What Keeps a CTO Up at Night and How a Managed Service Provider Can Help
What Keeps a CTO Up at Night and How a Managed Service Provider Can Help
June 2019

Hedge Fund Chief Technology Officers (CTO) face a litany of responsibilities ranging from:

  • Maintaining the technical infrastructure necessary to run their firms
  • Overseeing regulatory compliance in the technology stack
  • Guarding the firm’s non-public data and systems
  • Managing critical investment and trading systems
  • Shepherding the firm’s adoption of future technology paradigms

To deal with each challenge effectively and comprehensively, CTOs need to narrow their focus to the key issues that involve protecting the firm and their investors and ideally giving the firm a competitive advantage.

Infrastructure / Support tasks can in some cases be removed as a distraction and partially or wholly outsourced to a Managed Service Provider (MSP), a company that remotely manages a customer’s IT infrastructure, applications and / or systems. Often, leveraging the right MSP will allow a fund to redirect their investments in physical infrastructure and onsite support of that infrastructure to other more mission critical projects. With the right MSP partner, a fund can scale quicker and create a robust infrastructure, supporting enhanced performance and productivity, while leveraging the deep and specialized expertise of the MSP. This is especially true with the popularity of Azure and AWS, where the right MSP has deep expertise in leveraging these environments and locking them down securely, an expertise that many funds do not want to hire for internally.

The decision to use an MSP may seem straightforward. But, in order to use an MSP successfully, several factors must be thought through before even engaging with the MSP. (Note that, while we assume you are working with MSPs for the first time, even if you currently have an MSP and are looking to replace them, our subsequent advice is still relevant!) When FinServ performs a vendor selection for our clients in the MSP arena, we focus on the following key questions and on documenting the existing state of key items to facilitate the transition:


 Key Activities
  • Identify the critical goals for using an MSP
  • Document the current state of existing IT Infrastructure and Staff, including any significant material investments
  • Define a strong process to assess and select the MSP ensuring that the right choice is made
  • Envision the onboarding and managing of the MSP, including knowledge transfer and KPI / SLA definitions



MSP Goals

In order to successfully choose and onboard an MSP, it is critical to understand and document the main goals you are ultimately trying to accomplish and how. Consider the following:


 MSP Goals
  • Why are you looking for an MSP?
  • Is your goal to cut costs or to enhance performance and add resiliency to your organization?
  • Are there goals that your Chief Financial Officer (CFO) wants you to meet, for example a percentage cost savings or headcount reduction?
  • Do you outsource the entire staff or only certain roles?
  • How do you transition old resources and train the new resources?
  • Are there firm standards to train the MSP on, like Documentation and Testing Approaches?
  • What do you do with the displaced staff – use them as fungible resources to be redeployed elsewhere or do you eliminate the position?
  • What are the most critical requirements you have in terms of turnaround time on issues from the MSP’s support function?
  • Do you have a well-defined escalation policy with your internal staff that is easily transferable into an SLA (Service Level Agreement)?
  • What are the most important measurements you need to assess the success of the MSP against KPI’s (Key Performance Indicators)?



IT Current State

The MSP’s responsibility is to take on the tasks that your current IT staff is doing. How do you communicate that clearly and succinctly to the MSP so that both parties have a common understanding of what tasks are in scope?

The answer lies in having a full understanding of what your existing IT footprint is and what your current IT staff does. Rationalizing their current roles and what the target operating model will be is crucial to a successful transition.

To effectively outsource tasks that were handled internally to an external party, it is critical to understand all tasks that your staff does, system dependencies and external dependencies. Once you have a holistic picture, you can then go through the exercise of segregating tasks that will be outsourced and those that will remain in-house. With a clear definition of the tasks that you expect the Managed Service Provider to take on, the expected roles and responsibilities will start to become evident.

To achieve this goal, FinServ developed a “Functions of a Hedge Fund” map which allows us to review all the functions you have and then efficiently highlight which functions will be targeted for partial or full outsourcing. This becomes a key document to share with the vendors during the selection process.

Questions to ask yourself include:

  • Do you have a complete and well documented picture of your firm’s IT hardware and applications?
  • Do you have a comprehensive and well documented view of what the IT staff does? Ask yourself, your managers and your staff. This operational assessment exercise might surface some unexpected discrepancies in your understanding of their tasks to what they actually are
  • Which tasks will be outsourced?
  • Does the MSP have the resourcing / skill-set to do those tasks effectively?
  • How will the MSP be enabled to do those tasks effectively?

The FinServ team are experts in comprehensive current state documentation. We can quickly document these current state items to ensure the selection process is based upon your firm’s unique footprint and requirements.



Choose and Assess the MSP

As the technology thought leader, you should determine and agree on how you will choose the MSP. Choosing an MSP is no small task and to give yourself the best chance at success, this needs to be carefully considered. Having an experienced consultant like FinServ with specific knowledge of the MSP marketplace and industry trends can increase your firm’s chances for success.


 Choose and Assess
  • How does the MSP staff their IT support team? Full Time / Part Time, Pooled Resourcing vs Dedicated Resources
  • Will you use best of breed or do you want a one-stop shop MSP provider for all IT-related services?
  • Does the MSP offer support for all Cloud providers or do they specialize in one provider?
  • Does the MSP have a global footprint? Can the MSP provide support for all your locations with local resources?



Onboarding and Managing the MSP Relationship

Equally as important as selecting the right MSP for your firm, ensure you can properly onboard and manage the MSP. In most cases, we have seen that clients do not have the dedicated resources to see this part of the MSP process through. Should that be the case, it is critical to get an experienced consultant like FinServ who can provide dedicated expert resources to lead you through the process.

Once the MSP is onboarded, they will need to be managed – you will need to have measures of success in place to measure the MSP’s performance. As part of the selection process, meeting with each MSP candidate to review their understanding of how you will evaluate their performance is critical. Consider items such as:


 Onboarding and   Managing the MSP
  • Who is managing the MSP Onboarding project and is there a clear definition of key milestones and sign offs for the onboarding process?
  • Is there a communication plan to inform the rest of the firm on what the change is, how it impacts them and what the new process is?
  • What is the new MSP support operating model (i.e. how to submit tickets, who to contact) and is it well understood by your team? If this is a change to your current process does everyone in your Front Office know how things will change? Have you level set their expectations?
  • What are the key metrics being measured and how often will they be measured?
  • Will there be financial repercussions if KPIs are not being met? Have you defined an escalation policy with the MSP?
  • Are there SLAs in place that keep the relationship healthy and intact?
  • Who on your team and on the MSP team will be managing the relationship?
  • What is the cadence of meetings with the MSP to review performance?
  • Is there an issue tracking, resolution and escalation process in place?




If any of these themes resonate with you and your organization, please reach out to FinServ. FinServ has advised and managed multiple Funds through selecting and onboarding a Managed Service Provider.

By leveraging our methodologies and industry best practice tools we can expedite your selection and ensure a successful onboarding process saving both time and money and ensuring this complex and critical process meets the goals you set for it at the start.

If you already have an MSP, but they are not providing the services that you require, the same thought processes and best practices are still relevant when replacing your existing MSP.

Throughout our 15 years of existence, we have proven that our deep industry knowledge combined with our project management and overall best practice methodologies can be an asset to your organization. To further continue the conversation or to discuss more of FinServ’s capabilities, please contact FinServ at info@finservconsulting.com or give us a call at (646) 603-3799.

About FinServ Consulting

FinServ Consulting is an independent experienced provider of business consulting, systems development, and integration services to alternative asset managers, global banks and their service providers. Founded in 2005, FinServ delivers customized world-class business and IT consulting services for the front, middle and back office, providing managers with optimal and first-class operating environments to support all investment styles and future asset growth. The FinServ team brings a wealth of experience from working with the largest and most complex asset management firms and global banks in the world.