Mark Hepsworth points the potential advantages of outsourcing instead of relying on in-house solutions in this report published in Financial Director:
A recent survey commissioned by Asset Control, polling decision-makers in financial services organisations in the US and Europe, found firms cautiously optimistic about ROI timescales for internally-developed solutions. While just 19% of respondents said they typically expect to see return on investment for internally-developed solutions within a month, a further 47% said, ‘within a quarter’; and 26% more said ‘within a year’.
However, the reality is less positive. 94% expected to run into challenges of some sort when building a solution in-house. These often lead to greater costs. Skills/resourcing was the biggest challenge respondents expected to encounter when building a solution in-house, highlighted by 62% of the sample. Interestingly, 54% cited ‘scope change: having to adapt the solution to meet changing regulations or business requirements’.
This points to one of the biggest problems with the in-house approach. Internal solutions are often approached as a one-off cost not an ongoing concern. This may look attractive at first. However, the subsequent maintenance costs to keep the lights on, and evolve features to meet emerging requirements, are large.
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To obtain a proper ROI analysis and a true representation of likely costs, firms must consider all the direct costs, such as license fees, and indirect costs, including the ramifications of poor data, regulatory fines and increased operational risk. Today, these hidden costs often impede progress and businesses are failing to deliver ROI from internally-built solutions.
That’s why more firms are opting for outsourced or third-party solutions. Some are attracted by the opportunity to tap into broader industry knowledge, others by a more straightforward drive to save costs. When asked: ‘if you use a third-party solution what are the main reasons for this, the top answer, cited by 49% of respondents was ‘we prefer to use qualified experts’. The next two most popular were: ’a third party has productised industry knowledge that we can benefit from’, referenced by 48% and ‘it is more cost-effective’, referenced by the same percentage.
