A growing trend continues among financial services firms to outsource their middle and back-office operations and accounting processes. In a recent SS&C survey of companies in one major buy-side segment, 62% of those firms surveyed cited outsourcing or co-sourcing as a high priority.
Application and Business Process Outsourcing (BPO) has long been a way to achieve increased efficiency, scalability and cost reduction. When companies outsource their middle and back office, they are less dependent on in-house staff, technical expertise and often domain expertise. If the outsourcing service provider is global, it may have multilingual and multi-basis accounting skills that are not available through internal resources. These added skills and expertise can provide financial service companies with more speed and agility to adopt new products, enter new markets and comply with changing regulatory requirements.
In addition, outsourcing could deliver significant tax advantages, as expenses associated with these processes transition from CAPEX to OPEX.
Most importantly, outsourcing middle and back-office functions allows financial services firms to concentrate on client-facing activities. The ability to offer more innovative and personalized products and services will be a key differentiator in what has become a very competitive environment with thinner margins.
Financial Services Market Size BPO
Another important technological evolution will drive more financial services companies toward outsourcing—artificial intelligence (AI). AI technologies like machine learning, robotic process automation and natural language processing can achieve levels of efficiency in middle and back-office operations that cannot be attained by traditional technologies. Financial services firms that don’t have the time or resources to invest in these technologies will need to leverage a hosted solution or an outsource service model from a vendor that continues to invest in this space.
With or without AI, outsourcing can provide significant benefits.
Business & Strategic
- A global perspective for clients who want to enter global markets or trade foreign securities
- Platform consolidation to help standardize the operating model
- Improved capacity to adapt to changing business requirements
- Expertise that can span multiple functions and business processes
- Ability to scale quickly and efficiently
- Immediate cost savings related to staff, technology, support and capital costs
- Avoidance of future investments, including regulatory spend
- Migration from a fixed cost to variable costs based on key usage-based business metrics—giving you operational flexibility
- Reduction in operational risk by standardizing processes and oversight
- Additional focus on automation to reduce human intervention and improve processing times and reduce risk of errors
- Transferring responsibility for regulatory compliance and support for systems and processes
- Ability to enter new markets, launch new products and better support new instruments quickly, without large upfront costs
- Improvements to service quality and efficiency
- Providing independent oversight and functional separation—a key determinant in some mandates
SS&C has been providing middle-to-back-office outsourcing services to financial services companies for 20 years. Outsourcing currently represents 60% of our business worldwide.
Written by Munther Haddad
Vice President, Head of Global Outsourcing Services, SS&C Institutional & Investment