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As investment firms consider upgrading or replacing their Middle Office technology, they increasingly include outsourcing among the prospective solutions.  First pioneered by major custodial banks a decade ago and joined by some large software providers, vendors now offer stable platforms, effective implementation and service experience.  Barrington Partners today sees very few system selection processes that do not include outsourcing as an option.

This research reports on ‘best practices’ for evaluating both systems and outsourcing solutions, and the subsequent vendor selection/ implementation. We interviewed 13 institutional managers who undertook an evaluation of their Middle Office in the past five years and included an outsourcing option.  Three were  startups, and their results are presented in a separate section.

Barrington prepared a questionnaire that formed the basis for structured telephone interviews with individuals at the participating firm; these individuals all had experience of the process used in the analysis, evaluation, decision-making and implementation of a Middle Office solution, whether outsourced or retained in-house.  We asked participants a range of questions about their process:

• What factors drove your decision to evaluate your Middle Office?
• What was the quality of existing Middle Office functions?
• What analysis was performed and what process was used evaluate alternatives?
• How did you rank the criteria considered in the decision to outsource or retain in-house?
• What criteria did they employ in selecting the vendor?
• If they did outsource, how did they manage the implementation, and how satisfied are they with the results?
• What recommendations would they make to others making an evaluation?

The results of these interviews are presented for all participants, both in summary and detailed form. The more quantitative response (e.g. numeric ranking of priorities and the like) are presented in detailed tables with accompanying commentary. More qualitative answers have been summarized, either in table form or in written descriptions attending each table.