Capital markets firms are adopting hosted and cloud-based managed services to better control risks, manage costs and utilize resources more strategically.

“Firms are under extreme pressure to reduce costs,” said John Avery, head of managed services solutions in SunGard’s capital markets business, Americas. “The cost to maintain regulatory compliance continues to mount and the revenue opportunities are not as dynamic and rich as they have been in prior financial cycles. This has created a situation where operations and technology costs are under extreme scrutiny and pressure.”

SunGard’s capital markets business serves a broad range of clients and functions in post-trade securities and derivatives, horizontal services like corporate actions and tax, as well as risk management and regulatory compliance, Avery said.

“SunGard’s vision for the market is clearly that managed services around common, shared technologies makes a lot more sense economically and from an efficiency standpoint,” he said.

Three major classifications of managed service offerings exist, according to Avery. The first is the most basic of managed IT services called managed infrastructure services. “This is where you would find typical hosting or infrastructure services and where SunGard, or another vendor, would take the responsibility for the infrastructure and people that run the technology operation,” he said.

The second is managed application services or application management services, where the vendor takes responsibility for all the change and support for the actual application software itself. This could also include supporting batch jobs and updating the system to reflect changes in the business.

The third, and probably the biggest but most significant leap for capital markets firms, is Business Process as a Service (BPaaS). “This is where the managed service provider offers operational processes to replace what each individual firm typically does around a platform or platforms from SunGard, or another vendor,” said Avery.

The largest market participants in financial services, particularly in capital markets, are under extreme pressures due to the size and complexity of their staff and technology, which creates the need to find novel ways to reduce the complexity and costs of those operations. For smaller customers, there is an expectation for a vendor to deliver managed services “that take the best of what we would offer the biggest tier one customers and provide it in a way that that tier two or tier three customer has easy access to,” Avery said.