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Has the question of “ buy versus build ” become outdated ?
The “ buy versus build ” topic has come up multiple times in my job helping banks build core technology platforms . Using the Formula 1 as an example , we can see why this question is outdated , and why companies need to change the way they think about how they create value for clients and compete .
Last year , the Red Bull Racing team won its 100th F1 Grand Prix race . To reach that milestone , they had to meticulously control every detail of its race effort , however , one thing they did not do was build the engine .
Instead , Red Bull currently outsources its engine production , relying on engine manufacturers to produce and deliver them , freeing up the team to focus its attention on the other things that make the difference between victory and defeat .
Building the technology engine F1 teams don ’ t buy pre-made engines off the shelf . Instead , they enter into deep , consultative partnerships with manufacturers to design custom engines that will mesh perfectly with their machines .
F1 owners understand that modern technology enables external partners to build exactly to the team ’ s specifications , and to seamlessly integrate the engine . Likewise , senior executives at banks and broker-dealers should understand that rapid technology innovation and advances in modular design have equipped technology providers in their own industry with the same capabilities .
Today ’ s fintechs operate less like vendors and more like expert consultants , helping clients create and implement the technology engines that drive their organisations .
94 // TheTRADE // Q1 2024
Delving into the build or buy question – IAN MAWDSLEY , chief product officer at Broadridge Trading & Connectivity Solutions , uses Formula 1 to illustrate why this question has arguably become outdated .
These partnerships can take whatever form works best for the client , some firms see specific technology systems as core value generators and maintain significant levels of technology talent and resources within their own organisations . In this model , the vendor might provide the initial offering , but then it ’ s up to the firm to complete the buildout using their own IP to create a bespoke , value-added solution .
In some newer iterations , technology providers allow clients access to the equivalent of an “ app store ” where in-house developers can obtain pre-configured software components , alongside creating their own apps , that can then be used to assemble into their own trading solution . This approach is cost-effective and provides the firm with complete control .
At the other end of the spectrum , the off-the-shelf fintech model delivers a more or less complete , turnkey technology platform . This can appeal to firms looking to quickly and easily install a what might be considered a commoditised capability or function .
Most firms find the sweet spot in the middle . Using this approach , the fintech partners with the client on system design , and then taps into a broad suite of pre-built and often turnkey apps to construct a customised platform .
Accelerating organisations In today ' s dynamic financial landscape , technological evolution is not just an option but a necessity for survival . Yet , for many financial institutions , the prospect of upgrading aging legacy technology trading solutions can be daunting . The challenge lies not only in the complexity of integrating new systems but also in the need to ensure seamless continuity of operations while minimising disruption to critical processes .
Herein lies the root of exactly why the ' buy and build ' strategy is so effective . It is a proactive approach that offers financial institutions a viable path to navigate the maze of legacy technology upgrades . Instead of starting from scratch , this strategy involves acquiring existing solutions and then customising or integrating them to fit specific institutional needs .
The advantages of this approach are multi-faceted , with the six key benefits being : Speed to market , cost efficiency , scalability and flexibility , access to expertise , time to focus on core competencies , and regulatory compliance .
The buy-and-build strategy presents a compelling proposition for financial institutions looking to upgrade their aging legacy technology trading solutions . By combining the advantages of speed , cost efficiency , scalability , expertise access , focus , and regulatory compliance , this approach empowers institutions to embrace technological innovation with confidence , positioning them for sustained success in today ' s fast-paced and competitive financial landscape .
And remember , Red Bull Racing continues to dominate F1 and is already looking towards a successful 2024 season .