However, despite the manifold benefits of cloud-based outsourcing, some sectors have proved largely immune to its charms. One such is the investment management sector, where the majority of firms have long eschewed outsourcing their data management requirements.

Perhaps looking to maintain control of their data, these firms instead find themselves burdened with complex and costly ‘defensive’ data tasks, such as data quality assurance, standardisation, and validation. By and large, the approach taken by such firms is to invest in ETL tools, data warehouses, and enterprise data management systems – an approach that hampers agility and leads to rapid cost inflation.

Outsourcing momentum gathers pace

Finally, however, things are beginning to change. Every year, RIMES runs a survey of buy-side firms, with the aim of uncovering some of the trends driving data management in the space. This year, our survey found that three times as many firms are planning to outsource data management compared to last year. These findings are supported by other surveys, such as one by Northern Trust, which found that nearly half of global asset management firms are considering data management outsourcing.

From the conversations I’ve had with clients, one of the reasons data management outsourcing is increasingly in vogue is because firms are looking to do much more with their data. In the past, it was easy to relegate data management to the back-office, because it only really served back-office functions. Conversely today, firms are looking at how they can use data to enable and optimise middle, second line and front-office functions.

Such offensive data strategies seek to turn data into a competitive differentiator, but they only become possible when a good defensive data strategy is already in place. The danger is that as companies invest in offensive capabilities, they overlook the necessary operational data foundation. If this happens, firms may find that their investments fail to deliver as expected across scope, timelines, and cost.

A strong data foundation

This is where outsourcing comes into its own. By outsourcing the complex and non-core data sourcing, mastering, and governance processes that lie at the heart of defensive data strategies, firms can focus on the value-adding offensive capabilities that are core to their businesses and which help them generate alpha. Viewed this way, outsourcing data management becomes a foundation for the successful commercial exploitation of that data.

Within this overarching driver, there are a several other benefits that are coming together to make a compelling case for data outsourcing. These include:

Bridging the data skills gap – Data expertise is in short supply and is becoming more expensive to acquire as data management shifts from being a processing-centric task to one focused on business enablement. Managed data services provide on-demand access to the expertise and resources firms now need to thrive.

Lower cost of ownership – Outsourcers can leverage economies of scale to help reduce the cost of data management. By helping create a single unified data operation they can also ensure against the duplication of data licenses (our survey revealed that managing data license costs is still one of the most important priorities of firms). When underpinned by stringent SLAs these cost benefits become even more compelling for firms.

Greater commercial control and visibility – Finally, managed data services can help firms bring order to data management practices that can be unwieldly. Often, business users will use data in siloes, which can create governance issues and drive up costs. By taking data management as a service, firms can overcome this complexity and ensure one single, well-governed data framework is in place. What’s more, as outsourced services can be bought and paid for on consumption-based modelling, firms can easily scale their data according to need.

Cloud-based outsourcing has already transformed the way businesses operate in a large number of industries. The investment management sector is now undergoing its own transformation. Over the medium-term, the sector will become increasingly data-driven, and firms will secure or lose market share based on their data strategies and the operational insights and business models that their data enables.

As a first step, firms need to get their data management in order and secure a complete, accurate and timely source of data for all their operational needs. Clearly, taking this data as a managed service is making more and more sense. 

Andrew Barnett is the global head of product management at RIMES 

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In a recent interview with the consultancy firm China Venture, the CEO of a beloved Inner Mongolian food chain vented at the government, in particular criticizing a mandate that companies continue to pay their employees a full salary during the coronavirus public health crisis. Jiǎ Guólóng 贾国龙, the CEO of Xībèi 西贝, said he only had three months’ worth of cash to spare — and feared that smaller firms have even less breathing room. He blamed the government and called on authorities to step in and ease the pressure.

This article was on WeChat for half a day and went super viral (100,000-plus shares — WeChat doesn’t give data above that number) before being deleted from the platform. But it can still be found on the China Venture website.

Xibei restaurant’s Jia Guolong: The epidemic has left more than 20,000 workers in limbo; even taking out loans to pay salaries, Xibei won’t last three months

During China Venture’s exclusive interview with Mr. Jia Guolong, Chairman of Xibei Restaurant, which has more than 400 Xibei Oat Noodle Village restaurants in more than 60 cities throughout the country, he expressed that at present, 400 of Xibei’s shops were basically closed, only leaving 100-odd shops to handle the takeout business. He estimated that in the month around the Spring Festival, Xibei would lose about 700 to 800 million yuan ($100 million to $115 million) in revenue.

What worries Jia Guolong even more is that right now more than 20,000 employees are waiting for work, but in line with national policy regulations, Xibei must continue to pay out salaries, forking out about 150 million yuan ($21.5 million) per month. Supposing that the epidemic situation does not come under effective control in a short time, the cash that Xibei has on hand will not last three months.

“Within this industry, our life still isn’t too bad, so what about those who aren’t doing so well? We can take on a loan, tighten our belts, and give out three months of salary, but what about other brands and what about other industries?” Jia Guolong says. “You must know that 30 or 40 million people are employed in the F&B industry. If these people become society’s burden, what will that look like?”

Jia Guolong believes that employee expenses, which take up 30% of company costs, are the biggest issue deciding whether the business will live or die in the current epidemic. On one hand, he took initiative in expressing the need for the business to assume responsibility by supporting its employees, and on the other hand, he urgently hoped that the country will offer support by way of policies as soon as possible, such as tax reductions or exemptions, subsidies for employee salaries, and so on, so that responsible enterprises will not suffer.

On January 31, China Venture had an exclusive interview with Xibei Restaurant Chairman Mr. Jia Guolong, the content of which is below.

More than 20,000 employees waiting for work

ChinaVenture: Right now, are Xibei’s shops still in operation?

Jia Guolong: Xibei has 400 shops and more than 20,000 workers in over 60 cities throughout the country. Right now, dine-in restaurants have all basically stopped, and only a small portion of shops, such as those in large cities like Beijing, Shanghai, Guangzhou, and Shenzhen, are staying active to handle take-out orders. But the take-out order volume is extremely small, and is only reaching about 5% to 10% of ordinary revenue.

Our earliest closures started in Wuhan, where we have nine shops. After that, we started to close shops one by one in Beijing, Shanghai, Guangzhou, and Shenzhen, with closures then spreading to the entire country. Now, even our takeout stores in Inner Mongolia have been closed due to government enforcement.

But after closing, our employees are still staying in dormitories, which is an entire other problem.

CV: How many employees are there in dormitories?

JGL: Right now, more than 10,000 employees are in dormitories, and we have to take care of their food, residence, and safety, and also make sure they are in a good mood. Not running all over, not being infected by other people, and also not allowing oneself to become a source of transmission.

On the other hand, we have more than 10,000 workers at home. Right after we suspended operations, there was a portion of employees who chose to return home. Once they’re home, we still have to care about their psychological condition.

CV: What’s the current mental state among employees?

JGL: Right now, still normal. Every day we have good food and drinks, we organize study sessions, and we organize entertainment within a limited scope; there’s no big problem. But as time goes on, who knows?

CV: Nowadays, all of society is in short supply of masks and other protective equipment. Xibei has over 10,000 workers in dormitories — is there sufficient protective equipment?

JGL: We were quick to act and stored a batch, enough to use. We have a specialized logistics department, which buys speedily, even if at a high price. You have to know that some of this batch was [sold] at a high price, with one N95 mask costing more than 30 yuan ($4.30), so this division spent several million RMB.

Cash flow can’t cover three months’ salary

CV: The Spring Festival holiday period is traditionally peak season for the F&B industry. Based on the business situation of previous years, what would Xibei’s revenue be during the Spring Festival period?

JGL: I think it should be 700 or 800 million RMB ($100 million to $115 million) this month. Now, 700 or 800 million RMB of business has suddenly become zero, and even with no revenue, you still incur expenses.

CV: What are the main costs involved?

JGL: Within our cost structure, raw materials take up 30%, but these are equivalent to money, and are not losses. Aggregate labor costs take up 30%, which is the actual big issue. Of the remaining, rent takes up 10%, and with no operations it doesn’t need to be paid. And then taxes take up about 6% to 8%.

After counting everything out, the single biggest variable is manpower costs. But national policy stipulates that these people must all be salaried during vacation, which we recognize, and as a responsible brand, we also feel that we should be good to our employees.

But even if this is no problem in the short term, in the long term it can’t be endured. In one month, we give out 156 million RMB ($22 million) in salary, so two months is more than 300 million ($43 million), and three months is 450 million ($65 million). What kind of enterprise stores up such a huge cash flow?

CV: How much cash does Xibei have in its accounts right now? If the situation does not improve in the short term, how long can you hang on?

JGL: Our cash flow is in accordance with the limit of salaries that we have to distribute. Right now we have not taken on many loans, but even if we take on loans to pay out salaries, I feel we won’t be able to hold on for more than three months.

Before Chinese New Year, we finished paying for goods and gave out bonuses. We didn’t keep much cash on hand because we knew that every year, Chinese New Year is a peak period for business and cash flow would immediately return. We had so much inventory, once sold, wouldn’t it all become cash? Then we can pay salaries and enter the cycle again.

Now things have ground to a halt — suddenly business has stopped, everything has stopped, but staff expenditures cannot be stopped. Shouldn’t that leave one stunned?

When we weren’t in crisis, we were pretty bullish, even saying that we weren’t short of money and that our cash flow was enough. With the crisis here, suddenly we found that our cash flow just can’t keep us afloat, and in one, two, three months will be completely squandered.

We used to say that “when the business grows, the cash flows,” no financing needed, no funds needed. Whatever loans and such the bank gave us, we would be unable to finish using them, and whatever credit was extended, we would use only half. Now we’re discovering that we can’t make it. Once the bills are counted up, really, we can’t even bear it for three months.

Within this industry, our life still isn’t too bad, but what about those who aren’t doing so well? We can take on a loan, tighten our belts, and give out three months of salary, but what about other brands and what about other industries? Forget about it, I also won’t pay out salaries, how about I dissolve the company? [They can only] retrench employees.

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