Moving investment operations to the cloud

Q1: What are the main cloud adoption patterns you observe in the investment management industry?

Cloud conversations have recently changed from being essentially technology driven to being more business driven at the C-suite level. One major reason for this shift is that investment managers have had to accelerate their digital transformation agenda due to the recent pandemic. They are consequently now better equipped to articulate how cloud, and particularly Software as a Service (SaaS), can support their business by improving agility and speed, becoming more cost efficient, and fostering innovation, all with reduced risks. A well-known proverb credited to Plato says that “necessity is the mother of invention”. That applies quite well in this context.

Many of the investment firms we talk to are on a cloud journey in some shape or form. When they are considering moving to the cloud, the fundamental questions they ask themselves include: Should we migrate our existing investment management operations to the cloud? And do we do this on our own or via an outsourcer? Or does it make more sense to transform our existing on-premise solution into a Software as a Service solution delivered directly from the software vendor? These are the main options we observe.

Building your own cloud infrastructure

When looking at an application on premise, it has a set of layered activities that all need to be executed to support the entire application lifecycle. These include the infrastructure, operations, application layers, and the management of the application on top. There is also a set of IT-supporting actions that span the whole stack, such as Business Continuity, which is fundamental to making the business resilient to unforeseen technical incidents, security, and ensuring compliance.

A typical approach for cloud migration is to rebuild the same structure in the cloud. This is called a “lift and shift” migration. Your application will now be part of your cloud environment, but you will still have the same operational responsibilities. This means that, while you do not own the actual cloud infrastructure, you will still be responsible for maintaining and configuring it. You will also still handle documentation, security and compliance. Any changes to the system will still involve substantial manual work, upgrading, patching, cloning environments, refreshing of data etc. These functions will need to be prioritized by your internal IT department, or – alternatively - outsourced to an external service provider.

The important point to remember is that a lift and shift migration alone will rarely deliver on the benefits of cloud computing, and that the additional investment required to individually build more automation and a cloud native integration will typically be difficult to justify when considering the business outcomes.

Consuming Software as a Service

The alternative to building your own infrastructure in the cloud is to consume specialized Software as a Service directly from a solution provider. The main advantage is that a SaaS provider will be able to make a larger investment into automation and implement cloud native features for all the subscribing entities.

This is exactly how SimCorp has constructed its Software as a Service Platform, leveraging Microsoft Azure for public cloud and many other technology partners, to form the backbone of our technology-enabled services. We are investing in automating the entire application lifecycle management on behalf of our clients, so they can focus on their core business and stop spending time on maintenance and mundane tasks.

Our development teams are currently working on bringing cloud features such as OnDemand scaling and environment cloning to our SaaS clients. As a SaaS customer, you will experience much more operational freedom, as well as an agile platform you can quickly adapt to your business needs.

Q2: When comparing service delivery options, how do you distinguish between an external “generic application outsourcer” and a “specialized end-to-end SaaS model”?

There are many small and large players out there and it is indeed important to recognize the differences in service levels between the two models.

Two different models for different business outcomes: manual workforce versus automation

Generic application providers are usually technology agnostic and will deliver support for multiple vendors, with tasks typically performed by a workforce that’s located out of lower cost regions. While generally proficient in supporting the general infrastructure and technical application management, this remote support model is less well equipped to support bespoke functional application management, and relies heavily on knowledge transfer.

Conversely, a specialized end-to-end SaaS provider will take full responsibility for the running of the software, delivering a high degree of automation together with a clear and committed technology roadmap. When partnering with a specialist SaaS provider, the customer benefits from business expertise, application skills and industry best practices. This means that, in addition to supporting the infrastructure and technical application service layers, the SaaS provider will also deliver best-in-class support of the functional application layer through a local team of highly skilled resources.

Q3: Why does subscribing to a specialized end-to-end SaaS model across the entire operations framework bring higher value?

Functional application services to augment internal base and improve employee satisfaction

Consuming functional application services directly from a specialized SaaS provider through one unified service level agreement with one single point of contact helps to ensure maximum efficiency and the best level of service across the organization.

It allows investment firms to focus on optimizing their strategic and unique business processes while benefiting from newly released functionalities. Moreover, it drives employee satisfaction upwards with proactive support for critical business processes, immediate help to business users, and upskilling opportunities via continuous learning programs always available.

Working towards a continuous and automated deployment pipeline in the cloud

Achieving automation is similarly crucial in this functional application layer. This is achieved by using the concept of a continuous deployment pipeline, where code and configuration changes are automatically deployed to a test environment, validated with client specific automated tests, and then again automatically promoted to Production once they have passed the necessary quality gates. The continuous deployment pipeline is composed of a continuous testing service, where client specific functional configuration is tested continuously against pre-release drops of new software versions and a configuration deployment service, transporting and documenting all configuration changes, in a similar way to how we manage configuration as code. This increased automation from the continuous deployment pipeline helps teams to spend less time on distracting mundane tasks and focus instead on value-adding activities that are business differentiating.

Looking for a partner who can deliver all the required specialized services across the entire operations framework

In conclusion, when looking for a partner to support the transition of their investment operations to the cloud, investment managers should look for one partner that is committed to investing in cloud automation and can take full responsibility for delivering all the required specialized services – both technical and functional - across their entire operations framework.

Interested to learn how SimCorp can help your firm transition to the cloud? We can also support you with a range of cloud managed services such as Continuous Testing and Configuration Deployment, as a stepping-stone to your cloud transition journey.