What are the benefits of a connected technology ecosystem for financial services firms? Robust integration between systems underpins the ability for capital markets and financial services firms to get accurate and up-to-date data quickly. This information is critical and required in order to drive well-informed decision-making.
What caused this shift in the industry? Anyone who’s working in and around the private markets knows that there’s more capital than ever flowing through the system. Limited partners are putting higher percentages to work, and fund managers are delivering consistent performance. According to a recent McKinsey report, global private equity (PE) net asset value grew by 18 percent in 2018; this century, it has grown by 7.5 times, twice as fast as public-market capitalization.
This creates ever larger managers and greater competition. Like any maturing industry, financial services firms are requiring evermore operational efficiency for these firms to keep their edge. This growth has collided with a need for alternatives to seem less alternative as they start to become a real mainstay of lots of investment programs. Investors who are more used to the data and transparency that they traditionally get in public markets have been driving their demands through these managers.
In conjunction, these investors want to benchmark funds and inform their own decision making with data that is true with data in what has traditionally been some might say deliberately been an opaque market. Where previously people asked for technology to do a single job, increasingly, people want data from all of their systems at their fingertips when they’re making those decisions through a connected technology ecosystem.
While connecting the dots of your technology ecosystem can seem like a huge project and a massive undertaking, the benefits of doing so far out-weight the costs:
- Reduce the burden of data entry on multiple systems: Instead of having humans dedicating to manual data entry across multiple platforms, API integrations allow for a single data point to be updated once, then pushed to all other platforms so that the data is unified in the technology ecosystem. For example, DealCloud clients may update information about a banker or business owner from inside their Outlook instance; and once that information is synced to DealCloud, it can be updated in the firm’s data warehouse, portfolio monitoring system, and other platforms. When these types of connections are configured, it drastically reduces administrative burden and allows firms to streamline their efforts.
- Accelerate access to specific data or lists of data: One pain point that is commonly felt across the capital markets industry is that professionals know that data exists, but aren’t sure where. Creating a centralized place for data, especially one that allows secondary and tertiary data to be normalized, is key for financial services firms. This allows deal professionals to search for data in one place, rather than clicking and searching around multiple platforms endlessly, just to find the data and learn it’s out of date.
- Streamline the communication between systems and teams: By connecting the dots between financial services ecosystems, firms are better able to share information with their colleagues in other functions, especially those who use other software platforms. For example, if the investor relations (IR) team is using separate technology, that’s satisfactory so long as those data points are accessible to the broader organization. Without that level of access and connectivity, the firm will struggle to build meaningful institutional knowledge.
- Establish new ways to meet compliance standards: When a potential conflict or risky move comes up, it’s never something dealmakers are happy about. Unfortunately, though, it’s an inevitability. That is yet another reason why having technology systems that talk to each other is important. In creating these connections, it’s easier for firms to track their ability to maintain compliance because it instills adherence to processes and leaves an authoritative record of the data needed to assess risk or mitigate it.
- Increase the value of investments made in all software: With a connected technology ecosystem, each of the software platforms your firm leverages becomes more valuable because they have more utility. Any system that is disconnected from the rest becomes less valuable because it is not a key component of the firm’s technology infrastructure or is not widely used and adopted.
To download our full guide to connecting the dots of your technology ecosystem, click here.
To listen to our recent webinar on the topic, co-hosted by the experts at IT|Venture, click here.