Posted July 14, 2017 by Luke Nardella
The unfortunate irony of technology is that it’s simplified the way members manage their superannuation, but made life far more complex for funds. Thankfully, there’s a technology model that might just change that.
The operating capabilities of today’s superannuation funds – their ability to meet customer needs, compete, grow and even survive – have become almost wholly dependent on technology. Despite, this, many funds are struggling to keep up with the pace of technological change and, as a result, face an uncertain future.
In their fight for sustainable growth and a competitive edge, super funds are facing three challenging conflicts:
Despite the promise of technology, these issues and conflicts are exacerbated by the cumbersome systems driving many super funds today. Many funds are operating with out-of-date, fragmented systems that are difficult to evolve: systems that tend to embed complexity rather than reduce it. But, as much as they would like to, funds are limited in their ability to update these systems due to the high cost, risk and disruption involved.
In the past, many funds have turned to third-party administration (TPA) providers to overcome the challenge of insourced systems. Today, an estimated 42% of superannuation funds outsource their back-office administration to a third-party provider, with just two providers collectively servicing 40% of the outsourced market.
In many ways, TPA was a smart option to the challenges of insourced IT. It removed many of the challenges related to managing complex IT infrastructures and provided a workable end-to-end approach to superannuation delivery.
However, TPA models create their own issues as well:
Now there’s a third way to build technological capability – Technology as a Service, or TaaS. TaaS creates a new opportunity for super funds to take control of their operations, customer experience and future.
TaaS is an IT supply model that allows super funds to access their core technological capabilities on-demand via the cloud, rather than as installed systems. By way of example, DST can work in partnership with super funds to help them understand the benefits and practicalities of end-to-end super capability as a service. This includes, as needed, cloud access to:
There are four things that set TaaS apart from other, more traditional, IT vendor models:
Technology as a Service creates an exciting new opportunity for superannuation funds. On the one hand, it gives them the ability to stay ahead of the game without the traditional risks, complexity and cost of traditional insourced IT models. On the other, it gives them the flexibility to be agile, innovative and differentiated, unlike the third-party administrator model.
TaaS also paves the way for far more ‘future-fit’ funds: funds that can leverage new ways of doing business as and when they arise. The second part of this series will explore these opportunities, including a new hybrid super fund operating model and the opportunities created by open APIs.
The views expressed in this publication are solely those of the author and do not necessarily reflect the position or policy of DST Systems, Inc. or its affiliates, subsidiaries, joint ventures, officers, directors, or management.
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