Buy vs. Build: Investment Process Infrastructure

Updated: Feb 11


The EDS Analytics Platform has created a world where fundamental investors can leverage technology to improve the probability of success. Workflows become more consistent and transparent. Teams are more productive. You have a feedback loop, so you know what "high conviction" means and you are continuously improving the investment process


But what if you have quantitative/software personnel in-house or are thinking of building it yourself?


Then the question becomes Build vs. Buy. Of course, the rational for "Build" is straightforward - if we have the resources, and we view it as a competitive advantage, shouldn't we just build it internally?


But the answer is less so and buying may be a better option.


When Could Buying be a Better Solution?

  • A Decision-Support & Analytics platform already exists and has many of the functions the organization needs. Remember, building platform is a multi-disciplinary exercise requiring several unique resources, such as software development, user-interface design, fundamental and quantitative domain knowledge, and IT resources to support, train and evolve.

  • The platform is flexible and can be configured to the needs of the organization.

  • The platform is debugged, is easy to deploy, and customers are not locked in for an extended period of time.

  • The vendor can provide training, manuals, and ongoing support.

  • Benefits - Allows in-house quant teams to focus on creating winning investment strategies, not building, training and supporting a software platform.

  • Benefits - The provider is iterating and advancing the product on a regular basis

  • Benefits - Buying also allows you to deploy at a much quicker pace, accruing benefits now, versus the added cost and length of time it takes to build internally.


Mark Lutchen, former Global CIO at PwC has this to say on the topic:


"When evaluating whether to buy or build, it's critical to thoroughly understand total costs during the software lifecycle which is typically seven or eight years. This step is important, Lutchen says, because 70 percent of software costs occur after implementation. A rigorous lifecycle analysis that realistically estimates ongoing maintenance by in-house developers often tips the balance in favor of buying."


Is Building an Internal Platform Really a Competitive Advantage?


The majority of investment process platforms are custom built, thus are very expensive and time consuming to build, evolve and support - the message from this small community is that these platforms are a key determinant of out-performance and a unique internal competitive advantage. However, at EDS we believe it is not the platform itself that is important, but how you use it, and the decisions it enables. Today, EDS is helping all types of fundamental investors leverage technology to drive continuous investment process improvement - through a lightening fast, configurable, intuitive, and affordable investment process platform without the high cost and complexity of custom built solutions.

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