Managing the alignment between technology and business groups, leveraging technology for effective investment management and the identification of appropriate resources creates a complex challenge for any company. This challenge is magnified in firms that invest in alternative investments. Finding resources that have a solid understanding of the fundamentals behind alternative asset classes (real estate, private equity, mortgages, agriculture, timber and infrastructure) coupled with an in-depth technology background is difficult. Adding to this challenge, the number of technology resources with relevant experience has not kept pace with the recent growth in these asset classes.
Solving this challenge involves utilizing the connection between people, process and technology.
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People: Connecting Business and technology through subject matter experts
Project after project starts with the promise of massive benefit, short-term returns on investment and iron clad business cases. A number of factors result in diminished project success and even failure — some studies estimate the failure rate of complex projects to be as high as 70%! Whether it is the result of poor executive sponsorship, a sudden change in business strategy, a lack of funding or inaccurate requirements, more often than not the project vision falls short of the reality. Although project methodologies and standardized processes can promote project success, the main problem is invariably the disconnect between business and technology resources.
Without an understanding of the business concepts projects often result in the misinterpretation of requirements and business strategy leading to a business perception of project failure.
The solution
Project resources should be selected based upon their subject matter expertise, not their certifications (six Sigma, PMP, CFA, etc). These subject matter experts are critical project resources and should be leveraged as both analysts and in project management. They can assist in project planning, building the business case, ongoing project management, and utilized as trainers for existing staff.
Resources can be full time hires, consultants or both. The advantage of leveraging a consulting firm is that these service providers are exposed to multiple clients at any one time and generally have a wealth of relevant experience. They are familiar with current technologies, industry trends, and benefit from understanding the combined business challenges of their clients.
Process: Aligning projects with business goals
Aligning projects with business goals is not just a matter of linking requirements to some language in a business plan. It requires an actual alignment of business to technology that has the business rethinking the role of IT in an organization, so that IT is perceived as a group that can help drive profitability and manage risk. Unfortunately many fortune 500 companies have moved to centralized IT organizations that neglect the role of IT in supporting business functions. Applications focused resources in these companies have become generic to the point of irrelevance. Whereas, it’s clear that infrastructure roles can be centralized, applications roles cannot.
Without resources that can document the current business process and provide valid recommendations for the design of a future state, there is little chance the technology solution will result in the operational advantages a business is seeking in their technology investment. Commonly the outcome will be the modeling of a broken process in a new system or application.
The solution
Align projects with business goals, build an architecture resilient to change and identify resources that can bring it all together.
Technology: Building a resilient architecture
When returns were high it was acceptable for a fund with billions of dollars in investments to get by with Excel, an email server and an IT guy. Not anymore, investors have been burnt by the promise of high yield opportunistic investments that have seen values erode more than 50%. Ironically, at the same time an opportunity has arisen where diminished portfolio values allow institutional investors increase their portfolio allocation to these investments. However, these investors, particularly public pension and sovereign wealth funds are demanding detailed operational information about their investment portfolio. Investment managers that will thrive in this environment will have the technology platform to provide this information accurately and immediately, contributing both to better internal management and comprehensive external information dissemination.
Even in firms that have made a significant technology investment there is a constant struggle to be relevant and meet business objectives. There are very few companies with the architecture and methodology in place to thrive in this new business environment of transparency and accountability.
The solution
There are a number of core systems and platforms required by a firm managing alternative investments, these components must be implemented to support business change and provide resiliency to changes in process or direction.
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