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Selecting The Best Fit Asset Management Solution – Traps To Avoid

Selecting the best fit asset management solution – traps to avoid

Selection of new solutions or service providers – whether a new investment management solution, data management platform, or middle office service provider – is not a common activity for most asset managers and owners but is critical to get right given the cost of change and potential broader impact on their business. 

Given the number of vendors and services providers in the market, firms have a range of options to choose from to meet their needs.  You would assume, therefore, that organisations are able to procure the solution that is the ‘best fit’.  But so often the solution selection process results in a poor choice – whether that’s a misalignment of solution to an organisations strategic direction, unexpected commercial outcomes that unfold over time, or a relationship that quickly sours.

Shoreline has undertaken countless selection processes for asset management solutions and service providers and have fine-tuned our method to assist firms in selecting the best fit for their circumstances.   This experience has given us a good understanding of the many traps and pitfalls organisations fall in to when selecting vendors and service providers. 

 Here are four of the most common problems we see.

1 – Unclear assessment approach

“How hard can it be to select a solution?  We know what we need, and the vendors are all very willing to discuss their solutions and help us with our choice.“  Although slightly exaggerated, that is a common attitude of many firms when setting off on a selection.  It seems easy at the start.  And for many, selecting the solution is an activity done in parallel to their BAU responsibilities.

Defining the overall approach and associated criteria to assess and ultimately select the best fit solution is often done loosely or not at all.  And the relative importance of various factors associated with a solution – whether functional, non-functional, or commercial – is not considered.

Agreeing who must have input into the assessment and who will make the decision, another key factor in a well-defined approach, is not done or incomplete.  The stakeholders that will use the solution and have the best understanding of needs and fit are those that typically have limited capacity to participate in the selection process so firms end up taking the easy path and not getting the level of commitment from these stakeholders that is required.

2 – No idea on how the solution fits into the Operating model

All too often firms set off on a solution selection and dig into the functionality and consider the commercials / fees (at least at face value) without having a clear view of how the solution fits into their overall operating model.  They treat the solution to the underlying problem as a point solution and don’t consider related issues and overall context.  The focus is also typically short term with limited regard for other changes to their operating model / technology architecture and how the solution may need to be applied differently in the mid to long term. 

Lack of this operating model context ignores additional areas of solution assessment, can understate the commercials – both vendor and internal costs – and ultimately lead to a poor fit.  Not preparing a comparative total cost of ownership model, for example, that considers cost of gaps / service offer differences or the hidden cost of data, is a prime example of cost underestimation. A vendor could be eliminated because of cost model inaccuracies or the chosen vendor’s cost will blow out at implementation time  and potentially 2 – 3 years down the track.

3 – Can’t see the forest for the trees

The most common approach to solution assessment is to issue an RFP with every possible question covering functionality at a granular level.  The view is ‘more is better’ in terms of collecting information from the vendors involved in the selection.  We have seen RFP’s with over 1000 functional questions.

Firms soon realise they must review the responses across all the vendors involved in the process and somehow decide which vendor is the best fit.  The extensive questioning ends up being noise that prevents the firm from focusing on what is truly important, not to mention creating extra unnecessary work for those evaluating the RFP’s. And ironically, many times key questions are not included – particularly regarding non-functional, commercial, and implementation topics.

 It’s also important to remember that the RFP is important but only one aspect of a robust selection process – and in my view not the most important aspect.  It’s a marketing document that provides a starting point for the specific questions and analysis that are more critical in ensuring a good choice.

4 – Under-weighting empirical evidence

There is no better way to understand the strengths and weaknesses (and fit) of a solution and vendor than real world experience, including hands on use via a Proof of Concept (PoC),  speaking to current and past clients of the solution to understand their experience, and using a consultant that has broad experience with the solution and clients that use the solution. 

Many firms do undertake a PoC and do speak to clients of the solution as part of their assessment.  Where they fail is the extent of information collected and the weight they put on this information in their assessment and ultimate choice.  Often, they weigh the RFP more than this empirical evidence – a mistake in our view.

A robust process – the only way to choose

The extra effort and time required to run a robust selection process, and avoid the pitfalls mentioned, is well worth it if you consider the risk of selecting the wrong vendor / solution.  Many firms have ended up with a solution or service provider that they don’t use, are not getting business value from, or impedes their strategic business objectives.  

Given its importance, we will be providing additional, more specific insights on how to set up robust selection processes in a follow-on article to be published shortly.

John DiBiase

Managing Director

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