency and enabling vital business growth.”
A copy of the InvestTech paper as featured in the latest SimCorp Journal of Applied IT and Investment Management, can be downloaded here.
However, a London summit on the industry’s introduction of the technology cautions that testing and acceptance are still at an early stage and firms should proceed with caution.
The Danish shipping and oil conglomerate confirmed that it will separate its businesses into stand-alone transport and energy divisions.
The central bank has tweaked its stimulus programme and is making a fresh effort to push Japan’s inflation rate above its 2% target.
A total of US$4.88 trillion of debt has been sold so far this year reports Dealogic, close to the level of 2007 when US$4.91 trillion of bonds were issued over the same period.