The asset management industry faces unprecedented pressure from evolving client expectations, intensifying regulatory demands, and the relentless need for operational efficiency. In this dynamic environment, technology is no longer a peripheral support function but a core strategic enabler.
Asset management firms, including hedge funds, private equity, venture capital, family offices, and boutique managers, are confronted with a critical decision regarding their technology infrastructure: should they build bespoke software solutions in-house or buy specialised, market-ready platforms?
This whitepaper provides a comprehensive framework for evaluating this “Build vs. Buy” dilemma. The analysis delves into the crucial factors that must underpin this decision: the total cost of ownership (TCO), encompassing both upfront and hidden costs; the time-to-value, measuring speed and agility in deployment; the trade-offs between deep customisation and platform configuration; the long-term implications of maintenance, support, and future-proofing; the non-negotiable requirements of security and regulatory compliance; and the strategic alignment of resources with core competencies.
While building offers the allure of complete control, the evaluation consistently reveals that buying often presents a more compelling case for many firms. Purchasing established platforms typically delivers superior speed-to-market, potentially lower and more predictable TCO, reduced operational and compliance risks, and immediate access to specialised expertise and ongoing innovation.
This advantage is particularly pronounced for complex, highly regulated, or specialised functions critical to asset management, such as Investment Policy Statement (IPS) creation and management, and Strategic and Tactical Asset Allocation (SAA/TAA). Platforms purpose-built for these functions, exemplified by solutions like Acclimetry, offer integrated workflows, robust features, and compliance support that are challenging and costly to replicate internally.
This guide aims to equip asset management leaders with the insights needed to navigate this pivotal technology decision and chart a course for sustainable growth and competitive advantage.
The landscape for asset management firms is undergoing a profound transformation. Clients increasingly demand greater transparency, personalised service, and seamless digital interaction capabilities, mirroring experiences from other sectors. Simultaneously, regulatory bodies worldwide are intensifying scrutiny, imposing complex compliance requirements related to data privacy, financial crime prevention, and operational resilience.
Compounding these pressures are persistent fee compression and a challenging growth environment, demanding unprecedented levels of operational efficiency and cost management. Firms relying on outdated legacy systems or manual processes, such as spreadsheets for critical functions, face significant operational drag and risk.
In this context, technology transcends its traditional role as a mere cost centre. It has become a fundamental pillar of competitive strategy, essential for enhancing the client experience, acquiring and retaining assets, managing risk effectively, enabling data-driven decision-making, and ensuring regulatory adherence. The failure to modernise technology infrastructure is not just an operational inefficiency; it poses a significant threat to a firm’s long-term viability and growth prospects, especially as competitors leverage advanced platforms.
At the heart of this technological evolution lies the fundamental “Build vs. Buy” decision regarding core software systems. This is not merely an IT procurement exercise but a pivotal strategic choice with far-reaching implications for resource allocation, operational agility, financial performance, and the firm’s ability to focus on its core competencies. The accelerating pace of technological innovation, particularly in areas like artificial intelligence (AI), advanced analytics, and cloud computing, alongside rapidly shifting market demands and regulatory landscapes, makes this decision more critical and time-sensitive than ever before.
Making the right choice, whether to invest significant internal resources in developing proprietary tools or to leverage the specialised expertise embedded in third-party platforms, is paramount for navigating the future of asset management successfully.
Making an informed build vs. buy decision requires a rigorous evaluation across several critical dimensions. Moving beyond superficial comparisons necessitates a deep dive into the true costs, timelines, functional fit, long-term sustainability, compliance implications, and strategic alignment associated with each path.
A common pitfall is focusing solely on the initial price tag—the development cost for building or the licence fee for buying. A more accurate assessment demands an analysis of the Total Cost of Ownership (TCO) over the expected lifespan of the software, typically 3-5 years or longer.
Building Costs: The TCO for building custom software extends far beyond initial development salaries.
Buying Costs: Purchasing software, typically through a Software-as-a-Service (SaaS) subscription or a perpetual license, presents a different cost structure.
TCO Comparison: Over a multi-year horizon, the TCO profiles differ significantly. Building involves high, often unpredictable, upfront and ongoing costs, heavily influenced by internal execution and hidden factors like technical debt. Buying, particularly via SaaS, typically offers more predictable, albeit recurring, costs.
Break-even analyses suggest that while a simple custom build might reach cost parity with a SaaS solution after several years, more complex builds can take decades, if ever, to become more economical purely on a cost basis. The choice of SaaS licensing model (per-user, usage-based, etc.) is itself a critical factor influencing cost scalability and predictability; a mismatch between the model and the firm’s usage patterns can lead to significant cost inefficiencies, such as paying for unused licences or facing unexpected charges during peak usage. Careful evaluation of these models against projected needs is essential.
Table 1: Comparative Cost Factors – Build vs. Buy
Cost Factor | Build Approach | Buy Approach (SaaS) | Buy Approach (Perpetual) |
Upfront Investment | High (Development) | Low (Subscription Setup) | High (Licence Purchase) |
Infrastructure | High & Ongoing (Server/Cloud) | Included in Subscription | May Require Internal Infra |
Implementation/Migration | N/A (Internal) | Moderate to High (Vendor Fees) | Moderate to High (Vendor Fees) |
Talent Acquisition/Training | High & Ongoing | Lower (User Training) | Lower (User Training) |
Ongoing Maintenance/Support | High & Variable (Internal Team) | Included in Subscription | Moderate (Annual Maintenance Fee) |
Updates/Upgrades | High & Variable (Internal Effort) | Included in Subscription | May Require New Licence Purchase |
Technical Debt Risk | High | Low (Vendor Responsibility) | Low (Vendor Responsibility) |
Scalability Costs | Potentially High (Infra/Refactor) | Predictable (Tier/User Based) | May Require New Licence/Infra |
Potential for Overruns | High | Low (Contracted Pricing) | Low (Contracted Pricing) |
Cost Predictability | Low | High (Recurring) | Moderate (Upfront + Maintenance) |
In the fast-paced financial services industry, time is a critical competitive resource. The speed at which new capabilities can be deployed directly impacts a firm’s ability to seize market opportunities, respond to regulatory changes, improve efficiency, and enhance client satisfaction.
Build: Developing custom software is inherently time-consuming. Projects often span many months, frequently extending to multiple years for complex systems. This lengthy cycle introduces significant risks:
Buy: Purchasing off-the-shelf software offers a dramatically accelerated path to deployment. Implementation timelines are typically measured in weeks or months, not years. This speed translates into several advantages:
The gap in time-to-value between building and buying appears to be widening. Modern fintech solutions increasingly incorporate complex technologies like AI, advanced analytics, and cloud-native architectures. Simultaneously, the vendor landscape has matured, offering sophisticated, configurable platforms. Replicating these advanced features from scratch requires highly specialised skills and significantly more development time compared to configuring and integrating a pre-built, vendor-supported module.
Consequently, for firms needing to address urgent compliance mandates or capitalise on time-sensitive market opportunities (such as those identified through tactical asset allocation analysis ), the extended timeline of a build project often renders it impractical. In such scenarios, the speed advantage of buying becomes the decisive factor, making it the only feasible path forward.
A key consideration is ensuring the software solution aligns with the firm’s specific operational workflows, strategic objectives, and potential needs for competitive differentiation.
Build: The primary appeal of building is the promise of complete control—the ability to tailor software precisely to existing processes and unique requirements. This can potentially lead to the creation of genuinely differentiating capabilities that provide a competitive edge. However, this path requires a deep internal understanding of requirements and carries risks:
Buy: While purchased software might not offer the same level of absolute control, modern platforms provide extensive configuration options, allowing significant tailoring to specific needs without writing custom code. Key considerations when buying include:
The decision is not necessarily a stark binary choice. The increasing prevalence of open architectures, APIs, and microservices enables hybrid approaches. Firms can adopt a strategy of buying robust, foundational platforms for core, non-differentiating functions (like basic infrastructure or standard reporting) and dedicate internal development resources to building only those specific modules or features that provide genuine competitive differentiation (e.g., proprietary algorithms, unique client interfaces).
This “Build on Buy” or “Formula One” approach allows firms to leverage vendor expertise and speed for the essentials while focusing internal efforts on high-value innovation, mitigating the risks associated with both pure build (high cost, slow speed for core tech) and pure buy (potential lack of differentiation).
Furthermore, the perceived need for deep customisation should be critically examined. Often, the desire to replicate existing, potentially inefficient, manual workflows drives the push for custom builds. Opting for a ‘buy’ solution, which may incorporate industry best practices and standardised workflows, could compel the firm to undertake beneficial process re-engineering, ultimately leading to greater efficiency than simply automating legacy procedures. Resistance to change can sometimes mask itself as a requirement for customisation.
The initial deployment is merely the beginning of the software lifecycle. The long-term viability, cost, and effectiveness of a solution depend heavily on ongoing maintenance, support, and the ability to adapt to future needs.
Build: Developing software in-house saddles the firm with the full, ongoing burden of maintenance and evolution:
Buy: Purchasing software shifts much of the maintenance and update responsibility to the vendor:
From a future-proofing perspective, the ‘buy’ approach often holds a distinct advantage for most asset management firms. Vendors typically serve numerous clients, giving them broader visibility into market trends, emerging technologies, and upcoming regulatory shifts. They aggregate feedback and invest significantly in R&D to keep their platforms competitive and compliant.
This collective intelligence and focused investment generally result in more robust and timely updates than a single firm can typically achieve with internal resources dedicated to a custom build. While vendor dependency is a valid concern, the “key person dependency” associated with custom builds can represent a more immediate and potentially catastrophic risk. The sudden departure of a critical internal developer can paralyse a custom system’s maintenance and evolution overnight, whereas issues with a vendor often allow for more lead time to negotiate, plan transitions, or seek alternative solutions.
In the highly regulated financial services sector, robust security and unwavering compliance are not optional; they are fundamental requirements for operation and maintaining trust.
Build: Building software provides complete control over the security architecture and compliance protocols. However, this control comes with immense responsibility and requires deep, specialised, and continuously updated expertise:
Buy: Reputable vendors specialising in financial technology invest heavily in security and compliance as a core part of their value proposition.
For particularly complex or niche compliance functions, such as sophisticated AML transaction monitoring systems or generating highly specific regulatory reports, attempting to build a compliant solution from scratch carries exceptionally high risk. Specialised vendors in these areas often possess deep domain expertise and pre-built rule sets reflecting intricate regulatory requirements, capabilities that are extremely difficult and expensive for a non-specialist firm to replicate and maintain accurately.
Furthermore, regulators and institutional investors are increasingly focusing on the cybersecurity and compliance practices of asset managers, including their oversight of third-party vendors. Therefore, choosing to buy necessitates establishing and maintaining effective vendor risk management programmes, adding a layer of operational complexity and resource requirement to the ‘buy’ decision that should not be underestimated.
The build vs. buy decision has profound strategic implications regarding how a firm allocates its most valuable resources: capital, talent, and management attention.
Build: Embarking on significant in-house software development requires a substantial commitment of resources that might otherwise be directed towards the firm’s primary activities.
Buy: Purchasing software allows firms to leverage external expertise for technology development and maintenance, enabling them to concentrate internal resources on their core mission.
The opportunity cost associated with building software extends beyond the direct financial outlay. It encompasses the strategic cost of diverting leadership focus and scarce, high-value internal resources away from activities that directly drive investment performance and client satisfaction. Unless building proprietary technology is central to the firm’s competitive strategy and differentiation, the strategic argument often favours buying solutions that enable the firm to excel at its core asset management functions.
The decision to build or buy asset management software is complex, with no single answer fitting every firm or every situation. It requires a careful weighing of the factors discussed, considered within the unique context of the firm’s strategy, resources, risk tolerance, and the specific application under review. To guide this critical evaluation, leadership teams should address the following key questions:
Considering these questions may reveal that a hybrid approach—buying foundational elements and building only specific differentiating components—offers the optimal balance for certain needs. The following table summarises the core trade-offs:
Table 2: Build vs. Buy – Pros and Cons Summary
Key Factor | Build Approach | Buy Approach |
Cost Predictability | Low (Variable, Hidden Costs) | High (Predictable Subscriptions/Fees) |
Speed-to-Market | Slow (Months/Years) | Fast (Weeks/Months) |
Customisation Level | High (Tailored Fit) | Moderate (Configuration, APIs) |
Control | High (Full Ownership) | Lower (Vendor Dependent) |
Maintenance Burden | High (Internal Responsibility) | Low (Vendor Responsibility) |
Access to Innovation | Limited (Internal R&D Capacity) | High (Leverages Vendor R&D) |
Compliance Expertise | Required In-House | Leveraged from Vendor (Requires Oversight) |
Strategic Focus | Diverts Resources from Core Business | Allows Focus on Core Business |
Scalability | Can be Complex/Costly | Generally Simpler (Vendor Managed) |
Key Risks | Budget/Time Overruns, Technical Debt, Key Person Risk | Vendor Lock-in, Roadmap Misalignment, Vendor Stability |
Ultimately, the decision requires a strategic assessment tailored to the specific software needs and the firm’s circumstances.
While the build vs. buy framework applies broadly, the argument for buying becomes particularly compelling when considering complex, highly regulated, or standardised yet critical functions inherent to asset management operations. Areas such as Investment Policy Statement (IPS) creation and adherence, along with Strategic and Tactical Asset Allocation (SAA/TAA) modelling and monitoring, exemplify functions where specialised vendor solutions often provide distinct advantages over internal builds or manual processes.
The IPS serves as the foundational document governing the relationship between the asset manager and the client (or internal stakeholders), outlining objectives, risk tolerance, constraints, and allocation guidelines. Asset allocation, driven by the IPS, is the primary determinant of portfolio returns and risk. Effectively managing these processes involves:
Many firms still rely on manual processes involving scattered spreadsheets, Word documents, and disparate systems to manage IPS and asset allocation. This approach is fraught with risks:
Managing IPS and asset allocation effectively is fundamental to upholding fiduciary duty and maintaining client trust. Errors, inconsistencies, or failures in adherence stemming from inadequate tools or processes can have severe consequences beyond mere operational inefficiency; they strike at the core of the manager-client relationship. As portfolios incorporate more sophisticated strategies and alternative assets, the complexity of tracking constraints, monitoring drift, and ensuring policy alignment grows exponentially, making robust, dedicated software less of a luxury and more of a necessity for effective risk management and compliance.
Specialised ‘buy’ solutions designed specifically for IPS and asset allocation management address these challenges directly. They typically offer structured workflows for policy creation and approval, integrated modelling and analysis tools, automated monitoring and alerting for deviations, comprehensive audit trails, and features designed to ensure data consistency and regulatory compliance. By leveraging the focused expertise and technology of specialist vendors, firms can significantly reduce operational risk, enhance efficiency, and ensure greater discipline and transparency in these critical investment processes.
Acclimetry serves as an example of a specialised ‘buy’ solution purpose-built to address the intricate challenges of Investment Policy Statement (IPS) and Asset Allocation management within modern asset management firms. Positioned as an “all-in-one Investment Policy and Asset Allocation management platform,” it is designed to replace the inefficiencies and risks associated with scattered spreadsheets and manual document-based workflows. The platform caters to a diverse range of users, including hedge funds, venture capital, private equity, family offices, and boutique asset managers, acknowledging the unique challenges these firms face, from managing strict mandates to navigating dynamic markets.
Acclimetry offers a suite of integrated functionalities tailored to these core processes:
Acclimetry shows how a specialised ‘buy’ solution can deliver the core advantages discussed earlier: access to tested, purpose-built features; the implicit benefits of vendor support and ongoing updates; significant time savings compared to building internally or managing manually; and a reduction in the operational and compliance risks inherent in less robust approaches.
By providing a dedicated platform for the critical functions of IPS and asset allocation management, solutions like Acclimetry enable firms to instil greater discipline, insight, and control into their investment process, allowing them to focus their primary efforts on generating returns and serving clients rather than building foundational tools.
The platform’s focus on unifying the often-disconnected realms of static policy documents and dynamic allocation monitoring addresses a critical potential compliance and efficiency gap present in many organisations.
Furthermore, its user-friendly design facilitates broader engagement and understanding across different roles (portfolio managers, compliance officers, committee members), fostering better communication and alignment throughout the investment decision-making chain.
The decision between building proprietary asset management software and buying a specialised platform is one of the most critical technology choices facing firms today. It demands a thorough, strategic evaluation that looks beyond initial costs to encompass total cost of ownership, speed-to-value, customisation needs, long-term maintenance, security imperatives, regulatory compliance, and alignment with core business objectives.
While building offers the potential for complete control and unique differentiation, this analysis suggests that for many asset management firms, the ‘buy’ approach presents compelling advantages. Purchasing established solutions often leads to faster deployment, more predictable costs, reduced operational risks, access to specialised vendor expertise, and the benefit of continuous innovation and updates driven by the vendor’s broader market engagement.
These advantages are particularly pronounced for complex, regulated, and mission-critical functions central to asset management. Investment Policy Statement (IPS) management and Strategic/Tactical Asset Allocation (SAA/TAA) stand out as areas where manual processes or generic tools introduce significant inefficiency and risk. Specialised platforms, such as Acclimetry, demonstrate the power of the ‘buy’ approach in these domains, offering unified workflows, robust features, enhanced control, and built-in compliance support that are difficult and costly to replicate effectively in-house. By leveraging such solutions, firms can ensure discipline, transparency, and efficiency in these foundational processes.
Ultimately, the “right” path is not monolithic. The optimal technology strategy likely involves a portfolio approach: strategically choosing to buy best-in-class solutions for standardised or highly complex functions while potentially dedicating internal build resources only to areas offering true, sustainable competitive differentiation. The key lies in conducting a rigorous, context-specific evaluation for each technological need.
Making informed build-versus-buy decisions is crucial for navigating the future of asset management, enabling firms to enhance operational efficiency, manage risk effectively, meet evolving client expectations, and secure a lasting competitive advantage in an increasingly demanding marketplace.