Blog Entries from 09/2011
People take vacations. Companies don’t.
Hedge funds, just like most financial firms, need staff to run their technology, handle special projects, build (and manage) complex applications and of course execute core business activities. But in many cases it is not realistic or cost-effective to keep everything in-house. Enter outsourced staffing.
Outsourced staffing options for hedge funds abound. So let’s take a look at five common outsourcing practices, which we first introduced in our Technology Outsourcing Guidebook:
This is a story about a New York City investment firm and how it was affected by Hurricane Irene (You didn’t think we were done talking about Irene yet, did you?).
When Irene struck New York on Sunday, August 28, most people were fortunate enough to find shelter in their homes. And while financial markets were closed, many investment firms were still concerned about the technology infrastructure in their offices and the potential loss of power and/or data as a result of the storm.
This particular firm, based in midtown Manhattan, had a primary Internet line that ran through its building’s basement level. Several telephony circuits also ran through this space. Due to the heavy rains from Irene, this basement quickly flooded, damaging Internet service and creating packet loss and uneven traffic.
As cloud computing continues to become increasingly popular among hedge funds, there still seems to be an area of confusion that surrounds this technology. In previous Hedge IT articles we have looked at Why Cloud Computing is Right for your Hedge Fund and Understanding Public, Private, and Hybrid Clouds. Today, we will three key elements within the cloud: Software as a Service (SaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS).
In the SaaS model, firms are offered a complete range of application via the Internet, which are managed by the cloud provider. This means firms do not need upfront investment in servers or software licenses, while for the provider, the costs are lowered since only a single application needs to be hosted and maintained.
PaaS is the delivery of a computing platform over the Internet. The PaaS model enables hedge funds to create Web applications quickly without incurring the cost and complexity of buying and managing the underlying software/hardware. Firms have control over the deployed applications and environment-related settings.
The tablet computing industry is growing at an exponential rate with no signs of slowing down. More and more hedge funds and alternative investment organisations are considering moving away from laptops and notebook computers as the popularity of the tablet continues to grow. Many hedge funds are becoming attracted to the tablet more than ever, as this new technology allows them to track down market intelligence and stay abreast of changes more efficiently via apps, as opposed to trawling through the web via laptops or desktops.
Tablets apps provide hedge fund users with a tailored computing experience, as they are able to dive right in and get the information they require instead of having to search for it. This is a huge advantage for hedge funds because it allows managers to focus on returns and keep a closer eye on risk and exposure.
As technology continues to grow as an important competitive differentiator for hedge funds and investment firms, funds are continuing to leverage technology outsourcing as part of their operational strategies.
A variety of circumstances in the industry have driven this move to outsourcing including:
The changing economic environment as a result of the financial crisis and increased investor focus on transparency and operational risk
Rising overheard costs relative to owning, maintaining and monitoring one’s own technology infrastructure
Hedge funds and investment firms can leverage outsourcing in a variety of ways – everything from help desks to document management, virtual Chief Technology Officers and other staff to disaster recovery plans, FIX connectivity and more. But regardless of the specific elements being outsourced, funds should look for a few baseline requirements as part of an outsourcing solution:
As we approach the final quarter of 2011, there are a number of important and exciting events going on throughout the investment industry examining the trends we have seen so far this year, as well as what is to come in Q4 and beyond. These conferences and seminars feature some of the top names in the financial and technology communities, as well as prominent industry experts. These events also provide fund managers and other attendees with exceptional networking opportunities.
Following are a few of the top industry events coming up this fall for your consideration.
The technology treadmill is a tough place to be these days. Technology refresh cycles last only a mere three years, forcing firms to change out their infrastructure and make costly software and hardware upgrades on a too-frequent basis. And with hedge fund budgets tighter than ever, many firms cannot afford to stay on this path.
But the technology treadmill is not a firm’s only option anymore. Costly in-house, traditional IT services are giving way to more cost-effective outsourced IT and managed services that get firms off the treadmill and on a path to success. Let’s have a look at some of the key reasons why firms are moving from traditional, on-premise IT services to managed services.
As part of our April 2011 Hedge Fund Benchmark Study, we asked hedge fund managers about the use of an email and instant message (IM) archiving system. Of the funds we surveyed, 61 percent of respondents who were using an archival solution said they were using Global Relay. Other popular vendors named in the survey included Symantec and Iron Mountain.
This was an important question on our survey, particularly in light of changing requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Dodd-Frank now requires registered investment advisers to retain email records for between five and seven years. In addition to regulatory requirements, investors are also looking for firms to have email and IM archiving in place as part of a complete technology infrastructure.
A comprehensive archiving solution will assist investment firms in responding to any audits or litigation discovery requests in a timely manner. An ideal solution, for example, should be able to effectively handle electronic discovery requests under the Federal Rules of Civil Procedure (FRCP) by ensuring quick access to relevant data and avoiding disclosure of irrelevant, sensitive or proprietary information.
When evaluating technology service providers, there are a number of important factors to consider. Among the most critical of these considerations is the depth and quality of experience the provider and its team members possess. While young start-up IT companies may present seemingly comparable solutions, it is crucial to consider the trade-offs associated with trusting your firm’s IT infrastructure to a less established provider.
Advantages of Working with Experienced Providers
Well-established outsourced IT firms typically boast a more seasoned and reputable management team than young, inexperienced companies. These individuals are more familiar with the nuances of the industry and are in a better position to understand your firm’s unique business needs. Equally as important, having an experienced management team typically helps a provider attract, develop and retain the best and brightest technical staff, including highly skilled engineers and analysts.