4. Choosing your vendors on cost vs. substance. When outsourcing IT projects or services, don’t base your choice solely on costs. Get references and talk to funds that have implemented similar systems/services successfully. Cutting costs can result in back-end fees, reduced functionality, less support than expected, etc… Key things to ask include: did the IT provider deliver on time, what issues did they encounter, and how did they respond when things didn’t go according to plan?
5. Being unaware of the technology that makes your business run. Often hedge funds can’t identify their mission critical systems and applications. They may know they need e-mail and access to their order management system but rarely know that their trader is using a locally saved spreadsheet that is critical for their day-to-day tasks. Make sure you know your employees and understand the technology they are using. If it is important to their work process, ensure it gets backed up and others know how to use it.
6. Not understanding the difference between backup, business continuity and disaster recovery. A lot of people get these terms confused, which is costly when data is lost or unavailable. Backup is the process of copying your data and having the ability to restore it in case data is lost or becomes corrupt. Business Continuity refers to the plans, policies and procedures your fund has in place in case a disaster happens. Disaster recovery is a group of technologies and solutions that ensure your critical systems remain available during a significant outage. A well-prepared fund should have all three.
7. Lack of procedure and systems documentation. Very few funds document their technology solutions. This can be a critical mistake if you lose a key employee who understood the ins-and-outs of a particular system, or if a relationship with a key vendor sours. Make sure every IT project is well documented and that you retain a copy of the documentation for your records.
8. Making the wrong call on outsource vs. in-house. While there is no clear answer to the question what to outsource and when, rule of thumb says: Keep your core competencies and what differentiates you from your competition in-house. Outsource the rest. For example, systems like e-mail and compliance solutions have been commoditized. There are very few scenarios where it makes sense to keep them in-house. Your proprietary research database, models, etc., should be kept close and not fully outsourced.
9. Under training your staff. You can spend a lot of money on quality technology solutions. If your people don’t know how to fully utilize or support those systems, then they will wither on the vine. When implementing a new solution, get the most functionality you can from the system by training your staff. This is key for user acceptance and the project’s success.
10. Keeping old desktop, workstations and laptops. Best practice says to replace a third of your systems every year. This way you can always have a planned budget for these systems and never get stuck having to replace everything in one year. Support costs increase and productivity will likely decrease as your equipment ages – its performance will drag and require more attention.