Time changes everything. What was once state of the art becomes a cumbersome nuisance at some point. The explosion of activity that occurred in the 1990's when hundreds of small software companies built applications to sell to asset managers allowed a big increase in efficiency. Processes that had taken weeks were reduced to hours or minutes. New processes that were impossible dreams became a reality. This was all possible because of Windows and Visual Basic and the process was not unique to asset managers but affected every business sector. By comparison the Dot Com boom did not reach the business community but was aimed at the retail market and when it busted prematurely, development slowed.

So today the IT landscape of the Asset management industry is one where any company of any size has 10 to 20 important systems upon which it depends for a variety of essential services. The majority of these systems are all provided as software that is installed on the company's own servers in their own IT centre. They will probably have many other applications of less importance that they run as well. The result is that they have large IT teams, complex processes and relatively high costs.

Some companies have tried to outsource the whole thing to a third party such as a custodian or IT services provider. However, there are many horror stories that warn this is not a simple solution. In fact the rule of thumb is that if your IT department works well and efficiently, you can outsource it, but if it is inefficient you can't. The outsourcer cannot be expected to unravel your mess.

What has worked is selective outsourcing. This typically means getting the supplier of your system to host their own application. This makes sense as the supplier ought to know how to support its own product and if they do this for all their clients, they can get economies of scale which a generalist outsourcer cannot hope to achieve.

The other factor is that Web 2.0 has unleashed a new revolution in IT making it possible for suppliers to provide Software as a Service (SaaS) solutions over the internet and with relatively low cost. Incumbent suppliers are reluctant to adopt this new technology as they fear cannibalisation of their existing business and because they calculate that such is the complexity of the processes that surround their embedded systems, clients will be loathed to move anyway. That leaves the door open for start-ups, but this generation have a much bigger battle than the class of 1995 as the standards and functionality they have to match are significantly higher and the gains in efficiency are less about time and volume and more about money. Clients want the same for less rather than more for the same.

We believe that eventually all our clients will want to access their services over the web just in the way that we all use email rather than a fax (or telex, or telegram). Indeed, email is fast being superseded by instant messaging. However, we also recognise that clients cannot simply throw everything out and start again, but rather need to evolve in a sensible direction according to a plan that has been tried and tested. The last thing anyone wants to do is jeopardise their business for the sake of saving a relatively small amount of money.

This means focussing on deploying new services and products that offer quick savings for clients whilst moving them towards the strategic objective of low-cost web-based applications.

Many asset managers must be thinking about SaaS as a way to reduce their costs, but the obstacle they will encounter is the complexity of getting there and doing so for a wide number of applications.