Market data is essential in the financial sector, but market data subscriptions also represent a significant cost. The management of market data vendors and subscriptions is also highly complex, especially in large organizations with diverse workforces. How can you manage and control costs without sacrificing data quality, team performance, or business priorities?
With the right tools and support, you can optimize market data vendor management in just five steps.
Step 1 – Understand Your Current Position
The starting point is to get a handle on which vendors your organization currently uses and how much you currently spend with them. This will tell you the total spend on market data subscriptions and licences.
It’s also beneficial at this stage to review the contracts you have in place with vendors, as renegotiating and changing subscriptions is an important part of optimizing market data vendor management.
Step 2 – Audit Current Subscriptions and Spending
While it’s important to know how much you are spending and where, it’s not enough. You also need to understand how your market data licenses and subscriptions are being used.
This is where things can get complex, particularly when conducting a manual audit. Manual audits are time-consuming, prone to error, subject to human biases, and rarely comprehensive.
The only viable option is to use automated data capture and analysis technologies, such as our solution at WatchPoint Finance.
With automated data capture, you will get a full and accurate picture of what subscriptions are being used, where they are being used, and how they are being used. You can then use this information to:
- Compare the needs of users with the capabilities of subscriptions.
- Identify gaps between perceived user need and actual utilization, i.e., are subscriptions in place because we think we need them even though they are under-utilized.
- Assess how costs are being allocated to clients, portfolios, and business strategies.
- Identify subscriptions that are not delivering value because they are being underused or not used at all. Both underused and unused subscriptions are wasted spend, but they also increase compliance risks.
- Uncover duplicate subscriptions.
Step 3 – Cost Optimization
When you have an understanding of what you are spending with each market data vendor, you can start optimizing your position to reduce costs. This includes:
- Cancelling or reallocating unused and duplicate subscriptions.
- Changing underused subscriptions to lower-cost alternatives. For example, underused market data terminal subscriptions can potentially be replaced by consolidated platforms. Terminal sharing can also reduce subscription costs with no impact on data quality.
- Analyzing the cost benefits of changing to a different vendor.
- Consolidating vendors where possible to reduce management complexity and enhance negotiation power.
Step 4 – Negotiate Contracts
Getting access to accurate usage data is the most important part of reducing market data subscription costs. That said, negotiating favorable contracts is also beneficial. Best practices include:
- Don’t just let contracts roll on when up for renewal. It’s always best to review market data vendor contracts to identify areas where terms and pricing can be improved.
- Leverage your buying power to get the best possible deal.
- Prioritize contract structures that offer flexibility. After all, requirements for market data subscriptions are highly fluid as personnel, teams, and commercial contracts change. Building in as much flexibility as you can makes it possible to make adjustments to more closely match your subscriptions to business requirements.
- Use contract renewal negotiations to switch suitable subscriptions to lower-cost vendors.
Step 5 – Continuous Management
Optimizing market data vendor management is not a one-time event. It is true that now is the time when you can make the greatest cost reductions and efficiency savings, i.e., the biggest savings can be made when you have the least visibility and control. Once you have visibility and control, and you have made an initial round of adjustments, future improvements will be more incremental.
However, continuous management is important on two fronts – to ensure costs are always optimized and to prevent the management of market data subscriptions from drifting back to challenging complexity.
Continuous management involves staying on top of vendor contracts and keeping them under review. It also includes regularly analyzing requirements and capturing usage data.
The Right Tools and Support – WatchPoint
The five steps described above outline a clear roadmap to optimizing market data vendor management and reducing subscription costs. To make the steps work, you need accurate, reliable, and comprehensive usage data, in addition to expert support.
This is where we come in at WatchPoint Finance. Our industry-leading software captures subscription usage data in real-time without interrupting teams or disrupting day-to-day operations. We’ll then use that usage data to provide advice and recommendations on how to optimize your subscriptions and reduce costs. Plus, our pricing model means we only charge fees when we save you money.
If this sounds like something your organization could benefit from, get in touch, and we’ll arrange a demo to show you how it works.
