I’ve spent almost my entire career in investment operations.
During that time, I've worked with virtually every major investment industry software provider and accounting platform.
And when it comes to choosing an outsourcing partner, there are a few points wealth and asset managers must consider.
In many cases, investment firms will opt to outsource their middle office and back office directly with the portfolio accounting software provider.
There are benefits to that approach, but there are additional benefits to consider when partnering with service providers that exclusively focus on investment operations.
When a portfolio accounting software company goes into business, their goal is to build and sell their own systems.
They want to build robust and reliable platforms that serve clients well, and like any business, they must maximize revenues and keep costs down while maintaining exceptional levels of quality their customers expect.
Of course, the core strength of the software provider is building software. They do it best, and producing and marketing their product is the primary focus.
Additionally, the software company might offer middle- and back-office support.
Note that servicing operations is an important but secondary part of their business.
You choose a software company because they’re the best at what they do. Similarly, you should choose an operational services partner because they’re the best at what they do.
To the extent they are well-versed in the technology from the software company, consider the benefits of a managed services partner for outsourcing:
As mentioned before, operations servicing is a secondary component of the business for a software company.
But for a managed services provider, the middle and back office is their primary focus.
In the majority of cases, you will get the most benefit from a vendor when you select them for what they focus on the most.
To clarify, just because operations support is “secondary” for the software provider, it does not mean that the service line is not important to them; they want their customers to be satisfied with all services provided.
The point is to acknowledge and distinguish vendors between what their primary focuses are and where they do things best.
Addressing the point above, the best operations vendors are the ones that prioritize operations.
That is because they focus all their efforts into being the best they can be in that one area.
Naturally, they’ll have more breadth and depth in their service capabilities because they’ve spent all their time in a focused space.
In fact, the software companies can benefit a lot by having managed services partners that are experts on their platforms. More on that below.
When dealing with investment operations, the services partner will have encountered all the same tricky situations the software company deals with.
The business model of the services partner is based on operations, which means they are more likely to find ways to efficiently handle challenging operational scenarios.
An operational services partner will have figured out solutions for cost-effective, efficient, and scalable support. Otherwise, how will they be in business?
For software companies, it’s most effective for them to produce standard, off-the-shelf solutions that meet most (but not all) needs of as many customers as possible. And that’s perfectly fine.
And an outsourced operations services partner is the perfect complement; they are more willing and better equipped for specialized support and building out customized versions of the software.
Partners like Empaxis have nearly two decades of experience in investment operations, including software development and customization capabilities.
The managed services provider and the software company can enjoy a symbiotic relationship.
Being the best they are in their two spaces, their two offerings complement each other, allowing for an improved client experience.
Here’s how:
If the software company focuses on what it does best, building and selling software, then the operations services partner does what it’s best at: servicing the middle- and back-office.
When the operations partner does well servicing clients on the software company’s platform, then investment firms using said software will be satisfied, and they are more likely to renew their agreements with the software provider.
Renewed agreements = renewed revenue streams
Many software companies have lost business altogether by attempting to do too much: they sell the software but fall short at servicing the client on the software. Frustrated and annoyed, investment firms are inclined to switch platforms altogether.
But it doesn’t have to be that way.
When a middle- and back-office partner handles daily processing and custom development on the software in use, the software company is more likely to retain their clients.
That’s why software companies love a good operations servicing partner, and that’s why software companies have forged strategic partnerships with Empaxis. They do what they’re best at, we do what we’re best, and together the clients win.
Recognize that a portfolio accounting software company and a managed services provider each have their core focuses and capabilities.
When you understand these distinctions, you know when it’s best to choose one for one service and another for another.
It’s simple. Get the best in software from a software company, and get the best in operations from operations servicing experts like Empaxis who know the software. That’s the winning recipe.
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