The question for the industry today is whether firms have hit the technology breaking point. In other words, can firms continue to maintain and sustain the technology they’ve built over the past 20-plus years? A new breed of tech firms is emerging to help address this challenge.
There are increasing signs that the so-called “technology stack” at various firms is not economically sustainable, nor is it necessarily more efficient. For years, various technology vendors have been expanding their product mixes to handle front, middle and back office responsibilities for firms. The industry is seeing a mix of established tech vendors expand offerings via acquisition and then a number of startups offering new ways to tackle problems with a whole new business model and set-up.
As banks, brokers and trading firms look at the technology and compliance landscape, there is no question that they are seeking new efficiencies in their businesses. Outsourcing critical yet commoditized parts of the trading chain has become more acceptable for firms. Deloitte’s 2018 Banking Industry Outlook pointed out that technology “modernization ranked as the most important technology trend for nearly a quarter of global banking respondents.” It also pointed out that “technology externalization” is more possible than ever with the growth in fintech vendors, not to mention broader technology advances such as AI and cloud platforms. And this is where the technology is getting interesting for some.
Deep Systems’ CEO Steve Tumen buys the argument that existing firms cannot sustain their businesses with the current traditional technology setups. He should know – in his prior life running a market making firm, he was paying 5,400 invoices annually to vendors for a spaghetti bowl of technology for the firm. Not only was it tough to maintain, but the cost and administrative function of the firm was a constant challenge.
His firm is one of several that are taking a flexible and holistic approach to the technology challenges. Deep Systems spent the past four years rolling together a new software, hardware and IT services ecosystem. It was built from scratch by Tumen and his team, all with market making and trading backgrounds, to handle everything from compliance, risk management and trading to accounting, research and a firm’s CRM.
The question today is whether firms can look at their business model is a new way. He believes they are willing to stop, reassess and try a new model.
Tumen won’t give a blanket cost savings to this as every firm is different. But cost savings is a critical component of the business proposition in today’s marketplace. Upgrading how firms take and adapt the data they need for everything from trading to reporting is another key element.
Tumen is not alone is his approach. Keith Todd‘s KRM22, launched in April, has taken a “holistic” view of risk within an organization by building a risk management dashboard that runs on a cloud-based system. In doing so, KRM22 is aiming at streamlining this fragmented and costly operation. If this service can simplify and increase the risk management function within a firm, perhaps it too can help reshape the way firms use and integrate technology.
A slightly different approach with the same goal of lowering cost and managing risk is Access Fintech, focused on monitoring all of the various trading, middle office, regulation and compliance risks within an organization. In doing so, it aims not to replace vendors but to provide a better view of how each element of a firm’s operation is doing, regardless of the technology.
These are just a few of the firms that are taking a new approach to the growing problems facing CIOs in the space. Today’s economics are forcing them to consider some new approaches. The new technology is making it more possible than ever.