Five situations when you should request a Proof of Concept


Any major IT project on behalf of an asset management firm is fraught with risk. Client, market, jurisdictional, regulatory and technological changes can all derail a perfectly planned technology roll-out in asset management and the IT highway is literally strewn with abandoned, over-budget and overdue systems failures. One way of mitigating that risk is the Proof of Concept (PoC).

A PoC is a limited-scale deployment of a software system within an asset management firm’s operational structure in order to demonstrate its practicality, or a demonstration in principle with the aim of verifying that the software has the potential to improve processes for an asset manager. In short, a PoC is about giving an asset manager the reassurance it needs that a project is feasible and has a high probability of success with a particular partner.

Some asset managers will request a PoC and as long as that is a ‘PoC lite’, the vendor will provide that service free of charge. In these situations, the final parameters are a negotiated judgement between the client and the vendor. If after that process is underway or completed the client requests a much larger PoC, then this would normally be charged for, as it is substantially requesting what would normally form part of an implementation.

In the client reporting world, most buy-side firms request a PoC due to concerns around data, reporting templates or volume. Indeed, there are certain circumstances when conducting a PoC is advisable, if not compulsory. Here are five such scenarios.

  1. Data issues – An asset manager might perhaps have created its own, highly customised data warehouse. In this situation a firm may justifiably have concerns that any vendor they work with can access that data store directly and take a feed from it. Comfort may be sought because either no other vendor has attempted to access this data warehouse or previous attempts have been unsuccessful.
  2. Unusual functionality – It may be that an asset manager has functional needs that it cannot readily satisfy. For example, the Marketing team may have a desire for some very unusual displays of holdings data, something that the asset manager simply cannot create without deploying teams of staff on manual workarounds. The asset manager might say: ‘You show us that you can do this, and we will be interested’. The asset manager then needs to send the vendor some sample data and let the vendor prove that it can provide the solution. Similarly, the asset manager may want to know that a series of manually-intensive tasks involving Word and Excel can be structured into an automated process.
  3. No vendor experience – A circumstance whereby an asset manager with a highly bespoke, legacy client reporting system and no experience of deploying an off-the-shelf solution is tailor-made for a PoC. Reassurance that the longstanding systems and processes that have (perhaps until recently) coped admirably can be effectively replaced would be crucial. This is as much a cultural challenge as a technical one.
  4. Firm moving across jurisdictions or centralising reporting – When an asset manager is seeking to expand its business across multiple jurisdictions or is looking to centralise its reporting operations and benefit from economies of scale or consistent style and branding, a PoC can be immensely beneficial. For example, an asset manager may be attempting to satisfy global factsheet requirements such as multi-currency or manage workflows across regions. Automated translation and multilingual capabilities may also be critical, as is the ability to centralise reporting while considering specific regional requirements.
  1. Internal sell-in – Convincing the Client Reporting team is only one part of the sales process for any vendor. In many asset management firms there are multiple stakeholder groups, including IT, Data Management, Regional Heads and Heads of Desk involved in any complex procurement process. There is often no better way of securing the buy-in of these diverse influencers than a PoC that successfully demonstrates that a deployment from a particular vendor will benefit all of the interested parties concerned.

The PoC process is not always a one-horse race. Asset managers will often invite multiple vendors to design and execute a proof of concept. In my view, asset managers should always be open and honest about how many vendors they are engaging with. After all, when a vendor is preparing a PoC free of charge they are entitled to know how many other firms are in the race. It gets the relationship off to a bad start if the selected vendor later realises that the other competing vendors were kept hidden, but far more importantly, it means that the PoCs will probably be of a higher standard from the asset manager’s perspective.

An area of the asset management world where there is no need for PoCs probably doesn’t exist – and possibly never will. The secret, however, is knowing when the circumstances match the benefits.

Abbey Shasore, CEO, Factbook


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