In-house Vs. Outsourcing

Like many businesses, investment services firms frequently debate building technology in-house vs. outsourcing. There are hidden costs and challenges with building in-house systems. An infrastructure in which systems can talk to each other and facilitates business automation is essential. Here are three reasons your firm should consider outsourcing your technology functions.

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3 Reasons to Outsource Technology


1. Tech Talent Shortage

In 2013 the Obama Whitehouse had predicted that by 2020, there would be 1.4 million computer-science-related jobs available and only 400,000 computer science graduates with the skills to apply for those jobs. We have since learned that the shortage isn’t as acute as we had once thought. Nonetheless, a tech talent shortage does exist. According to research by Indeed, nearly 9 in 10 business owners (86%) state that it is challenging to find and hire IT professionals. Finding good developers is hard, especially if your firm is not located in a top tech center. It can also be costly. The average national salary for software developers is over $100,000, which is in addition to the work required to source this talent, which increases overhead. As with any form of outsourcing, partnering with a technology solution provider eliminates the costs associated with hiring employees.

2. Outsourcing Technology Reduces Costs

Building an internal technology solution takes time and incurs high set-up and ongoing costs. Even if your firm has an established IT infrastructure and talent pool, the systems and software need to be built. Back-office platforms are notoriously difficult to implement, integrate, and maintain. Also, there will be ongoing updates and enhancements; in-house, custom solutions tend to lack scalability. A technology outsourcing partner furnishes access to a turnkey product that is built by experts, thoroughly tested, and extensively used by other clients. Your firm has access to a platform that is stable and scalable. There are additional costs to consider: building and maintaining a technology infrastructure requires an enormous investment of time and resources, everything from data management, system maintenance, and support. Outsourcing technology functions not only solves these challenges; there is the added benefit of getting access to the latest technology.

A technology outsourcing partner furnishes access to a turnkey product that is built by experts, thoroughly tested, and extensively used by other clients.

3. Improved Focus on Core Business

Last but not least, a financial services firm should focus on their core competency, which likely is not developing business automation systems and tools. A recent study from Fidelity found that 48% of firms outsourced IT/technology; those that do outsource report more growth in both the number of clients and assets under management. A broker-dealer’s team of in-house engineers may lack the expertise to create sophisticated technology capable of addressing your needs. Outsourcing your technology functions your business avoids the challenges of finding and managing tech talent. You will also leverage the technical expertise of a solution provider with years of experience and industry knowledge. Building in-house requires an enormous investment in both people and technology. The investment of time and resources entailed in building an internal platform could and should be spent in other areas of your business. By partnering with a solution provider, it allows your staff to increase their focus on revenue-generating activities and other business goals.

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