Smartsourcing: Scaling with a Hybrid Approach

The asset management landscape is going through a period of rapid growth, with market volatility, geopolitical uncertainty and expanding global markets. This calls for a rise in need for scalability and transformation. While the business objectives may be similar, the strategies and growth rate of each organization are unique.

To thrive, their growth depends on flexibility and an ability to navigate complex markets at speed. This has prompted a review of the traditional operating model, with a dynamic operating framework – enabled by a smartsourcing approach – emerging as a superior alternative over the traditional “set and forget” model.

Instead of overhauling all four elements of an operating model – people, process, place and platform – smartsourcing simply changes the “place” or “people.” By working alongside trusted partners, organizations gain flexibility and can create their unique mix of internal, external and hybrid support as needed. 

This adoption raises a critical question: Are those embracing smartsourcing more likely to achieve sustainable growth and outperform peers in the long term?

What’s driving the increased appetite for smartsourcing in APAC?

Digital transformation continues to be a key challenge for Australian businesses, with 53 percent listing it as a top concern for the next one-to-five years. While cost control and efficiency are direct drivers, digital transformation provides companies with the scalability they need. For asset managers, it’s also a gateway for sustainable growth and new market opportunities.

However, digital transformation takes time and can disrupt daily operations. This is where smartsourcing is gaining traction, as it provides managers with a strategic and dynamic approach to operations. This adoption is driven by four key factors, namely:

1. Consolidation

In recent years, we’ve seen a rise in investment giants and mega funds. This new trend is growing at a fast clip, with more fund managers consolidating to meet innovation and service demands, as well as minimize regulatory and management complexities.

While they might be rapidly increasing in size, they’re not scaling. Without major system changes and data integration, this isn’t possible: They also need transparency and control throughout the entire data lifecycle and across the various asset classes they hold. All of this is time consuming and can be costly.

By adopting a smartsourcing model, companies can gradually scale up as demand needs grow. It also allows them to fill resource and capability gaps quickly in order to maintain business continuity.

2. Globalization

With expanding market opportunities and financial markets more interconnected than ever before, asset managers must act quickly to stay ahead. This increased need for trend insights and reporting is challenging, particularly in terms of resources. While getting a new trader in a region is relatively simple, the new regulatory and reporting requirements that accompany it are more complex.

By strategically choosing investment partners, managers can bridge these gaps and expand rapidly. Rather than “all or nothing” contracts, smartsourcing enables support to be customized specifically to operational needs, depending on growth and expansion.

By strategically choosing investment partners, managers can bridge these gaps and expand rapidly.

3. Diversification

Investors are looking for diversification. The growing demand for diverse asset classes requires managers to move into more solution-based offerings. While expanding an offering into a new asset class can be easily done, it’s a significant challenge from a data and technology perspective.

New data sets (and analytics to support them) can be difficult to build internally and take time to create. With smartsourcing, managers can expand into new markets quickly and get the support they need straightaway. Internal capabilities can then be developed over time, with tailored support to meet their demands.

4. Internalization

Traditionally, asset managers have managed their investments in-house. However, with increasing compliance, regulatory and operational risks, more managers are looking to outsource key parts of management to external providers.

In the past, this would only be possible with enterprise-level technology and system integrations. As smartsourcing leverages the same people, processes and platforms, asset managers are now able to determine who is responsible for management tasks. This flexibility enables asset managers to access support faster, without major technology investments, process changes or new technology platforms. Additionally, it reduces operational risks while still giving them control over operations and reporting.

 As smartsourcing leverages the same people, processes and platforms, asset managers are now able to determine who is responsible for management tasks.

The long-term impacts of smartsourcing

This dynamic approach to resourcing is creating real organizational impact, with asset managers leveraging it strategically to drive long-term growth. The key to its application is to continuously review operational needs and make strategic changes to the internal and external sources as business demands evolve.

To help you navigate this space, we’ve developed a strategic smartsourcing guide. Our eBook is filled with key considerations, practical advice and insights from our experts to help you achieve operational success.