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Skandia in talks to outsource platform technology to IFDS

Skandia Building 480

Skandia is in discussions with International Financial Data Services over outsourcing the technology behind its £35.8bn platform and legacy business.

This week’s Money Marketing reveals the firm is conducting a review of both its platform and back office technology which could see it outsource to a third party or rebuild both propositions in-house. Currently the technology behind both the platform and the back office is proprietary.

Skandia says the move has been fuelled by the firm’s desire to integrate platform and investment solutions. It adds it is too early to put figures on how much it would cost to outsource the technology or build it in-house.

Feeney-Paul-Skandia-2013-2
Paul Feeney

Old Mutual Wealth chief executive Paul Feeney says: “We are constantly looking at how we can improve our technology and processes so that we can more quickly respond to adviser and customer needs. Whilst we have not made a decision yet, when we do so our overriding objective is to ensure we offer the best service levels and most competitive investment solutions in the market.”

In January, a number of advisers reported problems with the Skandia platform technology after they were unable to generate pension illustrations for new business and top-ups. The problem meant firms could not obtain illustrations when trades were in progress.

IFDS provides administration on 60 per cent of UK mutual funds and is looking to develop a fully integrated platform proposition. It is part-owned by US investment software firm DST Systems, which bought Australian software firm BlueDoor Technologies in November 2008 for £8.2m.

IFDS, which holds a 24 per cent stake in Cofunds, declined to comment.

The Lang Cat principal Mark Polson says: “Skandia has demonstrated recently that its technology is probably in need of a refresh. Outsourcing is an increasing trend which means the differentiator between platforms is service, while technology is increasingly becoming a commodity.”

The Platforum managing director Holly Mackay says: “Core platform technology is becoming commoditised and we think we will see all platforms start to focus much more on the front-end and customer usability.”

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Comments

There are 8 comments at the moment, we would love to hear your opinion too.

  1. Outsourcing makes absolute sense given the need to generate economies of scale and to share the costs of development. What I can’t understand is 1) why potentially gamble such a big book on a firm that hasn’t yet proved itself as an end to end platform and 2) why be so public about it and risk unsettling existing and potential new customers and IFAs? Keen to hear your views on that Mark and Holly.

  2. Anthony isn’t it a bit harsh to say IFDS “hasn’t yet proved itself” IFDS have been a major TPA player for years and is not much of Cofunds run on their technology?

    RDR has created a whole new world of legacy which could give organisations the opportunity to draw the line under old technology and migrate to new systems built for the 21st C. Platform 2.0 (or even 3.0)?

  3. I’m very familiar with IFDS Ian, and have been impressed. it would indeed be harsh to say they haven’t proven themselves in this space. My point was they haven’t proven themselves as an “end to end” wrap platform. That’s the gamble.

  4. Do you really want an end to end platform? Why put bank accounts, ETFs etc. on a platform just to add costs?
    Anyway I think that Skandia (or at least the Selestia platform- SIS) now recognises that they are not really up to the job. A 25 page user guide to explain how to switch funds!!

  5. In the past I’ve had Skandia reps say that a differentiator for them v the competition is that they own their technology. It looks like that “advantage” may disappear.

  6. Anthony hi. My cautious comments would be that almost every platform I talk to which has proprietary technology is having conversations with core technology and administration providers. Margins are falling, the capabilities of outsourcers are improving and people like Mark and I love to bandy around the word “commodity” ;0) As for this being a public conversation that Skandia are having, well you could say that this is a group which has been criticised in the past for not being as transparent as some newbies………is it refreshing to at least know that the group is open to discussions about remaining competitive and having the best operating model it thinks it can? As for IFDS, well every giant was unproven in the past and , as Ian observes, they’re no strangers to the TA business which has had some unecessary duplication with platform administration over the years. I think the bottom line is that we all do the best due diligence we can, we make what we think is the right decision for our business but any outsourced relationship will remove some inefficiencies at the same time as introducing new potential risks. I hope that’s not too flaky a response!? ps I’d be that the vast majority of those non-bank platforms across Europe which DON’T outsource technology will do so within the next 3 years.

  7. The reality is there is no right answer. Skandia are struggling with their in house technology however I am not aware of any platforms who use 3rd parties who do not have major issues in terms of development/maintenance etc as you are beholdent on someone else. Most platforms probably wouldnt admit it publicly but they would like to move the technology in house if they could to give them control. The other issue for Skandia is moving existing business onto the new platform. Altogther this development will cost tens of millions and there is a real risk that if advisers dont like it they will move – and this will be so easy to do when electronic re-reg comes in. They will now be reluctant to invest in their exisitng platform but who knows when they will get the new one up and running. years!!! This is a very unenviable position to be in.

  8. The current trend of outsourcing or working in conjunction with a 3rd party will continue. The pace and cost at which the technology changes means the ownership of the technology is no longer an advantage. The SIS platform is no longer leading the market and is only really used because of the user ability and habit. These are what the competitor platforms need to break.

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