Saas: The Next Frontier in Fund Outsourcing

By Albert Bauer, Citco

Published: 18 January 2019


Software as a Service is a subscription-based approach that can deliver unlimited scalability, unprecedented flexibility and increased accessibility for fund operations.

It is no secret that fund managers are constantly looking for ways to do more with less. Their problem has always been that improving efficiency in fund operations also increases operational risk. For example, installing new technology increases the risk of system downtime and data loss. It may also require the installation of new and unfamiliar hardware.

But there is now a more effective way for managers to implement better tools within their organizations and access just the services they need. It’s called Software as a Service – SaaS.

SaaS solutions enable managers to use complete outsourced, managed services – or they can simply implement a better tool for a specific job within their organization. Whichever approach they take, SaaS solutions enable managers to concentrate on alpha-generating activities while leaving operational logistics and software development to a third-party.

The Citco group of companies’ (“Citco”) new Æxeo Treasury system is an example of a tool that can either be fully used by a manager’s operations team or provided as an outsourced managed service. That managed service can be anything from simply providing help with processing third-party invoices all the way to having Citco manage all cash movements to fund counterparties.

SaaS solutions use cloud-based software. This means that the hard work of running applications is carried out on centrally-hosted systems that are specifically designed for this task, and there are dedicated teams that keep the applications secure and up-to-date.

As a result, the SaaS approach offers lower up-front costs, reduced roll-out time and a near-endless capability for scalability and integration, compared to traditional inflexible models of software installation. Moreover, because SaaS applications are hosted and managed in the cloud, the software is always up-to-date, with state-of-the-art solutions for security and the changing regulatory environment rolled out to all users as soon as they are ready.

Where the installation of traditional fund administration systems required huge upfront effort and cost, SaaS is scalable, so funds can begin by using just a small subset of the total tools on offer. Instead of receiving a large initial bill, managers pay by subscription for the services they actually use.

The development of SaaS systems in fund administration can be seen as an evolution of outsourcing. For some years, the traditional one-size-fits-all model of running operations internally has not been suitable for all managers. Depending on where a manager is in his/her lifecycle, the full internal model can be less effective and costlier. As a result, many asset managers are choosing to outsource some or all of their middle and back office operations. Outsourcing ensures that those best equipped to handle tasks are delegated exclusive responsibility for them, and thus can dedicate all their resources to guaranteeing utmost efficiency.

Providers of outsourced solutions, such as Citco, have always been at the forefront of developing and delivering technological solutions that can manage the growing complexities of fund administration. One benefit of being a third-party vendor is that we have the capability and resources to innovate specifically for operational processes, which is the crux of our service for clients. As a result, the last decade has seen a broad adoption of emerging technology in fund outsourcing.

Since 2008, fund managers have increasingly adopted cloud-based solutions, commoditized data subscription services, and a hybrid mix of cyber security and reporting applications. The direct benefits of this adoption have been increased flexibility, data accuracy, team collaboration, transaction expediency, compliance management and improvements across all workflows.

At Citco, Saas is simply the next step on this journey. As our clients’ needs change, so too do our solutions. We partner continually with our clients to deliver innovative technology and will soon introduce the next generation of born-on-the-cloud SaaS solutions. Our goal is to develop these solutions in the most flexible manner possible to suit our clients’ varied demands, while always enabling quick onboarding for new clients and the ability to roll out additional functionality. This approach will continue to enhance fund managers’ operations and improve resiliency across all administrative functions.

SaaS is the ultimate solution for outdated traditional software models because it improves on legacy inefficiencies while retaining the highest levels of security and control. Without a doubt, the future for financial services is SaaS-based.