The future of managed services – five key trends for the next three years

As more financial firms recognise the opportunities that market data in the cloud can create, the adoption of managed services is growing in popularity. Five key trends are shaping the choice to implement managed services in the cloud – where data acquisition, storage and deployment are outsourced to a third party. Over the next three years, as the number of firms shifting to managed services for their market data infrastructure is set to skyrocket, these trends will impact why and how firms make the transition.

• Managed data services, based in the cloud, are expanding in popularity as financial firms rethink the future of the architecture of their market data infrastructure.
• Key trends include adoption of the public cloud, enhanced operational resilience, greater connectivity, boosted data agility and a growing focus on data risk. 
• LSEG Data & Analytics is investing significant resources to support the ability of firms to adapt to these five trends and thrive.
• More financial services firms are turning to managed services for market data management and storage in the cloud than ever before – and this trend is expected to become larger over time.

Across the financial services industry, firms are reassessing the competitive environment they are facing, the impact of rapidly evolving technologies such as generative AI (GenAI) and how internal resources can be better used to drive value creation. As a result, LSEG has identified five key trends that it believes will drive managed services implementation over the next three years: 

• Adoption of the public cloud – According to recent research, 91% of banks and insurance companies have now initiated their cloud journey, a significant increase from 2020, when only 37% of firms had embarked on their cloud transformations. Although at first financial firms favoured the private cloud, firms are shifting to the public cloud for use cases such as master data management and regulatory reporting. We are expecting to see public cloud adoption accelerate significantly over the next three years as it becomes appropriate for more and more use cases. 
• Enhancement of operational resilience – Regulatory change in some jurisdictions – such as the EU’s Digital Operational Resilience Act (DORA) and the UK’s operational resilience rules – is driving evolution in the market data operating environment. With increasing geopolitical risks and constant cybersecurity challenges, we think operational resilience will be an important business priority for financial firms over the next three years, beyond regulatory demands. So, LSEG Data & Analytics is investing significantly in its real-time network to deliver the operational resilience that financial firms need in today’s more challenging environment. 
• Demand for greater connectivity – As financial firms move to the cloud, most are seeking to adopt multi-cloud strategies that build in cloud-to-cloud connectivity. We believe this will become an essential part of financial services firms’ infrastructure as they engage with more third-party technology solutions along with AI and ML in the cloud. So, cloud-to-cloud connectivity is on LSEG Data & Analytics’ real-time road map as part of its managed services programme.  
• Acceleration in data agility – In today’s hyper competitive markets, being able to access new data quickly can make the difference between seizing an opportunity and missing the boat. We are forecasting that financial services’ need for data will grow rapidly over the next three years, driven by increased use of AI and ML to boost both performance and profitability. For example, according to one recent study, the use of GenAI can boost productivity for front-office employees by as much as 27%–35% by 2026, after adjusting for inflation. This translates to an additional revenue of US$3 million to US$4 million per front-office employee. Through LSEG Data & Analytics’ managed services, firms can quickly access data on more than 90 million instruments. Each instrument on the LSEG network is enriched by between 15-20 derived fields depending on the asset class. 
• Increased focus on data risk – In a recent study, more than 40% of financial services respondents said that they have policies/procedures to control data risks due to the use of generative AI. However, that means that nearly 60% of the participating firms do not have data governance and other data risk approaches in place. Certainly, the world’s regulators are becoming more savvy about the relationship between data risk and model risk, particularly around AI and ML use cases. We believe this focus will only intensify. In addition, firms are recognising that poorly managed data can lead to suboptimal outcomes, which can harm the business. With more than 800 instances around the globe, LSEG is trusted by financial firms to supply high quality data via managed services. In addition, firms use our market-leading entitlements solution to ensure they can track data use and lineage across the enterprise. 

Over the past 13 years, LSEG has accumulated more than 800 instances worldwide of its various managed services. If today’s key trends are borne out, it’s highly likely that the number of firms deploying a managed services approach for market data will expand very rapidly across the front, middle and back offices. LSEG is investing in developing the next generation of managed services capabilities today embedding regulatory requirements from across the globe to support the needs of the financial services industry tomorrow.