Funds Europe talks to Hakan Valberg about the vendor experience of moving clients from their legacy systems onto new platforms and the importance of fostering a community of users.
One of the biggest challenges for vendors is helping clients to recognise when they have outgrown a platform and when it has assumed ‘legacy’ status.
There are typically three catalysts that lead firms to arrive at this situation, says Hakan Valberg, president of Advent Software EMEA. The first is cost – it becomes uneconomic to try and maintain a system over a long period when they become outdated and rely on lots of manual intervention; then there is compliance – a new regulation may have particular reporting requirements that cannot be met by existing systems; finally there is a change – the firm may want to enter a new market but is prevented from doing so because of legacy technology.
“Most firms will initially look to make a series of small fixes as required because changing platforms is seen as such a large commitment of both time and money. But in many ways, that approach is just creating another challenge for the future,” says Valberg. Often things will come to a head when a firm falls foul of compliance rules – either a client’s mandate or a regulator’s reporting requirement. However, ideally a vendor can get involved before that point is reached. The better conversations take place when a client is looking to grow but is inhibited by their systems.
“Replacing a legacy system is a major investment, it can be disruptive and it is perceived as a risk so it is easier to make that decision when you are operating in a steady market and looking to be positive in terms of your business model or product development.”
There is also often some political and personal resistance to overcome, says Valberg.
“Very often when systems have been in place for many years, people are naturally protective towards any change. Our role is to convince the firm of the benefits a change can bring to their business and their clients.”
Advent has also developed a client portal called Advent Direct Community., says Valberg. “Clients can talk to other clients, Advent staff, register support cases, get latest updates and information and share knowledge on how they use Advent’s solutions. Clients also use the Community to recommend enhancements and our latest upgrades of our main solutions in 2014 were based on the feedback received from clients via the Community.
“A lot of IT and ops people have great ideas that they are happy to share with other users. It is amazing to see how much they help each other. We launched it a year ago and have 12,000 users around the globe. Client feedback has been positive with a lot of traffic between them discussing topics like how to better use the products and how to prepare for upgrades. It’s a win for clients and a win for Advent as it helps us get closer to clients and continue understanding their requirements.”
Advent has also looked to develop its user group community by holding a series of events based on industry segments – for example, a fund administration forum in Dublin that includes asset managers, fund administrators and distributors. The events continue to grow and have a wide range of people from the clients attending beyond IT and operations, more and more business director level and C level are visitors.
More than 50% of Advent’s projects are replacing first or second generation legacy systems, says Valberg. “Through that experience we have developed some best practice guidelines and refined our methodology. But there are some challenges. Firms might try and replicate the way they built their old system when implementing the new system but that doesn’t always work.”
This tactic is born of the familiarity and comfort that users have derived from their technology, says Valberg. “They have used it for so long because they know how it works.We have two new releases every year that we want our clients to use so making the technology easy to use is vital.”
As an example, Valberg points to the fact that no one takes lessons on how to use an iPhone. And if an app doesn’t make sense to a user within the first few minutes of use, it will be killed and they will move onto the next one. So if fund management platforms can aspire to that same level of intuitive, ease of use, then maybe legacy will not be a problem to the same extent as it has been in the past, says Valberg. “We realise that in many cases legacy systems will still exist, but we are striving to deliver new solutions that are so intuitive it will make migrations much easier than in the past decade, this is the main reason firms are afraid to make the jump.”
The other challenge is migrating the data from the old systems to the new. This is much more of a problem when the former is a first generation legacy system that is 20 years or more old and deeply embedded in the firm’s infrastructure. However, while this presents more of a technical challenge for vendors, there are some advantages, says Valberg. “When the system is that old, the users are much more motivated to change to a new system.”
LEAP OF FAITH
By contrast, when they are replacing a second or third generation legacy system supplied by a competing vendor, there is generally more reticence from the client about the replacement. “Maybe that legacy system is no longer supported. Or maybe the client is no longer happy with it but that can lead to a nervousness that is difficult to overcome as the new vendor. They have failed once and they do not want to fail again, even if it was the fault of the previous vendor. So the negotiations tend to be longer and the requirements more detailed. But once they take a leap of faith, our goal is to repay that commitment by showing the client how important they are to us and develop a long term relationship with them. We aim to be a business partner rather just a technology supplier.”
In the recent survey carried out by Funds Europe into the presence of legacy systems within the funds management industry, one additional comment from a respondent stood out. “If a client has a legacy system it is the job of the provider to adapt to that system and not to change it.” The implication is that too often asset managers are forced into moving away from their legacy systems because of the incompatibility issues of the vendor and not any processing or performance issues for the client.
Valberg says he is empathetic. “There is often a reluctance among some managers to think about best practice and the use of only the latest versions of technology. But there is another side to new technology that reminds me of the Henry Ford quote – ‘you can have any colour as long as it is black’. Our job as a vendor is to make them in as many as colours as feasible.
“Best practice can sometimes be a dangerous phrase. Every asset manager has different business models and objectives and works in different asset classes and in different markets. So there has to be some flexibility in the technology and we have to learn from our clients.”
Once again, Advent’s user groups and annual client conference are integral to this aim, says Valberg. Not only does it provide mutual benefits in terms of addressing industry issues like regulatory reporting, cyber security, cloud computing, it also prevents clients slipping into the situations where legacy issues arise. “The users get to learn more about the technology and the roadmaps for future development, while we get the benefit of shared research and development and peer advice. It is a good way to keep up with innovation and to prevent the legacy issues of the past arising in the future.”
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