As debates about an AI bubble rage and with notable industry figures including BlackRock’s CEO Larry Fink predicting “big failures” in the tech sector, so fund managers that are increasingly reliant on the technology start to question the stability of their providers.
Research from SimCorp finds 70 per cent of institutional buyside organisations are using AI to support their front office operations, compared with just 10 per cent last year.
And as the technology becomes more entrenched in their core businesses, fund managers, insurers and pension funds are prioritising vendor stability.
When asked to rank the most important factors when evaluating AI solutions for investment management, 57 per cent say vendor stability; 54 per cent say innovation access; and 47 per cent say analytical flexibility.
Julia Cloud, Global Investment Management Leader at Deloitte Global, says: “Evaluation of AI vendors is increasingly about enablement and proving capability, not merely managing a procurement process. Many firms want innovation and analytical flexibility up front, with vendor stability as the necessary underpinning.”
Matthew Bailey, Director Investment Operations at Knollwood Investment Advisory, describes the stability of both the vendor and the AI tool as paramount.
“We may be putting sensitive information into these models, so a proven method to secure our data with robust cybersecurity in place is a must. It would be a dealbreaker if we didn’t feel comfortable. We lead with that requirement, regardless of how innovative the technology is, because nothing would damage our firm and clients more than a breach of sensitive information,” Bailey said.
With almost two-thirds (63 per cent) of the research participants reporting fragmented data across front, middle, and back office – which SimCorp says is a “critical gap that undermines AI readiness” – there is a growing appetite to find vendors capable of providing a one-stop technology shop.
More than half (58 per cent) of buyside respondents say consolidating technology vendors and platforms is a top priority.
Dean McIntyre, Chief Commercial Officer at SimCorp says investment managers are “consolidating to innovate”, replacing fragmented best-of-breed architectures with unified core platforms.
“Integration complexity disappears; consistent data enables firms to modernise platforms and deploy managed services that absorb demand spikes effectively. What’s becoming clear from our client work [is] this consolidation makes firms AI-ready in ways that matter for competition. This simplification frees resources for competitive differentiation.”
McIntrye says that where firms once devoted teams to maintaining complex architectures, they can now redirect talent toward analytics, product innovation and client experience.
This, he says, is creating a divide between firms treating infrastructure simplification purely as cost reduction versus those using it to unlock capabilities that did not exist before.
“That gap will define who leads the next decade,” McIntyre says.
Joe Morant, Global Head of Asset & Wealth Management at Alpha FMC, agrees that the emphasis on consolidating vendors and modernising technology platforms “aligns with a drive to simplify complex IT environments and reduce costs as key enablers to improve integration and deliver faster decision-making promised by AI, data and automation”.
Morant added that firms are increasingly seeking partners for non-core activities, allowing them to focus their internal resources on strategic priorities.
“Overall, these results confirm firms are adopting a more pragmatic, execution-focused approach to transformation. By streamlining operations, leveraging external partnerships, and building internal expertise, they are strengthening their operational resilience and competitiveness in a rapidly evolving industry.”
