Treasury vendors take on corporate tech outsourcing
Running the latest treasury platforms internally can require a substantial upgrade in tech and increased IT spend, especially for smaller companies. For some, the solution is to look to third-party vendors for further outsourcing.
The in-house technical capabilities of treasury are being further streamlined, with third-party vendors often taking on the role of the chief technology officer (CTO). Although turning to third-party vendors to provide software is not a new concept for the industry, externally hosting those platforms on vendors’ servers is a recent concept.
Ed Adshead-Grant, general manager at Bottomline Technologies, says: “What we’re seeing is that CTOs are leaving and the role is
not being filled. The tech decisions are instead being outsourced to the partner. The consumption of IT is changing. An external partner can understand the tech and make the same decisions as well as a CTO previously could.”
The streamlining of internal teams is being used to reduce costs and workflow demands. Adshead-Grant says a lot of the change is
being forced by the new ‘gig economy’ companies that are focused on payments processing and user experience, rather than running all operations in-house. Managing technical operations is a small but vital part of treasury, and might not require having a permanent member of staff.
Lisette Overmars, director, treasury and finance solutions, at consultancy Zanders, says: “Maintenance and support of treasury systems is not a full-time job; it can happen that IT people are not involved in system issues for months or longer. So how much time and money does a company want to spend on investing in this knowledge?
“Therefore outsourcing can be a beneficial alternative. It is of course important for a corporate to look at the confidential data side and the contingency of the critical treasury processes, but professional vendors have taken care of this part.”
For some, the fees associated with paying someone else to oversee technical operations can be more cost effective, especially at a time when treasurers are under scrutiny from their boards to increase the profitability of their operations.
Stephen Baseby, associate policy and technical director, Association of Corporate Treasurers, says: “The decision to outsource can come down to simple maths; is it cheaper to hand over to someone else or to integrate and do it yourself? There is no standard response, each company will know how to look after itself.”
Martin Bellin, founder and CEO at Bellin, says there can be big financial benefits to pushing out low-risk parts of the business: “The outsourcing of responsibilities is something I would not consider, but the outsourcing of operations, especially the ones where no detailed knowledge of the business is required, is much more efficient. Being a provider of such services, we can support 10 to 20 treasury departments with a team of four. Without outsourcing, this would at least require one or two FTEs [full-time equivalent] per company, ending up with 15 to 30 FTEs – that is four to eight times the cost.”
The costs are not just associated with personnel, as the actual running of servers can use up resources. Baseby says the need to bring platforms up to standard can be one of the biggest drivers in forcing the change: “From the IT perspective it can be argued that if a big upgrade is needed, is it worth taking up so much space on the internal servers? The alternative can be as simple as logging on to an external website for the same processes if it is outsourced. Otherwise outsourcing daily treasury operation is a decision as to whether to resource skilled manpower or paying the outsourcer.”
Some vendors are already seeing the opportunities in offering treasury and technology services as a package. Baseby says: “FIS, for example, runs its treasury system on its own servers. Companies that get to the stage of knowing they need to upgrade their systems can assess the expense of needing additional computer capabilities, process and storage, and decide they are better outsourcing before the IT team begin the reconfiguration.”
Working with the FIS systems, Zanders has developed the Treasury Continuity Service to give advice to companies with small and under-resourced treasury teams. The service works on a monthly subscription basis, with customers paying fees only according to how many days they used Zanders services each month.
In doing so they reduce the cost of having to upgrade their own servers in order to host new treasury platforms.
Bottomline runs a service allowing the customers to only access, and pay for, the facilities that they need. Adshead-Grant says: “We operate a pay-as-you-go model, allowing the customer to pay for only the IT assets they need. The aim is to avoid barriers to entry, and high set-up costs. There are no long-term contracts attached to using the service.”
Overmars adds that the improvement in tech capability has forced this shift towards using external parties. The need to have a member of staff oversee each update on any platform has also been removed: “Due to SaaS and other outsourcing solutions, the need for internal IT support decreased and is shifted towards the vendors.”
With growing tech sophistication and a further shift towards cloud computing, the separation between how and where internal operations are run will become more complex. Baseby says: “Going forward the line between your own systems and other people’s systems is becoming more blurred. The boundary of who controls what might shift further over time.”