What Custom Development Means for Investment Managers
How Customized Software Development Is Transforming the Financial Industry
In the past five years, we have seen an immense transformation in the design and functionality of financial software and, in turn, the way people use it. The newest trend we are seeing in 2010, and one with great staying power, is customized software development. A perfect storm of technological and economic factors have converged to make customization more attractive to companies in the financial industry and will, we think, result in a significant increase in demand for bespoke service offerings.
Why the surge in customized software development? As a rule, as technology matures, it becomes less risky. Developers now have access to a larger number of standardized, user-friendly development tools and frameworks. This makes software easier than ever to build, customize and deploy. This is true for both data and platforms; there is little "technological friction" for most corporate software requirements when using technologies that are now mature (such as Java or the .NET Framework).
With a larger array of proven technologies in the marketplace, CIOs and CTOs can experiment more aggressively with strategies and can be more accurate in their estimates of effort and cost. As a result, companies are more willing and able to adopt new custom application development.
Growth in Open Platforms
Growth in open platforms
Additionally, there has been significant growth in open platforms, allowing for greater interoperability and better access to data for use in custom software implementations. With data readily available, the dream of commingled content in a single interface is actually achievable. APIs have revolutionized the way data can be delivered to an enterprise's user audience.
For example, we know of a company that offers an API that pulls broker research from hundreds of sources and easily integrates it into a firm's internal applications. In a space where content has historically been limited to proprietary, closed, Web-based or downloadable software, users can now customize the software.
At the same time, there's a confluence of economic factors that will lend to this push in custom software development. Because base technologies have already been tested and standardized, experimenting with new vendors and encouraging in-house innovation costs less than it did five years ago.
Data spending is also increasing from recession lows and this trend will continue. In the financial industry alone, it's predicted that IT spending on global market data infrastructures will reach $7.8 billion by the end of the year.
What Custom Development Means for Investment Managers
What custom development means for investment managers
Mature technology and lower costs have a few immediate effects for the financial industry. First, asset management firms get a higher ROI for their development dollar than ever before. The ratio of development time to value-added business analysis becomes much more favorable. The CTOs and CIOs responsible for development strategies are taking advantage of this to deliver higher output and quality to the user base they support.
Second, we expect to see increased integration of technological innovations that can have a real impact on technology project startup costs. One clear example is cloud computing. Once a cloud-based architecture is in place, the implementation time for new applications becomes shorter than ever thanks to infrastructure that is immediately available, easily deployable and scalable.
Also, applications hosted "in the cloud" are available at once to users in multiple locations-without the overhead related to global server installations. This provides instantaneous potential for globalization; companies can now scale horizontally and vertically in record time. It remains to be seen how capital market firms will ultimately use this development but the prospective benefits are numerous.
Adding Services-based APIs
Adding services-based APIs
Adding services-based APIs into the mix allows for easy integration of new functionality with minimal effort. For asset managers specifically, one of the requirements that this can help to fill is management of internal research. What was once a burdensome task, largely managed on network drives, is now something that can be completely automated and managed through a services-based API.
For example, we know of a company that enables clients to securely tag and upload their internal content into a customized version of the company's platform. Through Web services, the clients can take advantage of the company's proprietary tagging and optimized search functionality. This makes it easier to share information between teams and colleagues as well as track investment opportunities over time.
Before this functionality was available, the best you could do without a large investment was rely on searching through network drives or e-mail inboxes. Trying to replicate this company's tagging and search engines would be a whole new level of work on top of that, requiring a complex software build or the integration of an expensive search appliance.
Dealing with change
Historically, one of the biggest data product challenges for decision makers and users had been dealing with change. The benefit of solutions such as APIs and cloud services is that they can be built into a workflow that already exists, adding immediate value with new content and features. Today, technologists can do more for their internal clients-without major disruption-than they could just five years ago, effectively being more responsive to changing marketplace dynamics and investment strategies.
The surge in custom software development ultimately means that investment professionals get more of what they need, more quickly. This frees up technology strategists to focus on finding the places where value can be added rather than on figuring out how to get around the latest hurdle.
Rick Treese is Chief Technology Officer at TheMarkets.com. Rick is a specialist in Web product strategy, software development, and driving online businesses growth. He has over 18 years of technology leadership experience focused in the finance, Internet and media industries. Prior to TheMarkets.com, Rick was chief technology officer of global media company Advanstar Communications. Before that, he was vice president of technology at Goldman Sachs. Rick is co-author of CTO Leadership Strategies, published by Aspatore Books. He is a frequent speaker at industry events. He holds a Bachelor's degree in Banking and Finance from Hofstra University. He can be reached at firstname.lastname@example.org.