How can firms be sure their outsourcing relationships have not left them at a competitive disadvantage?

When entering into strategic outsource arrangements, most organisations dedicate significant time and resource to ensuring that the right supplier is engaged to meet their business requirements.  

The challenge many organisations then face is that, no matter how well they implement and govern this relationship, they do not have the wider market view to ensure the service standards they are receiving, and the fees they are paying, continue to be comparable to their peers and improvements in the market.  

Knadel offer a range of benchmarking services that provide organisations with a clear assessment of their market positioning, highlighting and interpreting key information relating to an organisation's operating model and client/product mix.   The assessment will also determine the supplier partner’s capability and the strategic direction of both parties in context of the overall competitive landscape.

The services that can be benchmarked cover a broad range of the features constituting an outsourcing relationship, but are captured within three areas; rate cards and fees, service levels  and performance. 

Our benchmarking methodology covers both the quantitative and qualitative aspects of an end to end outsourced model and relationship.

Simply put, are the fees being charged equitable when compared to a benchmark universe of organisations receiving similar services for a similar product range and scale?  Furthermore, are the commitments for the services at the ‘right’ levels, and is performance against these standards to the level that should be demanded given developments in the market since the original contract was signed?

These assessments can be applied at all stages of the outsourcing process, be it as part of the strategic decision and selection – providing a level of expectation for rates and services as part of an outsourcing selection; during delivery – assessing the provider as part of regular reviews and the monitoring process; or at contract renegotiation – assessing the prevailing agreements and rate cards against market comparators.

With extensive experience of business process outsourcing within the financial services industry, and direct exposure to large numbers of recent first and second generation deals, Knadel not only has the universe of data, but also the knowledge to assess and apply this data appropriately for the needs of our clients, and add value at all stages of the lifecycle.

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How Knadel can help

One of Knadel’s core areas of expertise is helping investment firms select outsource suppliers for a range of services that include Trustee, Depositary, Custody, Transfer Agency, Investment Operations, Stock Lending and Fund Administration. We also help these firms benchmark service levels and fees and re-negotiate outsourcing contracts at the end of their initial term.

We have recently helped F&C, Man Investments, Ignis Asset Management, Hexam Capital and Lloyds move to, or significantly review, their  outsource arrangements. We have also helped a large number of firms, including the likes of Artemis, Old Mutual, Ruffer Investments, Railpen and JPMorgan Asset Management to benchmark/renegotiate their existing rate cards, fee levels and service standards with their outsource suppliers.

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This recent body of work coupled with previous outsourcing engagements has allowed us to develop a leading and robust database of:

  • Current rate card structures
  • Levels of outsourcing fees
  • Service level standards
  • Best practice approach to contract re-negotiations

As part of a benchmarking engagement Knadel works with firms to clearly define their objectives for the benchmarking exercise, to understand how best draw on this knowledge bank.  With the projects assessing the existing relationships against the significant Knadel database of outsourcing deals in the industry, and incorporating peer interviews where appropriate, Knadel add value by presenting an interpretation of the detailed benchmarking information to ensure firms are optimising their outsourcing relationships.