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Vendor relationships are critical to operating any investment management business. The right partner can drive significant value for your firm and pay dividends long term. But how do you find the right one in a sea of offerings? And, if you suspect your relationship is no longer serving you, how can you reevaluate a current vendor to know if it’s time to move on?
As a relatively newer name in the investment management technology space, Ridgeline has been part of many conversations where firms are at this crossroads. They’re often trying to evaluate whether they should continue with their status quo vendor relationships or start fresh with a new – but less familiar – vendor.
It’s a healthy exercise to think critically about whether you’re still deriving the same benefit that made that vendor the right choice when you originally committed. Internal and external factors like technology advancements, regulatory changes, and evolving client expectations are all valid reasons to question whether your tech vendor is the best choice to meet your future goals.
Ridgeline recommends using the following 5 questions to guide your decision. That may sound like a simple prescription, but the answers you hear will go a long way in mitigating uncertainty and instilling confidence in your ultimate decision.
1. "Is your tech cloud native, cloud hosted, or on premise?"
Cloud is the indisputable future of business tech, and investment management is no exception. But while many vendors are claiming to be "cloud," it’s important to know that not all cloud is created equal. Cloud-native technologies were created in the cloud from day one and can fully leverage the advantages of cloud. "Cloud-hosted" or "cloud-enabled" technologies were initially developed for on-premise IT and eventually moved to the cloud via a "lift and shift" approach. This means you’re only experiencing partial advantages of cloud.
Simply migrating the same old infrastructure from an on-premise environment to be cloud-hosted often results in messy technology debt (AKA, the complexity cost of layering a quick fix on top of old tech) because services weren’t optimized for cloud infrastructure from the start. Cloud services built natively on modern cloud architecture, however, can operate more reliably and effectively because they were designed with cloud in mind from day one.
Only with cloud native do you experience things like continuous delivery of the latest enhancements, rapid innovation and improvements, and automatic scaling to match your computing needs. There’s also a significant difference in the operational burden that falls back on you for things like security, compliance, disaster recovery; if you are looking for more support on those fronts, cloud-native may be preferable for you.
So if you’re interested in moving your operations to the cloud and a vendor claims to be cloud, be sure to look under the hood. Because the pace of business is only accelerating, and you don’t want to be caught with a case of mistaken cloud identity that holds you back from embracing the future of the industry. As Andy Proud, co-Founder of asset management consultancy Liqueo told us, "The only thing you can project with absolute certainty is the need to change. And if you can go cloud native, you remove the burden of that change."
2. "How will this help me grow?"
Choosing a vendor that is aligned with your company’s stated growth goals is obviously important. What’s less apparent, however, is how they’re supporting your growth beyond the list of features they claim.
One of the most critical functions that all software should serve is enabling your talent to do what they do best. According to Cole Smead, CEO of Smead Capital, that means, "Finding software that lets the talent in your organization focus on creating wealth for your investors and growing your business."
If you introduce technology that is a challenge to learn and results in a handful of expert gatekeepers at your firm, that’s a problem (and becomes a regrettable investment). Controversial opinion, but we believe you shouldn’t need a PhD to acclimate to a new system. Is it intuitive? Can everyone who needs to quickly become a power user? Will it free your team up for value-driving work? Ridgeline feels that’s the point of technology: to catalyze your team’s optimal performance.
Also, look for technology (and the people behind it) that help you see things differently. There’s growth to be found in new perspectives.
3. "Will this create or eliminate data issues?"
"If you're going to implement new technology, it has to make life better, not worse."
Chris Flynn, Ridgeline’s VP of Product Strategy, should know: he has spent his whole career at investment management technology companies, witnessing the good, the bad, and the ugly. He came to Ridgeline because he knew there was a less painful way forward for the industry, but recognized that it wouldn’t be the result of a quick fix, M&A, or a shiny new UI. It had to start from a clean sheet of paper and a bunch of deeply knowledgeable people dedicated to making something better.
That’s exactly what Ridgeline has done, and domain experts like Chris have been instrumental in driving our strategy of "taking the long view" - doing it right from the beginning and taking no shortcuts in order to ensure more long-term gain.
One thing he’s passionate about is eliminating data issues commonly faced by firms who have invested in multiple best-of-breed systems. Often, the result is ongoing integration issues that become a significant drag on resources. "We see firms with a hodgepodge of systems that are bandaid-ed together via batch update – and you lose that source of truth," Chris says.
When each system has its own data set, the matching, exporting, and reconciling of those different sources not only creates operational headaches but adds undue risk to your business. Ridgeline uses a single book of record that is synced in real time across our entire end-to-end system, effectively removing those pains from the equation.
Be sure to inquire how any prospective vendor integrates with your other core systems to avoid data management woes.
4. "What are your security and disaster recovery protocols?"
Increasingly, cybersecurity has become the thing that keeps firm executives up at night. A breach or major incident can make or break a business. And while just about all vendors will say they are secure, this is another area you really need to dig deeper.
It’s important to understand whether your vendor’s security protocols have been externally validated. For instance, if it’s a cloud service, ask whether they have SOC2 certification. SOC 2 Type II is a 3rd party certification that is synonymous with high security standards. The rigorous audit process looks at how a vendor safeguards customer data and how well the controls are working.
When you’re moving to a cloud provider, one of the benefits is that you’re unburdening your team of the hefty responsibility of constant IT and security vigilance. But blind trust is never warranted. Do your homework on this upfront to determine the strength of a vendor’s security protocols - everything from how they encrypt data to what their incident response plan is. This will give you confidence before you commit that if there is an outage, breach, or other event, your business and reputation will not suffer.
5. "Who else can I meet from your team?"
This final question has nothing to do with the product; it is intended to provide insight into the type of people you’ll be working with – a factor that only grows in importance over time. In many cases, investment management software is a yearslong commitment. A vendor may start off highly attentive when they’re trying to get the sale, but does that attention (and responsiveness and service) wane once you’re locked in?
Because partners are so integral to your success, you should cultivate a deeply trusting relationship with them – and not just the one rep who sold to you a few years ago. Expressing a desire to meet more people from the team is a show of good faith from you. If they only offer up other salespeople, be wary. Ask if you can get time with roles like their head of security, their executive, their top engineers working on a part of the product you’ll use most often. Cole Smead put it this way: "You can learn a lot about an organization by asking to meet others. What is the culture? If the markets are bad, you need to know who you're going to sit in the foxhole with."
Vendors exist to serve you, not the other way around. Regardless of your business’s account value, you should always feel that you are a priority to your technology partners.
Whether you are evaluating Ridgeline or not, we highly recommend using these questions to find or reassess any investment management tech vendor – before signing on the dotted line. Interested in talking to us about what’s next for your firm? Reach out to Lauren Manchester lauren.manchester@ridgelineapps.com. We’d love to hear from you.
