Home Insights The ownership model for financial markets technology is on its way out – here’s why. 

The ownership model for financial markets technology is on its way out – here’s why. 


By Desmond Stockdale, founder and CEO of Phi Partners 

“You will own nothing and you will be happy.” These are not the words of a great Buddhist thinker but were spoken by Klaus Schwab: founder of the World Economic Forum and the man widely credited for popularising the concept of the Fourth Industrial Revolution. 

Such ideas around ownership have unsurprisingly attracted criticism, and I’m not going to start digging into those controversies here. But taken at face value, the idea that ownership will become redundant seems to reflect an unstoppable trend. 

In many circumstances, the adoption of consumption over ownership makes a lot of sense. The easiest example I can reach for here is Netflix.

Once upon a time, viewers owned their DVD players and their library of movies: both of which required effort and investment to procure and were gradually devalued by obsolescence. 

Today, Netflix, or any other streaming platform for that matter, can pipe an endless selection of consumable media straight into your living room via a model which is more convenient, more flexible and cheaper. 

Bringing consumable-state technology to the capital markets arena 

Similar examples of consumable-state tech are proliferating in all sorts of sectors. However, so far, financial institutions have largely been unable to modernise their trading technologies in the same way. 

Whatever the reasons for this latency – and there are several – it is not because the current models for managing trading technology are fit for purpose. In fact, the opposite is true. The traditional and prevalent approach to trading technology is riddled with flaws. 

Yes, the needs of the TV consumer are much simpler than those of a bank operating in capital markets. But many of the problems that Netflix has been successful in solving for its viewers are comparable to those that currently plague financial institutions. 

Obsolescence of hardware, huge CapEx investments in infrastructure and a lack of agility or responsiveness are not a million miles from the old frustrations associated with the emergence of Blu-Ray, the cost of purchasing a new-fangled media player, or the issue of only being able to choose from the limited selection of DVDs that sit on your shelf. 

In the same way that a viewer might just want to watch Forrest Gump, a bank simply wants to access the functionality of its trading software. Everything else is superfluous. If a service provider can fulfil its customers’ needs at a reduced price while simultaneously liberating them from the headaches associated with ownership, they can revolutionise their market.

Embracing cloud technology and rejecting the multi-party model  

With our new Platform-as-a-Service offering, Summit PaaS, this is exactly what we are doing. We are delivering the benefits of consumable-state capital markets technology for our customers. 

Summit PaaS moves your entire Summit environment onto the cloud and offers a comprehensive managed service for Summit operation, including all your ongoing needs relating to infrastructure management, test automation and application change. 

Traditionally, a bank would be reliant on multiple parties to fulfil these needs. For example, Bank X may use an inhouse team to run the application and handle updates, a third-party for its infrastructure, additional consultancies for specific customisation projects, and offshore helpdesks for things like issue management or support.  

With such a complex network of parties involved, inefficiencies and errors inevitably arise. Agendas compete, strategies do not align, information fails to flow and knowledge islands form. At its most dysfunctional, the multi-party approach fosters a culture of blame and muddies the waters of accountability so that crucial responsibilities get dropped. 

Just as Netflix made watching TV simple and frictionless, a non-proprietary PaaS model for Summit packages everything together through one provider to improve performance and lower costs.  

So, if consumable-state capital markets technology is such a good idea, why aren’t more financial institutions taking advantage of it? The simplest explanation relates to the inherent complexities of the technology, the sector and at the organisational level of each individual business. Phi Partners is unique in that we bring together world-leading cloud and Summit expertise and combine this with extensive experience of working with banks of all shapes and sizes to deliver a service that ticks all the boxes. 

Agility is everything 

Perhaps the most significant benefit of moving away from the proprietary approach to trading technology lies in the flexibility it unlocks. 

For instance, on-premise infrastructure and traditional datacentre environments are extremely slow to scale, and often difficult to modify or adapt. This massively impacts time to market and hampers innovation. 

By contrast, a well architected cloud-native infrastructure designed specifically for the Summit application can provide new test environments almost instantly. Not only does this make you much more agile, it also means you don’t end up paying for infrastructure capacity that is not needed during periods of low demand. 

In this way, dynamic scaling of infrastructure simplifies long-term planning because you no longer have to painstakingly forecast the levels of computational resource you will require. Let’s face it, nobody has a crystal ball so accurately judging future infrastructure requirements is impossible, even for the most experienced and skilled practitioner. 

You don’t need me to explain the value of agility in capital markets. However, it feels appropriate to end this article with another prediction from Klaus Schwab: 

“In the new world, it is not the big fish which eats the small fish, it’s the fast fish which eats the slow fish.” 

Want to find out more about how the technological landscape is evolving in capital markets? We’ll be exploring the subject in depth in our upcoming webinar featuring some of the most influential experts in the space. Watch this space for more news.

In the meantime, visit https://www.phipartners.com/summit-paas/ to learn more about Summit PaaS and what it can do for you.

Desmond Stockdale is Founder and CEO of Phi Partners, a leading financial markets technology consultancy and service provider that specialises in both vendor and bespoke technology solutions.