Sapient's Register says the ability to deal with data will help determine winners
Helping companies cope with big change is an essential tool on any consultancy's utility belt. Chip Register, Managing Director of Sapient Global Markets, says we are at the beginning of a transformational cycle as consumers are changing how they want to experience its service, and as new government regulations are placing burdensome data requirements on financial institutions. As a result, the ability to effectively manage and present data—both to consumers and government regulators—will lead to what he called "a Darwinian moment" for businesses. Naturally, all this change leads to increased opportunities for consultants and Register sat down to discuss them. In helping clients adapt to this transformational cycle, by building infrastructure, honing and devising new business processes, as well as improving data management, 2012 has been a strong growth year for Sapient Global Markets, which saw 8 percent growth in the second quarter and 11 percent in the third quarter.
Consulting: What has 2012 been like for capital markets consulting?
Register: What's taking up all of our time is business model transformation. Companies are doing different things to provide services than they've ever done before. At the same time you have a regulatory twist, you have a technology twist going on. The way customers want to experience their wealth management portals or investor portals is really changing the way these companies are aligning themselves. A lot of companies now are finding competitive edge around a better experience. We do a lot of work around improving that experience. Technology and the different uses of the Internet for data in general are driving a lot of transformation for our clients. So that's a big theme.
Massive amounts of data are becoming available that weren't before. The technology behind data management is growing hugely. There is so much data being required by the government and regulators that people are changing their data architecture to be able to provide all this trade-level data. That's another avenue causing the re-look at data management infrastructure. Anytime you want to really get into re-architecting data in a company, that's open-heart surgery. It has to be done very carefully by highly skilled people. Part of it is compliance, which is sort of a defensive impetus, and part of it is changing the customer experience which is playing a little more offense.
Consulting: What are clients expressing concern about heading into 2013?
Register: The biggest one I would say is how do you operate in a world where you have to maintain so much collateral in the institutions. You're going to earn less because that capital is not at risk. This is where, as with Sarbanes-Oxley, that the road to hell is paved with good intentions on regulations. The whole Dodd-Frank/"Too Big To Fail" legislation, what you could be doing is setting up a scenario with all these compliance mandates that only the largest institutions can afford to play the game, so all the smaller players get squeezed out. There you're going to start driving out transparency and liquidity and increasing concentration risk. That's a concern some people have.
Consulting: How is Sapient advising clients to stay compliant with these new regulations?
Register: Compliance really has been largely a data management exercise. There are things you can do to be smarter if you have strong data management and can put your fingers on all the different pieces of data flying around these huge, complex often siloed institutions. If you went to a large investment bank and said show me all your oil risk, that may not be an easy thing for them to do because they probably have a commodity trading unit, but also a project finance group, and probably some ETFs or Indexes they're monitoring with oil in them.
Those are all different operating divisions that don't speak to each other well given their current infrastructure, they never needed to do it before but now they have to. And the equity guys never really thought about how to communicate with the commodities guys so they can get an enterprise view of all these risks. They really have to kick it in gear from a data management side and get smart about how they move data around so they can aggregate it and slice it and dice it.
Consulting: How can managing data more effectively help institutions tighten their belts?
Register: I think if you look at what these institutions do, only about 20 percent is proprietary to them. The rest is common across every institution. Take reference data for instance. I've seen banks spending tens of millions of dollars just managing reference data. Why is every institution on the street managing their reference data? Why isn't there a utility that everybody just plugs into and it manages one set of reference data, and you pay some sort of fee for everybody to access what is essentially the exact same information replicated across every institution?
It's a chance for large-scale business optimization that's going to save a lot of money just by taking inefficiencies out of the system. We call it the utilization process. I think a lot of that other 80 percent is going to get pulled out of that institution and into some common format. It's very exciting to watch that process, not only to see how they respond to it but also to help build those utilities.
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