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About Clearwater analytics
Clearwater Analytics, founded in 2004, is one of the leading providers of SaaS solutions for automated investment data aggregation, alignment, accounting and reporting. Martin Wallmann has been Managing Director for Germany, Austria and Switzerland since July 1, 2021. His visions of the future are part of the company’s growth strategy in continental Europe and now also in Germany. On a daily basis, the Clearwater platform generates data and reports for client assets amounting to EUR 5.5 trillion.
The cost pressure in the area of financial services is noticeable; scalability and automation are becoming more and more important
Hello Mr. Wallmann, we are very pleased to talk with you. What role does Software-as-a-Service (SaaS) play on this path?
We believe that SaaS adoption will continue to increase, especially in financial services. The data volumes which companies have to manage are continuously increasing. Since technology is advancing more and more, the underpinning data lineage and fidelity becomes harder to maintain.
Clients of SaaS solutions not only receive a finished output, even more importantly they can outsource the work required to produce the output. With that, SaaS solutions eliminate the need for clients to manage underlying infrastructures, i.e. servers, software licenses, release planning, cyber security aspects, as well as the underlying headcount allocated to these tasks. Ultimately, the burden of ensuring that the latest technology and architecture are used at all times shifts from clients to the providers. Providers can scale their business and offer their infrastructure to a large number of clients. Therefore, they have a much better business case to justify continuous investment into their infrastructure.
Taking the insurance segment as an example: increasing data requirements combined with new reporting requirements and client expectations have created waves of challenges. At the same time, these challenges have created opportunities for the insurers not only to meet increased requirements, but also to improve their entire operating models by ultimately automating processes that help them disclose all required financial information in a timely and accurate manner.
Clearwater’s SaaS solution helps the insurance companies to respond to all these challenges by providing a single-instance multi-tenant platform solution that provides such timely and accurate accounting data and regulatory reporting and supports client-specific requirements.
Automating investment data
Clearwater Analytics specializes in automating investment data. In your opinion, what makes this market segment so exciting?
To date, investment data is an area that has generated multiple touch points. These stretch across different, often disparate technological systems for multiple internal and external parties involved in the process – to the extent that the investment data tends to lose its lineage and fidelity. For insurance and investment management firms, the cost burden of ensuring data lineage and fidelity increases over time, and this has an associated market reputation risk – from an end customer or fiduciary (duty of care) point of view.
Clearwater provides a single technology platform for all investment accounting processes that uses a single data model underpinned by a single global team through a managed service. What we find particularly exciting is that our technology allows us to be the single source of truth for data aggregation and dissemination, so we radically simplify investment data management for our clients. As such, we can make a real difference in the daily life of our clients and across their value chain.
In business environments, we simplify workflows and we facilitate more interesting job profiles, as we automate and remove a lot of the manual work. In the rare event of extreme scenarios like market turmoil, we enable decision-makers to assess the risk exposure of their portfolios instantaneously, and take a corrective course of action immediately. This would not have been possible with legacy technology.
Does this mean that SaaS also has a strategic component in the area of investment data?
Yes, we absolutely support the view that SaaS has a strategic component in the area of investment data for a number of reasons, some of which we have already touched upon.
Most importantly, by using a SaaS provider, companies can focus entirely on core business activities since they are no longer tasked with the maintenance of their software and related infrastructure. Secondly, the application’s source code is the same for all clients. Therefore, when new features or functionalities are released, they are rolled out to all clients. As a consequence, there is no need to develop bespoke solutions for individual clients. Against this background, SaaS is a driver for standardized market driven functionality. Thirdly, companies can integrate SaaS applications easily within their digital ecosystem through application programming interfaces (API), which ultimately means that SaaS becomes a driver for the Internet of Things (IoT).
This list is certainly not exhaustive, but it highlights a few of the key reasons that will apply to most, if not all users of SaaS solutions. Depending on use cases of individual clients, there may be additional reasons.
How do you think the market will change in the next few years?
At the moment, the whole industry is going through a transition phase, where numerous providers still offer solutions that are advertised as cloud-based SaaS solutions, when in fact they are hosted infrastructures and as such are much closer to traditional ASP / FSP models.
From the perspective of institutional investors – it is worth mentioning insurance companies here again – and as an exemplary illustration of a driver for change, IFRS 9 will come into effect as of 01.01.2023 and will, in direct comparison with the analogous period starting on 01.01.2022, represent a major shift in the insurance industry. It will have a significant impact on processes and organization throughout the front-to-back investment value chain. Drivers like these will continue to act as catalysts for companies, prompting them to reconsider their traditional models and take a really close look at the options that are available.
Precisely such analyses will in all likelihood lead to a new evaluation of the different options available in the market. It will become apparent that various models may look similar to “true” cloud SaaS solutions, but that at a closer look they cannot generate qualitative or economic benefits to the same extent for clients. As a result, certain models may become cost-prohibitive for the clients, and even for the providers themselves.
What role does client centricity play in this?
No doubt client centricity is key, however it is not an end in itself but a means to an end. To become truly client centric, providers will have to make their clients’ problems the drivers of their own R&D and create solutions that address a broad and pressing demand.
Providers in this space need to understand how institutional investors, whether they are insurers, pension funds or corporates, are challenged by the combination of increasing requirements and legacy infrastructures, and then offer solutions that address these issues by re-simplifying clients’ daily lives while lowering costs. In asset management, with similar issues in the background, clients are challenged by fragmented operating models that urgently require streamlining and automation to ultimately improve the client experience and drive both client retention and business growth.
An organization that starts with the client in mind, will be client centric by nature – and achieve not only longer term client relationships but also sustainable growth.
Thank you very much for the interview!