Inside or Out: When to Turn to Vendors
Technology executives discuss when to look for outside assistance on an internal project.
The debate over buying vs. building is eternal in financial services. Financial firms have always pondered the pros and cons of building systems internally versus outsourcing them.
And yet, here we are in 2016, and it seems the decision about whether or not to turn to vendors is still top-of-mind for many. A question submitted by an anonymous attendee via sli.do during an end-user panel at this year's Toronto Financial Information and Technology Summit sparked the interest of the crowd and panelists.
The audience member asked how you know if and when it's a good time to stop an internal project and turn to a third party.
Ben Draper, technology director of Bermuda-based insurance company Validus Holdings, said it comes down to when a project starts to be stagnant. Most commonly seen while using the waterfall approach, according to Draper, if progress is extremely slow, or goals seem a long way off, it might be time to look outside your firm.
Looking to outsource doesn't mean scrapping the entire project internally. In fact, he urged against outsourcing an entire project. If something was developed internally there is likely some sort of business intellectual property that a firm is interested in keeping in-house and shouldn't want to move outside, Draper said.
The solution, according to Draper, is having a vendor help the internal team, but it's a move firms must approach with caution.
"It could be a very delicate process because people's feelings get hurt, especially if they're invested in this project over a long period of time," Draper said. "But I think you can bring in outside sources to help you do things a little faster—help things move along. Worse-case scenario, you do have to take it away from the existing team."
Don't Buy the Taxi
Chai Lam, lead architect for Royal Bank of Canada (RBC) Insurance, used moving to the cloud as an example of the buy-vs-build debate. He compared buying servers to calling for a cab and paying for the entire cab as opposed to just the ride.
"We can pay per use. We don't have to do all this work to provision our servers. Somebody else can put it together and we use it like any utility," Lam said. "That's one good example where I think companies need to look at taking costs out of the IT equation and look at vendors to do those things."
Jim Gilligan, the recently retired president and CEO of Blue Cross Life Canada, said he believes it always makes sense to look at the possibility of using outside vendors. Too often, emotions get involved when a project is kept internal, which is why he said he likes to look at third parties from the outset.
"What I've seen when it comes to big internal projects, is when people themselves start to get invested in it personally, I think then maybe you've gone too far. I always ask the question: What's the sunk cost on this deal?" Gilligan said. "There is always a lot of ego on the table, and that's why I would generally want to talk to people first on the outside before going down that road."
Better Suited
Erik Vynckier, a board member of UK-based insurance company Foresters Friendly Society, was also in favor of outsourcing, but cited a commonly used adage when discussing buy versus build: You might be able to outsource cost, but you can't outsource responsibility.
Vynckier said that with roughly 300 large asset managers in the world, it doesn't make sense for firms to try to develop all their systems in-house. There is a large ecosystem of suppliers available to firms that specifically focus on specific tasks, he said. He used analytics as an example of something he would outsource.
"You're always going to have more experience and more scale if you externalize that sort of task rather than trying to do it in-house," Vynckier said. "How many people are doing exactly the same task across the industry? Does it make sense for each of us to internalize that, or is there maybe a vendor that can do it for us efficiently with a much larger experience base that is better?"
The Bottom Line
Panelists at the Toronto Financial Information and Technology Summit debated buying vs. building. All four agreed that there are big benefits to looking toward third parties, but the decision shouldn't be a blanket one.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@waterstechnology.com or view our subscription options here: http://subscriptions.waterstechnology.com/subscribe
You are currently unable to print this content. Please contact info@waterstechnology.com to find out more.
You are currently unable to copy this content. Please contact info@waterstechnology.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@waterstechnology.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@waterstechnology.com
More on Emerging Technologies
This Week: What is going on?
Is it weird that Euronext bought Substantive? It’s weird, right? Plus WFIC, tick sizes, Microsoft and BlackRock want more datacenters for some reason, and, of course, AI. What does it all mean?
Waters Wavelength Ep. 288: Media’s changing landscape
Wei-Shen and Tony discuss ways to improve the podcast going forward.
Fidelity’s quantum exploration unites theory and proof
The asset manager and Amazon have teamed to put a quantum twist on machine learning.
GenAI could connect ‘constellation’ of vital information technologies
At WFIC, Six Group’s Marion Leslie highlighted the opportunities and risks that the technology holds.
Why can’t we be friends?
The ABA vs most every regulator. LSEG vs BBG. AI vs SaaS. Buy vs build. Lots of drama in the capital markets.
DORA will change the buy vs. build debate… maybe
Waters Wrap: With DORA’s deadline looming, trading firms are having to reassess their long-term tech strategies. Anthony wonders if that means more building and less buying.
JSE rolls out exchange data to cloud Marketplace, built with DataBP
The move—part of a broader cloud migration at the exchange—allows financial firms to connect and subscribe to JSE news, market data, and analytics via the cloud.
The SEC needs a hand with artificial intelligence
The SEC wants to take a tough stance on AI, but it has a talent problem… or a marketing problem. Or both…