Making Hybrid Outsourcing Work for Middle and Back Offices, Step by Step

In today's competitive investment management landscape, operational efficiency and controlling costs are necessities.

Hybrid outsourcing, or strategically blending onshore and offshore middle- and back-office (MBO) capabilities, has emerged as a powerful solution.

And according to a report from Cerulli, 65% of asset managers cite improving internal employee productivity as a driver for outsourcing.

However, implementing a successful hybrid model requires careful planning and clear execution steps.

As we explained the benefits of the hybrid outsourcing model in a previous post, this post provides investment management firms with a step-by-step roadmap to make hybrid outsourcing work, outlining processes for internal alignment, task allocation, and how Empaxis' partnerships streamline the journey.

How Investment Firms Make Hybrid Outsourcing Work In 5 Steps

Step 1: Internal Assessment and Goal Setting

Before engaging an outsourcing partner, initiate a thorough internal review:

Map Current Processes

Document existing MBO workflows, identifying pain points, bottlenecks, and tasks with high error rates.

Quantify Inefficiencies

Calculate the cost of manual tasks, delays, and errors in terms of operational expenses and lost productivity.

Define Outsourcing Objectives

Articulate clear goals, such as cost reduction targets (e.g., 20% decrease), turnaround time improvements, or enhanced scalability.

Build Internal Consensus

Engage stakeholders across the firm, securing buy-in from senior leadership, IT, and operations teams for a collaborative approach.

Step 2: Strategic Task Allocation (Onshore vs. Offshore)

Determine which activities are best suited for each location, considering the following areas:

Regulatory Sensitivity

Onshore teams ensure adherence to complex US regulations, handling client interactions and managing domestic audits.

Specialized Expertise

If investing in niche sectors (emerging markets, complex derivatives), offshore teams may offer access to talent with specific knowledge.

Core vs. Non-Core

Keep client-facing, strategic activities onshore.

Non-client facing activities such as routine, repeatable tasks (reconciliations, data cleansing), are ideal for offshoring.

Time-Zone Considerations

Leverage offshore teams for overnight processing, maximizing the workday and accelerating certain tasks.

Step 3: Partnership Selection (The Empaxis Advantage)

The success of hybrid outsourcing hinges on selecting a partner who complements your strengths.

And it's not just about cost savings. There a variety of factors to consider, using Empaxis as an example:

Empaxis' Multi-Provider Approach

Empaxis partners with carefully vetted onshore and offshore providers, creating a customized 'best fit' solution for your specific needs.

We've build a a network of onshore, offshore, and nearshore teams that deliver according to investment managers' specific requirements.

Deep Domain Expertise

Empaxis understands investment management and operations workflows, minimizing implementation time and ensuring seamless integration with your existing systems.

Whether it's reconciliation or performance, or taking it a step further and digitally transforming your investment operations, a hybrid outsourcing provider like Empaxis has two decades of experience in these areas.

Security & Compliance

Demand SOC 1 and ISO certifications, of which Empaxis holds both. Empaxis is also audited by Ernst & Young, and our approach has always been to prioritize data security, implementing multi-layered safeguards that exceed industry standards.

Communication & Governance

Empaxis fosters open communication channels and defines a clear governance model for accountability and decision-making.

Step 4: Transformation & Optimization

Successful transition demands collaborative execution:

Phased Rollouts

Start with a pilot project, outsourcing selected tasks to gain confidence in the provider and refine processes.

Six Sigma Integration

Empaxis applies Six Sigma methodologies across both onshore and offshore operations, optimizing processes for maximum efficiency.

Technology as an Enabler

Utilize secure communication platforms and data-sharing tools for seamless collaboration between teams.

Change Management

Proactively address potential concerns with internal staff, emphasizing the benefits for onshore teams and the firm as a whole.

Step 5: Hybrid Outsourcing - Transforming your Target Operating Model (TOM)

Current TOM - Fragmented Models

Investment firms often face limitations with fully onshore (high costs) or fully offshore (security risks) models.

And that is why, as in the Cerulli study shown above, we see more asset managers looking out to outsource to drive greater productivity and efficiency.

Future TOM - Hybrid Model

A streamlined TOM is characterized by:

  • Cost reduction without compromising quality or compliance.
  • Access to specialized talent pools and round-the-clock operational support.
  • Improved scalability to respond to market demands rapidly.
  • Enhanced data security and process integrity.

Make Hybrid Work For Your Investment Organization

Hybrid outsourcing can transform your investment firm's middle- and back-office, but success lies in careful planning and expert partners.

Empaxis, through its unique partnership model and two decades of experience, empowers investment management firms to realize the true potential of hybrid outsourcing.

We're not just a vendor, but a strategic partner, working to:

Design a tailored solution

Empaxis understands your specific needs, creating a hybrid model that optimizes efficiency and aligns with your business goals.

Streamline Implementation

Our expertise eases the transition, minimizing disruption and maximizing ROI.

Maximize Long-Term Value

We foster a continuous improvement mindset, ensuring your hybrid model evolves to meet future challenges.

Contact Empaxis today and discover how a hybrid MBO solution can transform your operations and unlock new growth opportunities.

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