Citizen developed IT is now a fact of life and needs to be managed alongside traditional core IT systems. A Davies Signals survey on citizen development, undertaken in December 2020, noted 93% of asset managers are developing software solutions outside the IT function primarily to allow investment teams to add their “secret-sauce” – develop new strategies and conduct more sophisticated data analysis. New tools – such as Snowflake and Databricks – are now taking hold in the asset-management industry and are a potential game-changer.
An even more recent Davies Signals survey, undertaken in September 2021, on the adoption of Snowflake by asset managers and owners, found that 50% of respondents use or plan to use Snowflake in the next 12 months. The main rationale (80%) is to access large amounts of data and achieve scalability in terms of compute power; to deliver enhanced analytics and improved investment outcomes.
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Snowflake is a way for citizen developers to get access to data, providing business-enablement outside of the IT function in a safe manner.
Developing ESG solutions is a case in point – how do you design actionable metrics from disparate data sources different methodologies and metrics?
Analysis done on premise would have taken several hours to perform, now takes 10 to 20 minutes on Snowflake, it can be scaled up and down in seconds.
Service and system providers – data vendors, portfolio management systems, middle and back-office service providers now support in-house tooling – extending and simplifying access to APIs, publishing on-demand data at rest, providing access to elastic compute power, enabling tools to be shared within and across teams; all are important steps towards the delivery of robust solutions.
Regulators & Support for Change
Regulators are aware of the risks of use of uncontrolled software tools. Anyone who has been involved in a large-scale change project knows that having to manage numerous legacy citizen developed IT solutions – whether they are spreadsheets or more sophisticated apps – adds complexity, risk and propensity for surprise.
So what does good look like?
There are two key observations from the Davies Signals survey results:
Culture plays a large part in this, with organisational awareness and buy-in to the controls crucial to the success of the risk management framework.
…it was felt that the IT function should be an enabler of citizen-developed IT and needs to evolve to focus on creating operational alpha.
Choosing the appropriate tools is a first step – Snowflake, Databricks, Denodo are currently popular choices. You need to determine whether they should be implemented standalone or combined. You also need to work out how to integrate the new tools with your existing platforms to make the most of your investment.
Understanding and tracking new citizen developed tools as well as legacy business developed tools – how many there are; who the business and technical owners are; how many teams are using them; noting data sources; downstream dependencies; the functions they support; whether there is proper source control provision and level of structured testing processes – is an important starting point. Most asset managers track tools through Operational Risk registers but such tools often don’t capture sufficient information for effective management.
Implementing robust governance structures – ensuring tools align to mandated technology guidelines; undertaking structured testing of solutions when they are released or when there are upstream and/or downstream changes; ensuring tools are constantly reviewed to see if it would make sense to migrate capability onto core systems or retain in-house IP and agile development.
Managing key-person dependencies is also important – understanding how many people can support, or on-develop tools; making sure they are sufficiently documented, protecting your IP effectively so your investment does not disappear out the door if the originator leaves.
Ensuring your data strategy supports citizen development – determining the correct sources of each data class must be known and accessible; ensuring your data platform is flexible enough to support new sources and types of data; controlling and tracking data usage to ensure there are no nasty surprises when data vendors audit your alignment with licenses.
Ultimately regulators and senior managers are looking to ensure firms have mature technology & data functions in place whether IT solutions come from business or technology teams doesn’t matter; a mature function needs to ensure that risks are understood and are being actively managed.
We provide advisory and delivery services to asset owners and asset managers covering operating model design, data strategy, system selection and implementation. For an informal discussion about how we can help you address the challenges of Citizen Developed IT, please contact us using the form below.
