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In this blog article, Simon Cornwell, co-founder of Vermilion Software, explains why the need for financial firms to know their systems vendors has never been greater.

The principle of Know Your Customer (KYC) has been enshrined in banking and investment management legislation around the world. Few would dispute the need for a business to verify the identity of its clients in order to prevent identity theft, financial fraud, money laundering and the covert financing of terrorist activities. Yet how often do investment managers apply the same rigour to their vendor selection processes?

The need for financial firms to know their systems vendors, applying the same levels of due diligence as they would in order to know their customers, has never been greater as the markets bounce back and improving operational efficiency is once again on the agenda.

Here is a checklist to help ensure that you ‘Know Your Vendor’.

1. Financial stability

This is an obvious question and one that has driven many a systems selection process, especially since the financial crisis. Is the vendor winning deals in your space? If not then this is a point of concern.

2. Product roadmap

Is the vendor truly committed to your market? Is there a credible product roadmap of enhancements covering the next five years? It is crucial for buyers to consider the level of investment that the vendor has committed to the particular product that you are considering. This criterion is much harder to determine than financial stability, but it is of equal importance. Delve into their commitment to your geography, market sector and technology infrastructure.

3. Understanding your business

Can the vendor talk at the same level as you about your business and the people that you sell to? If the vendor has a deep understanding of your business, they will not only be able to efficiently design and implement the right solution for you, but also help you to establish your Target Operating Model (a key to securing a swift Return on Investment). Pin down the vendor on the amount of time they will devote to working alongside your Operations team before they implement, in order to understand your current and desired future state.

4. Culture

Does the culture of the vendor suit your business? Does the vendor demonstrate a strong consultative sales approach, or is it simply a race to get the client ‘over the line’.

No vendor-client relationship is perfect all of the time, but does the vendor devote time and resource to client service in order to really understand their client’s business and work in partnership (as opposed to an arm’s length client-vendor relationship).

5. Implementation

Although the customer-facing sales and technical teams may impress with their solution design and market knowledge, implementation resources are also critical. Clients need to know who is doing the implementation, and, crucially, does the vendor have its own implementation staff. Consider the broader skillset of the team, the years of experience from which the vendor can draw, the exposure of the implementation team to all asset classes (and recognition of the challenges associated with each).