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Software investment projects in financial markets organisations almost always include a ‘buy vs build’ decision: whether to buy – to purchase an off-the-shelf solution from a third-party vendor, or to build – to design and develop proprietary software in house. As there are arguments for and against both approaches, it is not uncommon for this to be one of the harder questions to answer when it comes to introducing or replacing platforms and applications in the financial services. However, a new approach is emerging that combines the advantages of both buy and build strategies by leveraging ready-made components that can accelerate the development of bespoke software; the buy-to-build approach.
By: GreySpark Senior Specialist Jennie Brotherston

Planning projects and implementing new software in large financial organisations can be extremely complex. As well as having to choose a solution that best fits the functional requirements of the project, it is very often the case that there are multiple additional restrictions and requirements imposed on project leads and sponsors. Established vendor relationships in the wider ecosystem of the firm must be considered and approving and onboarding a new vendor partner typically requires a long lead time. Additionally, the software implementation itself – whether bought or built – can be an arduous and drawn-out process confined by governance structures, the architecture already in place and the regulatory environment. Even with an ostensibly simple vendor selection exercise, there is very frequently an internal buy vs build assessment exercise required prior to (or in parallel with) the external vendor comparison process, which adds time and cost to projects. If not handled carefully this decision can divide business and IT teams and lead to frustration from talented (but stretched) resources.

Commoditised ‘off-the-shelf’ solutions are appropriate for many use cases in the financial services industry – for example, where processes are routine and highly standardised – but there are numerous other scenarios where off-the-shelf / ‘buy’ solutions must be supplemented by satellite applications, add-ons or workarounds to cover the full spectrum of functionality required by the financial firm. Indeed, most organisations have a register of these ‘grey tech’ applications – often developed by users themselves – indicating that many business requirements are not adequately met by the software that is currently in place.

The pros and cons of a ‘buy’ approach to software investment tend to mirror those of the ‘build’ approach, as illustrated in Figure 1, meaning that a decision between the two approaches becomes a contentious binary decision. The emergent buy-to-build approach, however, combines the advantages of both ‘build’ and ‘buy’, for firms, ensuring that they can quickly create highly bespoke functionality to meet 100% of business requirements and leverage the third-party expertise and experience of an effective vendor partnership. Vendor products that facilitate the buy-to-build approach often take the form of a flexible software platform that allow client partners to build – or to collaborate with the vendor to build – their own applications using a well-defined framework. In many cases, these buy-to-build vendor products are based around ‘low code’ or ‘no code’ platforms.

Figure 1: An Assessment of the Pros and Cons of Buy and Build Approaches vs an Assessment of the Buy-to-build Approach

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Source: GreySpark analysis

The LCNC Platform Development Approach

The benefits of a successful LCNC platform implementation can be manifold and significant. For example, time to production and speed of development is one of the most significant selling points of the LCNC approach. It is often possible to develop new applications using a LCNC platform in a matter of days or weeks, rather than the months or years it would take using more a traditional development approach. LCNC platforms offer a well governed project framework that facilitates fail-fast agile delivery – or, in other words, the ability to ‘pivot’ and make corrections or fix bugs at pace during development.

Resource optimisation is key to all efficient project deliveries and low-code platforms can empower developers to optimise their efforts. Using prebuilt ‘building blocks’ for commonly needed repeatable components, developers can prioritise their time and skills on the more complex and bespoke functionalities. Consequently, scarce developer resources are more efficiently used by businesses. Better efficiency of development teams is a theme running across LCNC, in that they can incorporate intelligent features that lead to a reduction of errors, such as automated in-line documentation and intelligent code completion tools that can reduce syntactic and typographical errors. Additionally, a reduction in one-off coding, through use and reuse of the extensively tried and tested pre-built components, can result in fewer bugs as well as more efficient development.

Some no-code platforms have the potential to allow development by non-developers, where technically minded users without extensive development skills can build simple applications on a robust platform. This can be particularly effective when used in tandem with a low-code approach, where the no-code platform is utilised to build applications to a certain point, which can then be handed to experienced developers who use low-code to flesh them out with more advanced features. If this is well managed, the result is the elimination of grey tech, since building within the platform is possible for a broad spectrum of people.

On the other hand, there are also potential risks involved with LCNC development, over and above those that might be seen using a more traditional approach. Low visibility of the code underlying the pre-made building blocks may be hidden from developers, which can lead to a lack of understanding of exactly what is being implemented and similarly any unintentional security issues or bugs built into underlying components are likely to be duplicated and exacerbated.

There is a fundamental risk that non-developers or inexperienced people building applications using LCNC platforms will not be experienced enough to consider critical non-functional requirements like security and access control and that although they are often useable by non-developers, this does not necessarily mean that just anyone will be in a good position to get the best results from a LCNC platform – some technical expertise is likely to be necessary, especially when building enterprise level applications. In a no-code scenario, it is likely that functionality will be limited to what is available in the platform, which may not be adequate to meet business requirements except for very straightforward use cases. This is mitigated to some extent by combining with low code, but even then, limitations are not unlikely.

Perhaps most importantly for financial services firms, the freedom created by LCNC platforms to create applications can lead to potential governance problems unless a proper governance and controls framework is in place. LCNC is often cited as a method to remove grey tech, and while it certainly can be, there is little benefit in migrating applications to a new platform only to suffer the same lack of controls and visibility as the migration was intended to solve.

Figure 2: Three-step Thinking to Identify Optimal Buy-to-build Vendor Solution

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Source: GreySpark analysis

These potential risks and pitfalls can be mitigated using sensible controls and governance and a well-developed, tested and maintained platform and framework, and should be carefully considered when selecting a LCNC vendor with which to partner (see Figure 2). A suitable vendor will not only offer to deliver the relevant benefits, but will be able to demonstrate how it can mitigate the risks for a given project, specific to the situation, requirements, governance and experience of the organisation, for example by ensuring visibility and documentation of pre-defined blocks of code, by having a robust framework for access, security and other non-functional requirements to create enterprise-grade applications or by ensuring that the purchasing partner is properly aware of the skills and experience required on their side.

LCNC for Enterprise-grade Platforms in Financial Markets

Financial markets participant organisations have some highly specific requirements, as well as needing technology that that is fit for purpose, fast to market and agile enough to respond to change quickly. As such, the generic LCNC vendors will not always be in a position immediately to assist in the most efficient way, but there are specialised providers which combine technological innovation with industry-specific knowledge and expertise, and whose low-code building blocks are specifically designed to address requirements particular to the financial markets.

There are a large number of potential financial services building blocks that might be employed by this kind of provider, including out-of-the-box integration with commonly-used industry systems and applications, pre-built interfaces with market and static data providers and the ability to consume and process very large volumes of data in real-time together with low-latency processing and access to data stores, which can be critical in, for example, electronic trading platforms but are generally not necessary to the same extent in software used in non-financial industries.

As well as the technical building-blocks, these vendors also offer financial markets expertise and an understanding of the specificity and complexity of use cases in the financial services industry, that enables far more efficient development timelines, as there is no need to spend time explaining concepts and terminology. They offer knowledge of financial markets – how they work and how they are traded – including terminology and processes. They may have expertise in electronic trading, with components reusable from previous development projects. Other financial services expertise may also be available – knowledge of post-trade and downstream processes and the many processes, hand-offs and interfaces that are so often involved, an understanding of the myriad regulatory requirements and constraints to which financial services industry is subject and, very importantly, an appreciation of the stringent governance structures around technology under which financial services organisations operate.

There are many possible use cases for LCNC technology in financial services, from the relatively small-scale automation of manual processes and replacement of risky end user-designed spreadsheets, databases and applications, via innovative applications which address new business opportunities or requirements, right through to the replacement of large legacy core systems.

Building on the Best of Both with Buy-to-build

As discussed in this article, the buy-to-build low code / no code approach has much to recommend it as a weapon in the financial services software development arsenal. In an industry that purports to thrive on innovation and swift reaction to change, the potential flexibility, agility and speed of these platforms is difficult to overlook and the allure of collaborative solution development between technologists and business experts within a robust and reliable framework is compelling. Whilst GreySpark Partners does not suggest that the software vendor giants will be replaced by this kind of technology any time soon, it is already very easy to see how it could be invaluable for smaller or more bespoke projects and, if proven effective, is likely to be extended into larger use cases over time.

Genesis Global is the only low-code no-code (LCNC) application platform built specifically for the financial markets and offers a fresh approach to helping firms wishing to adapt and innovate their business and operating models in an ever challenging and constantly changing environment. Genesis achieves agile and rapid application delivery through its microservices-based framework and business component library. This is augmented with ‘no-code’, ‘low-code’ and ‘pro-code’ development tools that empower users and democratises product design. The framework breaks down business problems into small functional components and is built on the core principles that solutions must be highly performant, resilient, robust, secure & compliant for the financial markets industry.

Jennie Brotherston is a Senior Specialist at GreySpark Partners and an experienced CFA and PRINCE2 qualified professional. At GreySpark, she has engaged with clients as a Business Analyst, Project Manager and SME to help deliver projects across a variety of disciplines. She thrives on the technical challenges that are part and parcel of a life in financial services and enjoys delving into the detail to help clients get their change management projects over the line.