Buy-side investment firms running legacy systems need to
spend more time in maintenance costs compared with newly installed IT,
according to a study by tech and consultancy firmSimCorp.

The company’s private research institution, SimCorp
StrategyLab, which is headed by Ingo Walter, Professor at the Stern School of
Business at New York
University, has issued
the results of a Global Investment
Management Cost of Operations Survey, conducted by the Nielsen Company in
2012.

Surveying 125 respondents in Europe, North
America and Asia-Pacific, the study polled executives at fund
managers, pension funds, asset managers and insurers. The survey primarily
focused on the cost of IT operations and the spending differences between firms
running on a patchwork of older, custom-built solutions (legacy systems) versus
those with state-of-the-art IT platforms.

The study indicates that as client and market demands
intensify, state-of-the-art investment management systems result in a lower
cost of operations over time versus retaining a legacy system, SimCorp said in
a statement.

Primary findings:

-- Increased cost burden of legacy systems: Legacy system
respondents spend a higher proportion of budget (39 per cent vs. 36 per cent)
on internal staff and external consultants than state-of-the-art system
respondents;

-- Legacy systems require increased IT operations budgets:
Over half (56 per cent) of legacy system respondents are increasing their
overall IT budgets versus 60 per cent of state-of-the-art system respondents
who intend to maintain or decrease IT operations spending;

-- Investing more to do the same: A net total of 43 per cent
of legacy system respondents intend to increase IT spend versus only 27 per
cent for state-of-the-art system respondents.

“The SimCorp StrategyLab study reinforces that buy-side
firms who rely on legacy systems are exposed to ‘creeping underinvestment’ and
may face greater costs and obstacles to growth down the road. Those firms with
state-of-the-art IT systems can measurably gain a competitive advantage and be
better prepared for market growth,” Professor Walter said.