Automation is not just for Christmas: The on-going benefits of automation

Posted on : 28-02-2012 | By : richard.gale | In : General News


We all know the quick wins of automation. Converting ad hoc manual tasks into repeatable  automated tasks, reducing knowledge silos and key man dependencies.

Turning what was a 30 minute task into a 3 minute one is beneficial in itself but you’d have to perform it more than 10 times to justify an initial 5 hour automation process.

But automation isn’t just a series of quick wins in isolation each with the same simple cost/benefit equation. If fully embraced, automation is a way of life.

With system states, tasks and their outcomes now captured in the automation system, why not make these as widely visible to users as possible. Even users who are considered to have a fringe interest in the system will benefit.

You’ll be amazed by how much routine communication between users and experts about system statuses and processes goes on when this is cut out by empowering users with access to previously ring-fenced knowledge.

Also, with expert knowledge now captured in the system as traceable repeatable automated processes, why not go further and make experts of your users by delegating control to them for their parts of the system. Again, this frees up the central system experts to use their skills to improve rather than merely maintain the system.

Tasks that were previously lengthy and complex are now faster, easier to perform and less involved. The empowering of users coupled with widespread increased confidence in the system will mean those tasks that should have been done more often for the good of the business (fixes, updates etc.) but have been left to be accumulate into larger less frequent tasks are now done more readily and frequently.

In addition, releasing people’s creativity from the straitjacket of cumbersome and involved processes encourage them to solve problems that have been previous considered “too difficult”.

The benefits of automation take off
The benefits of automation take off

If the benefits of automation are so compelling and clear, why aren’t more companies embracing automation?

Because it is hard. Initially.

Systems that have grown organically with an organisation (especially a fast growing one) are often complex and disparate and it is not always easy to see your way clear to implementing wide-ranging automation across them.

Instead, automation is initially seen as a series of those quick wins, picking off the low-hanging fruit of more easily automated tasks. However, as automation increases and the (sometimes unexpected) allied benefits become apparent, the default approach changes from “should this and can this be automated?” to “why isn’t this automated and how do we automate it?”.

As automation spreads the benefits increase disproportionately and the mindset of the organisation changes. The question flips from  “How do I make automation fit our systems?” to “How do I make our systems fit automation?”

What started as a way to improve and streamline your system processes ends up transforming and streamlining the very systems themselves. Rather than an end in itself, automation can be a real driver of improvement for an organisation’s systems and culture.

If you fully embrace automation, it really is the gift that keeps on giving.

Contributor: Andrew Porrer – Technical Director – Heathwest Systems (
For a demo of our application management software, please feel free to contact me at

The next phase of Investment Management outsourcing

Posted on : 27-02-2012 | By : richard.gale | In : Finance

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Many Investment Management (IM) firms have outsourced significant business functions: settlement, collateral management, accounting departments have been ‘lifted out’ of a significant number of IM companies and are being run as a service by a smaller number of specialised financial services organisations.

We think the next phase for outsourcing are the middle and some of the front office functions as focus for IM firms is on ability to out-perform, reduce time to market for new products and to reduce costs. Regulation is a key driver for this as the complexities of dealing with constant regulatory change is increasing costs and constraints on  IM firms ability to move into new, more profitable, markets. For example OTC derivatives are much more widely utilised in investment firms than, say, 5 years ago and there is an avalanche of regulation in-flight (Dodd-Frank, MiFIR & Solvency II to name a few)  to enforce reporting and risk management. This results in operational activities such as collateral management becoming much more complex than transacting with conventional securities.

Last month we discussed the future of middle office outsourcing with Maha Khan Phillips in January’s edition of Best Execution magazine and we want to expand on those thoughts here.

Another trend we see is how the Investment Banking industry is starting to look at outsourcing the non-value-add functions to reduce costs and help streamline their business areas. They are being impacted in a similar way to IM firms at the turn of the century in terms of reduction in income and focus on cost reduction.

 Outsourcing history and developments

The first phase of outsourcing often was a simple ‘lift-out’ where the back office was separated as a whole – people, systems, and processes  with a line drawn across the organisation splitting the remaining front/middle office from the outsourced back office. This was driven by a number of factors but cost reduction and the drive to better returns was core.

As an approach the lift-out worked and enabled the IM organisation to focus on its core business of investing money.  Over time as the industry matures, the limitations of this approach are becoming clear. The ability to be responsive to new business requirements can be reduced:  flexibility in the operating model to react to new changes such as business focus, new asset classes and volume variations are often slowed by split between organisations. The outsourcers will have a number of clients with differing requirements and a limited ability to change which can impact speed of delivery.

These factors have led to some operational challenges and frictions between the client and supplier the result of which has led to a reassessment of the services and relationship. The client has a number of choices available and, as the earlier contracts mature, firms are identifying this period as an opportunity to review the current state vs. alternative strategies. The choices are broadly:

  1. Insource. To undo the lift-out and bring services back in-house. Some organisations have done this with varying degrees of success but the underlying rationale for outsourcing and the business case underpinning this needs to be closely examined.
  2. Migrate to new outsourcer. This is potentially one of the more complex solutions but also a possibility to re-engineer the business. Often there are complex interactions between the client/supplier that exist because of the way the outsource was constructed historically. This ‘web’ of interfaces, processes and procedures will need to be cleaned and logically split to migrate. Also the level of complexity from moving from one (client) organisation to an outsource supplier goes to a new level when migrating suppliers.
  3. Stay with existing and work together to improve service, relationship and capabilities.
  4. A combination of the above not excluding outsourcing more functions of the client firm.

Assuming the client strategically does not which to insource the functions then one of the most important activities is to grow the client/supplier relationship into an aligned partnership. This is the time when parties need to work together to construct a roadmap to move to a more efficient, cost effective and flexible model to deliver optimised services and capacity to grow.

This trend is gathering pace as firms look to ‘smarter’ outsourcing which bundles up groups of functions and let someone else look after the day to day management whilst enjoying a consistent service and pricing. Significant middle office functions are in-scope and included in those are what are traditionally seen as front office capabilities such as deal execution and compliance monitoring.

Interestingly the Buy-side has led the way on outsourcing. Investment banks have previously been too busy ‘running’ to keep up – growing new business areas and have been wary of outsourcing as a brake on their flexibility and ability to expand. The focus has been on IT infrastructure, testing & development and creating ‘captives’ in lower cost areas for operations. Now cost and regulatory pressures are proving a heavy burden then banks are now spending more time and energy looking into outsourcing their non-propriety functions. We think this is one of the trend areas for the next few years.