Financial services organisations are risking missing out on the full potential of their technology systems, with over half (52%) of all senior business decision-makers only replacing their in-house solutions in reaction to the technology becoming outdated.
Research commissioned by data quality solutions providers Asset Control also found that 49% of the sample said they were driven to schedule changes by “the increase in digitalisation within the business” and 48% by “the need to keep pace with the competition”.
According to Asset Control, the findings highlight the difficulties financial services firms face in implementing in-house systems – some 94% of respondents said they expected to encounter challenges of some sort when building a solution in-house.
These challenges often lead, directly or indirectly, to greater costs, the company claims. “Skills/resourcing” was the biggest challenge that respondents expected to encounter when building a solution in-house, highlighted by 62%, followed by “staying within budget”, referenced by 60%. More than half the sample (54%) cited “scope change: having to adapt the solution to meet changing regulations or business requirements”.
Asset Control vice-president of marketing and strategy, Martijn Groot, said that the gradual accumulation of additional costs is one of the biggest problems with the in-house approach to technology development in financial services.
He added: “Internal solutions are often approached as a project, a one-off cost and not regarded, and consequently budgeted, as an ongoing concern. This is unrealistic in a fast-changing financial services landscape.”
For many financial services organisations, the costs of internal solutions do ramp up. Nearly, three-quarters of the overall sample (73%) reported that they had “experienced additional costs after implementing an internal solution”. The most common additional cost was “hiring new developers because of previous developers leaving the business”. This was referenced by 60% of respondents in total.
“The one-off approach, if executed well, may look attractive given that the firm is best placed to cater to its own specific requirements,” Groot added. “However, the subsequent maintenance costs to keep the lights on, and evolve the feature set to cope with emerging requirements, are large. Change is a given and any project scope is always shooting at a moving target. If their ROI horizon is only until go-live, the result will be a continuous ‘project mode’.
“Unfortunately, the true costs and constraints of an internally-developed solution often only become clear when firms need to change things.”