The ecosystem model for data ownership

Everything about selecting financial technology ecosystems is a calculation of trade-offs. If a firm is relatively small, they can enlist their resident tech savant to build an application uniquely suited for their business from the ground up. It will come at a lower cost and in a more tailored, custom approach that speaks directly to the business needs of the firm. The issue is that it doesn't grow from the knowledge base of other clients, other applications, and use cases that come into play. It might handle your business today, but it doesn't handle the business of the future. In an ecosystem model, which has open data architecture, “customers are involved in designing the options of their product to fit their needs and desires,” which some refer to as “mass-individualization.”^iv

The ecosystem model for data portability and scale

The ecosystem model’s value proposition is its configurability and flexibility to manage any future problem that you may run into. If all-in-one platforms are comprehensive, stretching end-to-end of the enterprise, then ecosystem models stretch end-to-end of the entire sector, as the name implies. It combines platforms, partners, and custom development in a fully transparent, extensible way that prioritizes data ownership. The foundational platform is the operating system, which is completely visible and accessible to anyone that needs information, whether it's the front office, treasury, or risk team.

Beyond that, there will always be edge cases that call for a custom solution. At that point, the firm can mobilize its developers, hire new developers if needed, or hire an implementation partner. Therefore, that foundational platform needs to play well with others or there will be bottlenecks and hangups that thwart progress. The open architecture, API-based infrastructure, and complete data lineage and observability make a smooth integration possible.

A golden source of truth for your data: see it, trace it, integrate it

In this connotation, transparency refers to the capacity to trace data all the way back to its inception to see how it changed and why: observability, full data lineage, full traceability and audibility of this information, even if it's coming from another system. This level of comprehensive transparency means that your tech team is happy because they can use APIs to integrate everything, and it's simplified on their side. Your operations team is happy because they can audit everything when they get questions. The single, golden source of data gives the entire firm flexibility around analytics and reporting, so the front office, management, and investor relations teams have a one-stop shop. That data infrastructure would also play well with others, like Snowflake and Databricks. The vision is to remove all barriers to expansion.

For example, a large hedge fund may have a fund administrator it outsources, a golden security master, an accounting engine that handles accounting, and an outside vendor that uses that accounting system as a managed service. Then, you may introduce a fifth point of connection, which might be the deal team who needs to consume this information to manage the daily underwriting of every investment, using over 200 unique data points that they track on an investment level. If the fund’s operations team is unable to make a switch to a new platform or is content with four systems but needs them to come together to solve one end-to-end problem, a centralized data infrastructure operating model supports these requirements in an ecosystem approach.

The right operating model for today — and tomorrow

The ecosystem model for technology architecture in the financial industry is driven by the need for open architecture, data centralization, and flexibility in response to growing asset complexity, fee compression, and competitive pressure. Asset level complexity is growing with more firms adopting digital assets and more complex private credit strategies and structures like asset-based finance (ABF).

The goal is to find the operating model that really suits your team in its current state, while staying ready for the opportunity that's afforded to you as you continue to grow in complexity and scale the team, the assets, and the investor base. Data portability ensures firms can adapt to new asset classes, vendors, and strategies without re-platforming. It’s your data, the best asset to drive alpha. The freedom of information afforded by the ecosystem model is your ultimate competitive advantage.