Much has been written recently regarding the need to centralise data management. Companies need to gain control of their prize asset – information – and they need to eliminate the wasteful duplication which continues to exist through the silo approach. For many, this is now a thing of the past and these are the companies who have best equipped themselves to deal with today’s pressures coming from both business and more stringent compliance demands.

Today, more than ever, asset managers rely on accurate and accessible reference data in order to execute their trades, value their portfolios, manage risk and comply with a burgeoning number of regulations.

The formation of industry groups to pool experience on enterprise data management marks the maturity of the concept, even if some are still struggling with implementation. It also highlights recognition of the intrinsic value proposition which data offers, the corollary of which is the need for total confidence in the quality of the data being presented. This confidence enables fund managers and traders throughout the enterprise to make far more refined and sizeable decisions than ever before, and encourages an environment where high levels of data curiosity, and the attendant profits from the golden nuggets thus revealed, are the norm.

However, the pressures on costs remain. An AITE study earlier this year highlighted the fact that, since 2001, the financial services industry has generated profit primarily through cost-cutting and questions whether this can continue without serious damage to the basic operational infrastructure.

With reference data errors adding at least 10% to overall operating costs as a result of manual exceptions and medium to large-size broker dealers spending $60-80 mil per year to maintain reference data, it is no surprise to find many institutions contemplating an outsourced data management solution.

Sibos 2005 saw the announcement of the first customer for the Accenture Managed Data Reference Service (MRDS) using Asset Control technology – a major US-based hedge fund whose complex requirements call for a mixture of both in-house data management and outsourced support.

Under the agreement, Accenture will provide a managed service for consolidating, validating and enhancing published reference data over a ten year period. The service will include a full suite of data management, information technology (IT), vendor management and performance measurement services. It is the financial industry’s first multi-source managed service for referential data on global equities, fixed income, and derivative securities that includes pricing data, fundamental securities data, and global corporate actions with both automated and manual data cleansing, validation and enrichment.

Unlike traditional on-site reference data solutions, the Accenture Managed Reference Data Service operates on a centralised, 'one-to-many' basis to maximise cost and operational efficiencies through economies of scale. The service will support incoming reference data feeds from multiple sources, including market data vendors, corporate actions data vendors, exchanges and other commercial and public sources.

Hybrid data management solutions such as this represent the optimum way forward for many of the world’s asset managers. A client may spend 90% of its time managing commoditised data and 10% on proprietary data, but this can be inverted to 10% of their time on managing commoditised data and 90% of their time managing proprietary data through a blend of inhouse and managed service data solutions.

In the industry as a whole IT spending remains conservative, and it is only those projects with creative thinking plus solid ROIs which are being funded. In this environment the perceived strategic value of the outsourcing option can be compelling, combined with the ability to retain proprietary data.

The benefits of a Total Data Management approach are almost self-evident. Centralised and standardised data supports risk, STP and front-to-back-office data integration. Additionally data management can be allocated more efficiently and cost-effectively, with the commoditised data handled by the outsourcing supplier and the strategic data remaining within the firm. Potential economies of scale are another bonus.

The debate over outsourcing, particularly in key aspects of the business, will continue. However, third party IT management in particular has reached such a level of maturity that the issues are all known and the options well explored. While the relationship is fundamentally one of trust, contracts are now robust, there are many reference points on outsourcing and participants can quickly become well versed in their roles and responsibilities.

Reference data comprises 40% of the information involved in every trade and includes the identity, origin, ownership, pricing history and legal terms and conditions of all securities. The emphasis to date has been on the collection, validation, normalisation and consolidation of this data from multiple feeds into cleansed composite 'golden copy' sets for business use. The availability of the outsourcing option on a global basis is an important step forward, allowing data managers to concentrate on supporting high value activities while managing risk and making the best use of available resources.