A solution for the next 10 years, not the next 10 months. The ‘Buy vs. Build’ question revisited

Written by

Helen Johnson

Published on


This age-old dilemma is still a common issue in any business arena where a technology solution is sought, and it is one that is both flushed with success and beset by frustration in equal measure. Of course, as with any strategic commercial decision, the arguments for and against buying, or building, are innumerable, and the first concern should be whether the solution you seek is unique to you or widespread across the market. The former will likely steer you down the build path, the latter more likely to result in lengthy internal capability debate, estimation, budget and resourcing discussions, whilst in parallel seeking RFPs from suitable vendors.

The perception is that an in-house software build gives you Ownership, Compatibility, Development, Prioritisation and comfort in the Security aspects. However, there are immense challenges with initiating an in-house build and having the resource, budget and appetite to enhance or change the solution in years to come are chief amongst them.

From my own experience, previously managing a portfolio of technology projects at a large global US investment bank, the initial foundation build of an in-house application will in itself be an expensive and drawn-out procedure before functional development is even begun. Once budget is obtained the project can still be subject to funding cuts and resource re-allocation (how many times have you been told to cut costs by 10% in Q4?); therefore, it is commonplace for an in-house build to get to 75% completion as a minimum viable product, only to have the resource subsequently pulled. This leaves the users of the system frustrated since it is typically the last 25% of the implementation where efficiencies are realised. They find themselves left with an extensive list of enhancements and costly technical debt for which they will have to continually fight to secure further budget and resource. The business areas are still required to lose headcount or reduce the costs that were promised in their original business case, but without realising the full benefits that were offered.

Over the last few years there has been a marked shift in attitude towards employing third-party solutions for operational processes. Instead of replacing legacy tech, where even decommissioning the old platforms requires budget, we have seen financial institutions leaning towards vendors, abandoning the frustrating and time-consuming development of legacy mainframes where much of the technology is outdated. They have instead opted for off-the-shelf solutions that have been developed by vendors with an agile approach that offers speedy time-to-market, using the latest technology and information security techniques.

Why, for example, fund an in-house team to work in the automated intelligence space with huge cost implications, when you can integrate with a software vendor which is rich in resources and expertise. It has already done the legwork, employs the experts to suit the business and continually refines the product so that you do not have to re-invent the wheel. Vendors know they must deliver within the cost parameters laid out in their contracts and service level agreements, keeping in line with their competitors, and will continually strive for improvements to stay ahead of the game. Let the vendors worry about keeping pace with the latest technology and issues and securing development resource; you can sit back and reap the benefits.

Particular areas of development are trending in off-the-shelf platforms, not least of which is a focus on ensuring that there is easy integration with enterprise platforms to access data to enable processing efficiencies across network management, invoice management and due diligence processes. The development of compatible APIs, using the Client’s data to use in task-led workflows, data processing and reconciliations providing control and oversight and with full audit trails, significantly reduces the build needed from the Financial Institution.

The additional benefit of choosing a third-party rather than the internal build path is that unit and system testing responsibilities are also not required in-house, freeing up resource to concentrate upon user acceptance testing and a speedier implementation. This gives the opportunities for Clients to dedicate their time and resource to more value-added activities, for example setting up their bespoke workflows, invoice automation and reporting, all of which realises processing efficiencies and cost reductions much more quickly.

Most importantly, once an application is in place, it needs to be supported, maintained and upgraded throughout its life. Again, this is where a third-party application can take the strain of business-as-usual requirements. Dedicated, experienced support teams, both on the Technical and Client Operations side, will both be dedicated to supporting and upgrading the product. Clients should be the primary focus from implementation through to BAU. Where a client has a new requirement, the vendor must collaborate with them to achieve their request and make it available to all other Clients, ideally at no extra cost. Needless to say, the in-house build would require additional budget and resource, and the business units would still need to fund the annual in-house support fee.

From a vendor’s point of view, the importance of ensuring data privacy and robust Information security is paramount to their offerings. Vendors will ensure that their solution meets the toughest of security requirements, where any security weaknesses are remediated with speed and priority in order to satisfy their Client’s rigorous security assessments; realising this is a critical requirement for approval and on-going due diligence of a third-party offering.

Many vendors ensure they are properly accredited and prove their levels of control and oversight, dedicating time, effort and resource to achieving ISO certification, affording Clients an important degree of peace of mind. Although a bank will have its information security controls in place, its in-house solutions are not ring-fenced in the same way, whereas the software provider will be able to demonstrate a dedicated IS framework applicable to the company and its products.

Operational resilience programmes are positively affected by the implementation of a third-party solution, ensuring data is readily available, something that the pandemic highlighted as a particular concern. Some institutions were still relying upon hard copy records, their disparate platforms exposing low levels of integration, weak security data integrity and poor access control. Integrating with a dedicated, external platform remediates all these areas of weakness, and potential risk, whilst leveraging the Client’s data.

A vendor always needs to focus on the future of their product and must anticipate what the requirements of their Clients and Prospects are, and will be, over the next 10 years, ensuring there is a plan to fund and deliver. As well as keeping up with their competitors, vendors need to listen to the market, identify where the pain-points are and ensure that these are addressed in their strategies. In-house administrators do not usually have access to the industry and its thoughts or even the time and budget to keep pace. Requests for changes are left for the users to initiate and therefore to go ride the merry-go-round of budget approvals and resource requirements. Using a third-party solution will get you there much more quickly.

MYRIAD Group Technologies is very much on the front foot as it innovates for the future. Plans are laid out and firing up for our MYRIAD (Network Management) and CODUDE (Due Diligence) ‘Next Gen’ products. These developments are concentrating primarily on processing efficiencies, elevated cost management and enhanced risk management capabilities for both the buy and sell side, addressing controls for financial institution relationships and vendor management. Existing Clients will automatically benefit without a painful budget, approval, and development process; in short – keeping up with the industry, but without the stress.

As an example, AFME is preparing to publish a structured excel format for the first time, as a resource to further standardise the annual industry due diligence process, where the same responses and format can be loaded by

the agents and sub custodians into multiple tools. MYRIAD Group Technologies are there to assimilate this resource, advise the market and execute upon it immediately. Extending upon current functionality, it represents a tremendous saving of budget and resource for financial institutions which cannot effectively build or maintain such development at such a rapid pace, and at such a low cost.

In-depth examination of development costs must surely trigger alternative thinking about how these may be mitigated – or eradicated. Since so much of it cannot accurately be forecast, wisdom would suggest exploring a new direction with specialist software. For many CIOs, the blanket of a fixed cost, off-the-shelf solution significantly outweighs the unpredictability of a variable cost associated with a build. Or it should!

Speak to MYRIAD if you would like to find out how our SaaS products can help.