Julian Trostinsky at Duco says in an FTF News Q&A that the challenges of the pandemic proved the value of cloud computing to post-trade Ops.
(Editor’s Note: Financial services firms that were sitting on the fence about cloud computing are changing their minds as they look to the post-pandemic world. So says Julian Trostinsky, vice president, strategy and solutions engineering at Duco Technology, which offers cloud-based, data and post-trade reconciliation systems. Trostinsky has more than two decades of experience helping large financial services organizations evaluate operational and IT infrastructures. During his career, he has built and operated reconciliation centers of excellence for many firms including Citi and BNY Mellon. Prior to Duco, Trostinsky was at SmartStream Technologies, where he was in charge of its global operations and client services division. This Q&A was excerpted from the FTF Special Report: How New Technology is Driving a Fundamental Rethink of Reconciliation.)
Q: Is it too expensive for some firms to move from their manual reconciliation systems and workarounds to a new IT system?
A: Well, it’s a hard question to answer directly because it all depends on a solution that you’re trying to implement that will replace those manual reconciliations.
For example, is the company trying to move from legacy-based technology? By legacy-based technology, I mean solutions that need to be deployed internally — ones that require a heavy presence of hardware, including Unix or Linux servers, and Oracle or Sybase databases.
You would need to deploy everything in-house, and you would need to train people. In this case, you are looking at a relatively long and very costly project.
Or are companies looking to deploy a solution similar to what we are offering at Duco, where you can have an environment within a couple of hours, and you can have your first reconciliations in production-ready within the first five-to-seven days? Your project timeline will be significantly smaller.
Q: Are you arguing that there does not need to be an internal IT infrastructure overhaul?
A: Embrace the cloud. Exactly. That’s the key.
Q: How has the cloud impacted the problem of manual systems? Also, is it too glib to say that you can throw a manual system onto the cloud?
A: Well, look, manual systems vary from site to site. And even within a single site, the manual process, or manual processes, could differ by a mile, one from another.
At the end of the day, what does cloud computing offer? Cloud offers stability, a very quick turnaround, and security. So, going into the cloud, nowadays, is a very, very positive thing.
In our meetings with different banks and different financial services organizations, we hear comments from them such as: ‘We are trying to be the first cloud-based bank,’ or ‘We’re purely going toward cloud.’
So, cloud is definitely the future.
Q: I have seen many firms declare that they are ‘cloud-based banks.’
A: There are quite a lot of banks that have made those comments.
BNY Mellon, Standard Chartered, and Citi are moving toward the cloud for example.
Q: It sounds great, right, and makes for a great press release. But is it real?
A: It is. Absolutely 100 percent real.
If you think about the situation that we’re in, many of the banks do not have anyone working out of their offices. Most of the technical people work remotely. But when you need to be in front of a server to reboot it or when you need to monitor something, sometimes not being in front of them is not a good thing.
From a cloud point of view, it’s very easy — everything becomes easy.
Q: So, is the pandemic-induced lockdown forcing the issue and making the case?
A: Well, no. The cloud started many years before the pandemic. What the pandemic has proven is that the cloud can add tremendous value for reasons that firms haven’t yet thought about in the past.
Q: So, if firms move to the cloud, how much of their reconciliation infrastructure should be left on-premise?
A: Well, there are certain things that will not migrate to the cloud for many different reasons. It could be regulatory-related constraints, geographically-related constraints, or other legitimate reasons why certain things cannot be done via the cloud.
Having said that, at the end of the day, cloud is the future. I truly believe in that.
And any firm that isn’t necessarily considering technologies running in the cloud could potentially be very far behind compared to their competitors or their peers in the industry.
Q: What are the key components of a compelling business case for automating reconciliation processes?
A: The business case usually stacks up by looking at quite a handful of different elements that one would need to render a reconciliation.
But, technically speaking, to look at what it’s costing you, overall, to run the reconciliation, you need to consider everything. You need to consider all the people involved in the reconciliation process. This includes, from the business point of view, all the people involved in the exceptions investigation process.
From an operational point of view, you then need to look at all the data-related activities that would be needed, including data gathering, data normalizations, and any additional development that one would need internally.
Then you need to look at the number of people associated with the data-related activities. You obviously need to take into consideration what would be needed to do this elsewhere or in a different type of a way.
And you need to consider the infrastructure costs: the cost of servers, the operating systems, databases, and so forth.
Q: What should firms be asking of potential vendors?
A: How much money are they charging for the software? What’s the maintenance scheme behind it? What’s the implementation timeline? How much effort would be needed from your end to implement something? What does the future look like? If you deploy something today, and the new release comes out in a year-and-a-half, how much will the upgrade cost you? Then try to look at it from the perspective of traditional deployment — where you deploy everything on premise — and then compare it to a software-as-a-service [SaaS] type of deployment, where someone else deploys it for you in their SaaS environment.
Then you compare the two items. I guarantee you that the cost of the SaaS-based items will always be lower than the traditional deployment.
(The free report can be found here: https://bit.ly/3eLuNPb.)
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