Outsourcing Roulette: A CIO's Challenge

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A million years ago, I interviewed the CIO of a second-tier investment firm. Smart guy, solid company. Outsourcing and offshoring were fairly new words back then when I asked him his thoughts. Man, did he have them.

First, he said, working with an outsourcing firm is very insulting.

"They're coming into your office and telling you 'I can do what you are doing with a fraction of the staff and cost,'" he told me. "What they are really saying is, 'Let me tell how much smarter I am than you.'"

In the years after our conversation this CIO did outsource some operations, but he also some operations back in house because the outsourcing firm was far from a proper fit. Meanwhile another CIO told me that when working with a third-party outsourcing firm, it takes as much time in overseeing and communicating with your outsourcing firm as with the in-house team that once ran that operation.

"Those weekly update meetings never go away," he told me.

In a smart article by Melanie Rodier (Full disclosure: I worked with Melanie when I edited Advanced Trading), CIOs inside major investment firms are still struggling with legacy systems. These systems may hark back to not only the last decade, they could be old enough to vote. And these systems from the 1990s are just as demanding as the newer systems:   

"Legacy platforms are becoming so expensive to maintain," says Daniel Simpson, managing director for enterprise data management at Markit, which provides data, valuation and trade processing products and services across multiple asset classes.

"In many instances, these systems are 20 years old, so even finding developers to work on them is difficult," he says. "And the ones that are available can be expensive."

Pauline Parker, head of application managed service at Rule Financial, a London firm that provides business consulting, technical consulting and IT services to investment banks, concurs. "IT specialists must be able to operate legacy and modern applications, and there's a dearth of experts in the market who can fulfill both requirements," she says.

In addition to dealing with a lack of experts who can actually maintain legacy systems, firms are feeling pressure to upgrade out-of-date platforms. Older systems often can stunt a company's growth, as they aren't able to adapt to new business trends, customers' transparency demands or the barrage of new regulations that all financial services companies face.

Along with the brand new shiny gear that CIOs dream of building -- sexy trading platforms, smart matching engines, cool wikis -- they have to maintain systems that were installed when they were doing keg stands in college. Along with that, you have to get your younger IT staffers motivated to keep these systems up and (still) running. This isn't as easy as it sounds. After all, did you join the technology ranks to do upkeep on a system written on OS/2 or NeXt?

How do you and your IT team deal with your major legacy systems? Does a part of you wish they would just go away? Tell us.

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