The Buy vs. Build Dilemma
There is no question that technology investment is increasingly a strategic rather than an operational decision. The question is not whether to use technology, but rather which one to use.

The financial service industry has changed significantly over the last decade. This rapidly changing environment requires significant investments in technology. Financial service firms are expected to spend over US$390 billion on information technology by 2012. Technology can be expensive, but if executed well, can become a key competitive advantage. A firm’s technology must be capable of tackling today’s complex challenges while remaining flexible and scalable enough to keep up with future market innovation.

Is it better to attempt to build a proprietary application, which allows for complete ownership of development, support and operational infrastructure? Or alternatively, is a vendor system the more viable and sensible option, as firms benefit from vendor insight and expertise? It is the classic ‘buy vs. build’ dilemma. This debate is now more important than ever as we enter a new era for financial services where IT investments are large, the required systems complex, and the margin for error small.

Ten years ago, ‘outsourcing’ had a negative connotation, as it implied vendor risk as well as loss of operational control and security, all of which were compounded by concerns about inadequate vendor response time. Today, it is considered to be an alternative strategy for firms who prefer not to allocate internal resources to years of development, testing and maintenance, with the added risk of the technology becoming obsolete by the time of launch. It is also a strategy that is growing in prevalence: according to a 2009 Deloitte Consulting poll of over 800 financial services executives, 74% of respondents reported that their firms have begun to outsource functionality.

The decision to outsource, however, should not be taken lightly and requires an appropriate level of evaluation to ascertain whether a vendor system is more suitable than an internally developed system. All firms should carefully evaluate the resource and time commitments before choosing to build or buy a system. If a vendor solution is the best choice, selecting the right vendor with a strong track record is essential. Finding a vendor, who can act as a partner and provide a sophisticated, robust and scalable solution that remains relevant, will ultimately allow firms to focus on the core of their business.

Request A Copy

insights

Navigate major trends & developments shaping the industry

Whitepapers

The Acceleration of Electronic Credit Trading

The adoption of algorithmic trading, systematic market-making strategies and advanced trading protocols requires firms to embrace new technologies.

Whitepapers

How to Get the Most Out of Your Liability-Driven Investment (LDI) Strategy

Liability-driven investment (LDI) is a core investment strategy for many life insurers, pension schemes and asset managers. It is an approach to investment in which all or part of the strategy is designed to match a scheme’s liabilities. This paper explores how, with the right technology, firms can achieve better results to get the most out of their LDI strategy.

Whitepapers

A Primer on the Equity Derivatives Market

Over time, the range of pricing models has grown steadily, both as new types of derivatives have been introduced and as weaknesses in previous models have been identified.

Let's Talk!

Speak with one of our solution experts
Loading...