SimCorp Dimension is a flexible software solution that differs from its competitors by its configurability. All clients have the same code base, and it is not possible to customize anything using code (except for the integration tool ‘the communication server’). An empty install of SimCorp is like a blank sheet of paper.
The days when a SimCorp installation did not contain any pre-defined setup or configuration are long gone and have been replaced by an ever-growing library of standard configurations which plays an important part in the strategies for Software as a Service (SaaS) and Business Processes as a Service (BPaaS). The latter even drives SimCorp’s first hand experience regarding best operational practices to develop the standard setup further.
In this piece we are going to take a closer look at SimCorp’s standard platform, what is it, what are the benefits, and are there any downside to it? We discuss to what extent the fintech space is ready (or how it plans to get ready) for standard solutions, consecutively as-a-Service offerings, and the involved amount of outsourcing.
What is Standard?
We asked ChatGPT what standard software for asset owners is:
“Standard software for asset owners refers to software applications that are widely used and accepted as the industry standard for managing assets such as real estate, infrastructure, and other physical or financial assets…”
In other words, common or market best practices across industries.
Standard Software and Standard Business Process are not the same, even though often used for both, depending on the context. While Standard Software means everyone uses the same application, Standard Business Process means using the application(s) in the very same way. SimCorp Dimension has always been a Standard Software. So, let’s focus a bit on the Business Process dimension.
Industry Best Practices
Standard Business Processes (Best Practices, aka Standard Configurations) in SimCorp did not get big overnight or by itself. Back 10-15 years ago asset owners’ strategy was a mix of proprietary IT architecture and business processes unique to them. No one envisioned a world where they could operate IT and business the same way as their competition. The value was in custom configuration allowing investment managers to do more and offer additional things to their clients.
This view changed over the course of the years as firms realized that market practices can save a ton of money on everything from IT infrastructure, staff, and also process resilience and stability without jeopardizing their competitive advantage.
SimCorp’s journey on standards started by collecting solutions from various implementation projects around the world and re-purposing them to a collection of solutions. It started out small, as templates in the technical IT architecture landscape and made its way into back-office operation and compliance rules. In turn this expanded and improved as time went on.
Standards have made it cheaper and faster to implement SimCorp solutions. Today, many areas in SimCorp's solutions have commoditized. Digital transformation and democratization of technology through new technologies and improved user experiences have empowered those outside of the technical industry to access and use technological products and services, so IT, for example, is no longer a key differentiator. And outsourcing is now a more common strategy amongst SimCorp’s clients.
Regulation and accounting rules have also made differentiation on back-office operations a non-issue for more success.
Anything as a Service
This change in view has fuelled a higher appetite for consumption as a service that generally exists amongst C-level executives. The idea is that investment managers want to outsource activities that are not key to their business, even though an important part.
Outsourcing is nothing new, far from it, but what is new is that you can outsource a part of your operation while still having access to data and even be on a shared environment such as SimCorp Dimension.
This is what has led vendors like Simcorp to offer SaaS. Operating their own software has highlighted some shortcomings in processes and workflows that were never previously addressed. But because they now directly experience operational constraints and possible improvements first hand, these are getting more attention than before, resulting in easier operations and fewer pain points both for SimCorp and their clients. Simcorp is incentivized to optimize client value across the entire life cycle more than ever. This might not have been a problem for investment managers before, but it certainly strengthens the vendor’s focus on the right value and represents a mutual benefit to all parties.
The Flip Side
The concept of a standard sounds appealing, and vendors will be the first to highlight all its benefits. But as with most things, there are challenges to this.
SimCorp states on their website that “…the mix of standardized building blocks and customization options [..] allows [clients] to run their business on an optimal blend of standard platforms and custom solutions..” Link.
While this is true if the standard solution is kept completely free of any customization, that distinction often runs into real life limitations. When you start adjusting the standard layer and add a custom layer on top, this is where you start getting into trouble. This is especially true for SimCorp where configuration is not layered. The problem is that any configuration in SimCorp that is not standard overwrites the standard configuration, and possibly invalidates regression consistency.
To manage configuration, automated change enablement, and regression safety, what really is required is a process to manage configuration resources in your source repository, aka Configuration as Code, which is also a focus area of SimCorp to strengthen the end-to-end value of standards much further. This entails a much more automated and technical framework for the release and deployment process for any change, be it code or config.
The benefit is efficiency and stability for everything inside the coverage of said release and deployment setup - and makes it very hard for components outside this coverage. That makes the holistic scope of continuous deployment setups an even more important and impactful aspect of the greatest SaaS offerings on the software market.
Be different where it matters
At the end of the day, the million-dollar question is: how do you manage where to be special and where to follow the crowd? And the next question becomes: how do you handle any specialties in an automated way that does not conflict with the standard? And what is the cost of not being able to achieve that?
Those will be the important decisions that differentiate the best institutions of this decade from the average.
Getting this right for your business model and unique selling point (USP) is not something you can read up on in a book. It is quality that defines your business agility to deal with market changes in the years to come. As well as also creating new opportunities.
If you have any thoughts on SimCorp standards, we would love to hear from you. Please get in touch with us or book a call with Ebbe Kjaersbo here.