Financial services firms are embracing modernization efforts to keep up with the competition, meet new regulatory demands, and to improve the bottom line. But should firms embrace a wholesale, Big Bang replacement of on-premise systems? Or should such projects be done in phases?

The phased-in approach is the answer, says Mahesh Narayan, the institutional asset manager segment head for the provider Arcesium. Narayan recently took part in an FTF Exchange podcast.

“This is not a quick six-month or 12-month journey,” Narayan says. “This is a multi-year effort … The primary reason is that these are fairly complex institutions with multiple business and multiple strategies and a broad portfolio of applications and systems within them. So this journey is going to take many years.”

Data platforms would a part of that journey. Arcesium designs advanced data, operations, and analytics platforms for financial services firms. The company offers a consultative approach, cloud-native technology, and deep domain expertise to help hedge funds, banks, institutional asset managers, and private equity firms.

“Clearly, it has to be a phased approach. Very few firms are doing Big Bang replacements of such systems and rightly so,” Narayan says. “Big Bang replacements carry risk. Big Bang replacements are also disruptive in the sense of what happens to existing business processes and needs — if you’re doing this replacement over a one-year period or a two-year period and completely replacing something. So, in most cases, we see phased approaches sometimes along business lines, sometimes along regional lines.”

Ultimately, the phased approach “seems to be the right approach given the fact that data is often underpinning all these applications. It’s usually the data platforms that get rearchitected first as part of this journey before downstream applications,” Narayan says. “That’s what I would call Phase One of the overall replacement cycle.”

In the podcast, Narayan also points out three emerging best practices for modernization projects that cater to client demands:

 Data Architecture: “The data architecture is key. … Where will the data reside? What are the inputs? Where does the data come from? How does the data get ingested? What are all the sources for the data? … How do the downstream applications get access to this data?”

 Being Cloud Native: “Cloud-native platforms, and cloud-native data platforms specifically give you the best bang for the buck. So, at Arcesium, our offering is 100 percent cloud-native we don’t have an on-premise solution.”

 Domain Expertise: “It is important that you have teams that understand your business needs, understand the data that you’re dealing with, understand the workflows, understand the integration, understand the asset classes that asset managers are dealing with. That only comes from having domain expertise.”

In 2022, Arcesium won the “Best Reconciliation Solution” award as part of the FTF News Technology Innovation Awards. The honor was in recognition of the company’s achievement in helping clients verify the accuracy of their data, reducing operational risk, and improving business control – the basic building blocks for any IT modernization effort.