The Secret to Selecting the Right IT Service Provider
What does the 'right' IT service provider look like?
In the financial industry, having the right technology and IT solutions is critical for success. However, simply having these tools is not enough – nurturing a solid partnership with an experienced and reliable IT service provider is also essential. IT service providers can manage several facets of a firm’s IT infrastructure, including cloud storage, server maintenance and data back up/disaster recovery. Such a partnership can provide financial firms with several key benefits:
Access to Expertise – IT service providers have extensive knowledge and experience in developing, implementing, and managing cutting-edge technology solutions tailored to the specific needs of financial firms. This expertise can help firms navigate complex market landscapes, anticipate future challenges, and stay ahead of the curve.
Scalability & Flexibility – A strong IT partner can help financial firms scale their operations and adapt to changing market conditions. This is crucial in an industry where quickly adjusting strategies, technology, and resources can make all the difference. Relying on an external service provider can reduce reliance on cumbersome legacy systems and manual internal operational processes.
Cost Effectiveness – Partnering with an IT service provider can be more cost-effective than building and maintaining an in-house IT team or relying on inefficient legacy technology stacks. This allows financial firms to focus on their core business activities while still benefiting from advanced technology solutions. Partnering with an IT service provider also reduces the need to train staff or hire specialised internal staff.
Continuous Improvement – An IT partner can help financial firms continuously improve their technology infrastructure, processes, and strategies. This includes keeping up with the latest industry trends and technological advancements and regularly assessing and optimising systems to ensure they remain competitive and efficient.
On top of this, it is also crucial for financial firms to select the right IT service provider. Given the ever-changing technological and regulatory environments in the capital markets industry, the ‘right’ solution can look different, for different firms, at different times.
The transition to a shortened security trade T+1 settlement period in the US, for example, has prompted financial firms to use more automation, across the front to back offices, to improve settlement efficiency and modernise post-trade processes. Another example is the Digital Operational Resilience Act (DORA), which comes into force in January 2025. DORA sets out specific minimum contract requirements from outsourced ICT service providers in order to strengthen operational resiliency. With this in mind, it is vital for firms to select IT service providers that meet these standards, or face the prospect of regulatory retribution.
Therefore it is crucial that financial firms frequently assess the credentials of their IT service provider relative to their ever-changing needs, and carefully consider the extent to which business and IT operations should be transferred to an IT service provider. In doing so, financial firms should consider several aspects, such as:
Breadth & Depth of Expertise - Not only regarding their product lines, but also their expertise relative to the capital markets industry.
Stability & Reputation - Assessing whether the provider has a solid track record and experience of delivering reputable, reliable services within the capital markets sector.
Ability to Accelerate Business Transformation - How far an IT service provider’s offerings can drive innovation while minimising risks (i.e., operational and security risks) within the firm.
Alignment to Business Model - How far the IT service provider’s offerings are aligned to a firm’s strategy and goals. It is important for some solutions to carry some flexibility to meet changing objectives and help reduce the future likelihood of bottlenecks, such as silos.
Regulatory Considerations - The extent to which an IT service provider’s offerings enable a firm to reach its global and local regulatory requirements.
Costs & Benefits - Full transparency into the contractual costs of using an IT service provider’s solution and what benefits the firm can realise from using it.
Partnering with the right IT service provider can be a significant change for financial firms looking to grow and succeed. By leveraging the expertise, flexibility, cost-effectiveness, continuous improvement, and competitive edge a strong IT partnership provides, trading firms can navigate challenges, stay relevant to the times, and ultimately achieve their goals.
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For further information, please do not hesitate to contact us at london@greyspark.com with any questions or comments you may have. We are always happy to elaborate on the wider implications of these headlines from our unique capital markets consultative perspective.