Technology underpinning rapid change

Australia’s superannuation fund members seem to have precious little to complain about at the moment. With strong investment returns and positive legislative change, those approaching retirement should find themselves well placed. But while investment returns and ‘simpler super’ have taken the limelight recently, it is technology that has enabled industry growth.

According to Steven Zacharidis, product manager for Composer architect InfoComp, technology providers to the super industry have ticked many of their clients’ boxes, but there is still room for improvement.

“At the moment, there is a drive within the industry to lower administration costs,” he said. “And the administration platform should be at the forefront of this.

“For providers, this should take the form of efficient systems processing across their entire member base, self help facilities for members, straight through processing (STP) of transactions, workflow applications and imaging facilities.”

Iain Dunstan, chief executive officer of Bravura, looks at things more broadly.

“I think the big thing happening to the super industry is the move to service oriented architecture (SOA),” he said. “I don’t believe it’s available yet, but the major players are certainly working on it. Super has always been a service business and recognition of that is becoming more widespread, and any movement in a service oriented direction will bring with it big cost savings and efficiency gains.”

For Robert Gould, managing director and chief executive officer of Financial Synergy, the main challenge currently faced by technology providers relates to the existence of two distinct customer segments in the marketplace.

“Firstly, there’s the larger end of town,” he said. “That includes the banks, insurance companies and, for us, customers like SuperPartners. In this area, we’re covering off those operations they do not already have — automation, receipting of paper, contributions and so on.

“On the other hand, there are also those customers looking for fully integrated solutions,” continued Gould. “These are clients looking to technology providers to do almost everything for them. In the main, we’re talking about the basics of transactions and web interfaces, and it is in these areas that we’ve seen a lot of work being done over the last 18 months.”

However, despite the fact that technology providers to the super industry currently seem to have a split focus, it seems clear that everyone is aiming for one thing: efficiency.

Gould points out that the best efficiency and dollar savings for super funds were always going to come from streamlining business processes and using technology providers to aid in the process. But he said the web is a good place to start.

“As it stands, pushing clients towards the web for super funds is still a long way from what the banks have achieved with internet banking,” he said. “But fund investment into web services always forms a close link with reducing costs.

“Unfortunately, it seems the focus for super funds is still on the business processes alone and not the technology,” said Gould. “But if funds set their sights on working with their technology providers to improve business processes then that is where the big savings are to be found.”

It is not a matter of small change for Dunstan either.

“The super industry is already an efficient industry dealing with large volumes and utilising a great deal of outsourcing, but technology is getting much older. Funds are now getting close to squeezing the last drops of efficiency out of their existing systems, but there’s only so much you can do, particularly when getting that little bit more is becoming increasingly expensive.”

Dunstan said the time for major upgrades was fast approaching.

“Because of its scale, a move to SOA has got to be the next step,” he said.

And if super funds want proof that searching for efficiency in overall business processes works, Gould said they needed to look no further than Choice of Fund.

“Even though we didn’t see a lot of member movement following Choice of Fund, it’s become apparent that people changing jobs are wanting to stay where they are,” he said. “Funds are now having to deal with a lot more employers and I think it has become clear that those that have done something about it with respect to their technology have maintained efficiency.”

In real terms, Gould said that the bulk of the transactions for super funds would always take the form of contributions receipting and benefits payments.

“This is where the payoff is greatest,” he said. “We can take a transaction that used to take a day to complete and reduce that time to minutes. The differences can get very large and our customers are generally astounded by the improvement.”

Unfortunately, efficiency is not the only quality demanded of technology by the super industry. Flexibility is a fact of life in this industry and the ‘simpler super’ regime is proof that platforms must be able to roll with the punches.

Looking at legislative change specifically, Zacharidis said that the InfoComp response had been the creation of a legislative group that was effectively a forum in which legislative changes and compliance could be driven though.

“We always try to get our clients to buy into the same approach but, unfortunately, the ‘one change fits all’ approach doesn’t always suit our clients,” he said. “At this point, we develop alternative solutions and parameterise the change, so, depending on our client and their needs, they can configure Composer to act the way they want it to.”

For Dunstan and Gould, flexibility is something already being built into their platforms.

“‘Simpler super’ was certainly a big development for technology providers as well, but I think everybody coped pretty well,” said Dunstan. “There weren’t any disasters or big issues that we saw.

“The Australian super industry is a pretty mature one and is used to coping with change, and I think the way ‘simpler super’ was handled reflected this.”

Of course, while efficiency and flexibility might be the light at the end of the tunnel for super funds with properly integrated technology, the fact remains that for various reasons legacy systems remain for many funds. Consequently, the disturbance proposed by integration of new technology makes the decision to upgrade a hard one.

Gould admitted that it would always be a challenge.

“For those with their own business process solutions, it’s about looking at what needs to be replaced and then looking at integration,” he said. “The main issue is always to look at what the client wants to be their business process and then we can deliver the solution that is right for them. Quite often, it turns out to be an argument between user happiness in terms of the systems staff are already acquainted with and the decreased costs and efficiency that can be gained from changing over.”

Dunstan and Zacharidis stated that like any big decision a lot of the challenge in upgrading to new technology lay in planning. But both added that SOA was something that the entire industry had to come to terms with.

“One of the biggest issues funds with old legacy systems face is that these systems either do not allow for easy integration or do not allow for STP because of the way they have been architected,” said Zacharidis. “Whilst a financial institution should never select a system on technology alone, one of the questions that needs to be asked is whether the system can integrate easily and cost effectively.

“The advent of SOA provides funds with a cost efficient method of integrating systems with significantly reduced risk. In our case, Composer catered for this with the introduction 12 months ago of the Composer Business Integration Server (CBIS), with Composer clients now having a central platform for integration with other systems.”

Gould pointed out that technology, by definition, was a 10-year decision.

“Generally, we find that mid sized funds prefer that their technology does more for them, larger players want best of breed and, so, may wish to utilise a specific piece of accounting software or similar, and smaller funds live without things,” he said. “Financial Synergy isn’t trying to be every solution that a fund needs, but we do see a reluctance to make large change.

“It is, after all, a long-term decision and is, therefore, difficult to make.”

Despite consolidation within the technology industry to mirror that within superannuation, Zacharidis points out that boutique providers are still out there.

“I believe there is always a place for a boutique provider,” said Zacharidis. “It really comes down to the financial institution and the weighting they place on risk management and the financial stability of their provider. From there, it comes down to the role the application plays.”

Alternatively, while Dunstan said space might remain for providers of niche services, his belief was that the strong would get stronger.

“You’ve got to look at the efficiencies of scale,” he said. “Boutiques may survive, but, as with many things, the middle is nowhere to be seen and I think you’ll find that, as we’ve seen already, the strong will get stronger and midsize players will get squeezed out.”

For various reasons, it seems that irrespective of provider, the technology industry is indicating that super funds should prepare themselves for change and, for many, ‘simpler super’ has probably constituted the first step towards that.

“There’s no doubt that the revenue funds currently find themselves with, largely due to impressive returns and the inflows following ‘simpler super’, have put the industry in a very good position,” said Gould. “And it has also enabled funds to look at providing their customers with a greater range of services and options.

“SuperPartners, for instance, has gone from four to 20 products in the last few years, and super funds across the board now provide this kind of scope.”

Looking ahead, Dunstan said that the blip on the radar for technology providers moving forward would be a market downturn.

“In ideal times, everyone is well funded,” he said. “It is during these kinds of upswings that the focus can be on new products and marketing. But when things tighten up, the focus comes back to back-office costs, and that puts us as technology providers firmly in the spotlight.”

Gould said the possibility of less buoyant returns would be a test for not only super funds themselves, but for technology providers as well.

“People are seeing their super as an investment vehicle now and have a much greater interest in their investment outcomes,” he said. “So when times are tough and member service comes to the fore, then we as technology providers have got to offer a great deal more.” SR