In late September, Waters Technology and FactSet published an exclusive publication focused on how capital markets companies can make a business case for subscribing to data-as-a-service solutions. An off-the-record roundtable discussion was held. Many Tier 1 and Tier 2 investment banks, market makers, and private trading firms were in attendance.
Prior to the event, all 12 companies that responded to the invitation were sent a three-question survey to assess the extent to which they outsource their data management needs to specific vendors or service providers. Although the survey was not specific to market data as a service, 8 of the 12 invitees spoke about the proliferation of managed data services overall. The results revealed the following:
75% (6 out of 8) already use managed data services 75% (6 out of 8) believe their organization will increase their use of managed data services in the future Just under 90% (6 out of 8) (7 people) The main benefits of managed data services compared to pure cost considerations include operational simplicity and reduced data management requirements.
Main themes and main points
Wait and see: The consensus among participants was that the market data-as-a-service model is still in its infancy, and capital markets firms are still in the “gradual” phase of its adoption. The “sudden” phase is likely to continue within the next 12 to 18 months. Try before you buy: This issue was cited by many participants over the course of the roundtable, and for good reason: Companies get used to a product or service over an extended period of time, up to six months. Possible proof-of-concept cases are now expected across the industry. One participant was keen to establish a “sandbox” environment where his company could “manipulate” market data and deeply understand specific use cases for the service. The reality is that most proofs of concept conducted by data and technology providers result in sales, unless the service in question is deemed inadequate or substandard. Vendor Lock-in: Vendor lock-in has become a perennial issue for capital markets firms as they consider relationships with new data and technology providers. Companies are looking for collaboration and true partnerships, not business agreements backed by contractual obligations. We also want as much standardization as possible so that relationships can be terminated safely and without fuss. Responsiveness: The theme of vendor responsiveness (the speed with which a service provider/vendor responds to customer inquiries/requests and general adaptability) was present throughout the hour-long discussion, highlighting how this issue applies to all capital markets firms. It highlighted how important it is to Use Cases: Participants will encourage market data-as-a-service providers to identify clear use cases for their data and services, rather than the “take it or leave it” approach common to capital markets firms. I suggested that. Business strategies are built around specific use cases, without which end users are unlikely to commit to a new service. The service must also offer attractive added value, such as innovative technology or enterprise cloud access, to be considered. Pricing: As expected, pure price considerations were cited as one of the key criteria driving companies’ purchasing decisions. All research conducted by WatersTechnology over the past 12 to 18 months shows that technical considerations and vendor flexibility, adaptability, and experience are more important to users than pure cost considerations. It shows. However, one large investment bank that participated in the roundtable reported that cost considerations were a higher priority than other banks. Heavy lifting: Attendees unanimously agreed that the biggest benefit of using managed data services is that the vendor/service provider takes care of all the “heavy lifting” around data management, normalization, and distribution. I agreed. Vendor-neutral or standardized data models: The word “utopia” was mentioned several times during the session, most notably in relation to the industry settling on and adopting standardized data models. That’s what I did. The purpose of this model is to fix various user issues related to data consumption. The financial services industry does not have a strong track record of agreeing to and complying with standards, so this issue may always remain a pipe dream. Time to value: According to participants, the ability for capital markets firms to quickly deploy new market data and feeds is one of the most notable benefits of managed services. Capital markets companies are increasingly seeking to minimize the delay between signing a contract and activating services in a live production environment. Licensing agreements: This is a big issue for all capital markets companies. However, it is also important for companies to be able to fully understand the licensing agreements associated with such data, which can be a challenge for even the most experienced and well-resourced companies. Knowing what businesses can and cannot do with the data they consume is no small task, and is an area that vendors should focus on to provide guidance to their clients.
This article was originally published on WatersTechnology.
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