July 2014: Beware the Snake Oil Salesman

While preparing for an upcoming investment book of record (IBOR) webcast recently, I was chatting with the CIO of a large New York-based buy-side firm about his experiences to date with what is undoubtedly the hottest topic on the buy side at the moment, even though some might describe it as over-hyped. He explained that he had been intimately involved with the extensive and laborious ground work that his firm had conducted in preparation for the long haul toward its ultimate goal of producing accurate, transparent and reliable start-of-day and intra-day positions for its small army of portfolio managers and traders, with the view to enhancing their ability to make more judicious investment decisions on behalf of their clients. He explained that while technology plays a crucial and undeniable role in allowing the firm to convert theory into practice, it’s also important to acknowledge that for complex and often protracted projects like those that typically involve the development of an IBOR, third-party vendor-provided, off-the-shelf solutions that can be implemented “out-of-the-box” simply do not exist, and that any vendor making such claims should be treated with same skepticism as a snake oil salesman.

One would assume that anyone who has risen to the helm of their firm’s technology hierarchy would be well-versed in dealing with the myriad vendors serving the capital markets, evaluating their wares, and possessing a “BS” radar sensitive enough to discern practical advice from spurious claims. But, given that the above scenario is a recurring theme with many of the CIOs I have spoken to over the years, it appears that not all technology heads have developed this ability.

For a financial technology publication like Waters that has close ties with the third-party vendor community, this sentiment might sound like heresy. But as far as I am aware, the publication, launched over two decades ago, has never espoused the view that technology alone is the panacea for all maladies. What we do focus on, however, is the importance for vendors to genuinely understand the nature of their client’s business, the extent and the vagaries of the technology and operational challenges they face, the client’s desired end-goal, and perhaps most importantly, the collaborative and consultative approach to arriving at that destination, which involves no small amount of hand-holding well after the contracts have been inked. Any vendor that does not understand that it’s not just about the technology, is no more useful in the long run than a purveyor of snake oil, and should be dealt with accordingly.