As technology continues to grow as an important competitive differentiator for hedge funds and investment firms, funds are continuing to leverage technology outsourcing as part of their operational strategies.
A variety of circumstances in the industry have driven this move to outsourcing including:
- The changing economic environment as a result of the financial crisis and increased investor focus on transparency and operational risk
- Rising overheard costs relative to owning, maintaining and monitoring one’s own technology infrastructure
Hedge funds and investment firms can leverage outsourcing in a variety of ways – everything from help desks to document management, virtual Chief Technology Officers and other staff to disaster recovery plans, FIX connectivity and more. But regardless of the specific elements being outsourced, funds should look for a few baseline requirements as part of an outsourcing solution:
- A secure physical infrastructure;
- Efficient and reliable communications;
- Data protection; and
- Vendor strength and stability.
Outsourcing options have evolved in recent years to support the growing needs of hedge funds and alternative investment firms.
Through the cloud, funds can leverage outsourcing options such as software-as-a-service, infrastructure-as-a-service, disaster recovery solutions and more.
Sometimes funds need personnel more than technology or infrastructure services. Outsourcing offers firms a variety of staffing options: for larger firms with in-house technology employees, they can leverage the expertise of a virtual Chief Technology Officer or supplemental and support staff for special projects. Smaller firms that do not employ their own IT staff may choose to outsource that department in its entirely so they can focus on doing what they do best – making investment decisions.
For funds not quite ready to outsourcing their technology solely to the cloud, colocation offers an alternative which allows for increased availability and redundancy without the needs to maintain infrastructure on-site.
Outsourcing FIX connectivity helps funds reduce costs and time commitments for installing, testing and maintaining connections to brokers.
Be sure to reach Part 2 of our Technology Outsourcing series, where we take a deeper dive into Software-as-a-Service and Infrastructure-as-a-Service and the role they play in technology outsourcing!
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