Modernization Research and Readiness: What should you know?
Modernizing Pension Administration, Part 2
Last week, we started a series of articles on modernizing insourced pension administration by focusing on the case for change.
Fuse has developed a Modernization Playbook, specifically for insourced pension administrators, to help structure and navigate this complex effort. We have hand’s-on experience with pension transformation programs of all kinds and have created this document to support leaders in planning and executing successful modernization programs. In it, we define:
The Case for Change: Why should you modernize?
Modernization Research and Readiness: What should you know?
Delivering Modernization: How do we do it?
This is the second of three articles sharing our expertise and lived experience with you.
Modernization Research and Readiness: What should you know?
Once you have identified the modernization drivers for your organization, defined the value you need your program to deliver and explored the potential implications of industry trends, you are ready to test your plans with market research and readiness assessments, by asking:
What have peers done, and why? Many pension administrator peers are investing in modernization and willing to share from their approaches and experience; this creates an opportunity to compare the drivers and value of modernization across peer experiences to inform the right choices for your organization.
What does the vendor market offer, and why? The pension administration solution provider landscape is evolving, and understanding vendor offerings and roadmaps is critical; pension administrators should look to learn from where vendors are investing, where they expect client readiness, and their best practices for implementation.
What can we implement, and how? Pension administrators need to balance aspirations with an honest assessment of internal capabilities to design, budget for and deliver a realistic modernization plan.
The amount of market research and readiness assessment that each organization requires may vary, depending on the preferences and expectations of decision-makers. Understanding your organization’s required ‘burden of proof’ will help you to define the right amount of knowledge gathering to be done; however, it is a critical opportunity for modernization program leaders to build an external fact base and set stakeholder expectations that, in our experience, pays off in the long run.
Peer Approaches
There are three distinct paths to modernizing insourced pension administration in Canada today:
Deploying Commercial-off-the-shelf (COTS) technology solutions from vendors,
Leveraging a best-of-breed model that integrates technology components, and
Pursuing a custom-build approach to redeveloping legacy technology.
Fuse has developed case studies of examples of each of these approaches at leading Canadian pension plans. The most valuable thing to understand from peer approaches is why these modernization choices were made, what were the drivers and value expectations that justified the trade-offs made in each approach. There are no right answers in pension modernization, only good choices! Peer research that provides insight into decision-making and outcomes can be invaluable in making informed modernization plans.
Vendor Research
The pension administration solution technology and service provider market in Canada is not massive, but it is dynamic. Established players are evolving with industry change, and emerging players are investing to provide options for clients. There are also internationally established providers interested in supporting the Canadian market.
At Fuse, we are vendor agnostic and maintain relationships with solution and service providers because good tools and partners in pension administration are a critical component of our goal to improve retirement outcomes for Canadians. We track four types of providers, cataloging their offerings, pricing and partnership approaches:
Large vendors with significant market share and/or additional offerings to pension administration,
Boutique vendors who cater to the pension administration niche, and have substantial experience with defined-benefit administration, domestically or internationally,
Unique offerings such as bundled partnerships between solution providers and system integrators or component parts of broader solutions, and,
Emerging players that are new entrants to the space, with compelling offerings but limited experience.
Success Factors and Implementation Considerations
There are factors common to the most successful transformation programs – including effective executive sponsorship, clear project objectives, engaged stakeholders, active risk mitigation, and robust governance structures – that may or may not be part of your organization’s everyday culture. Modernization readiness requires taking an honest look at the capabilities and capacity that exists today, what elements might be missing, and determining how to close any gaps to support your program.
Does your organization have effective change management? What technology skills are available to deliver data readiness, plan our enterprise architecture, configure or develop your chosen solution, and integrate it within your technology stack? What subject-matter experts are available to document your processes and inform your decisions about the planned future state? What common risks might you face, such as budget constraints, stakeholder resistance, procurement and vendor management risks, data migration challenges, and integration complexities?
Each of these dimensions requires consideration and planning, and they are interrelated! For example, there are several approaches to planning for implementation, including Big Bang, incremental, piloting, and full parallel testing. Determining the optimal rollout strategy involves dependencies and trade-offs across talent, technology, investment, and risk that need to be approached in an informed, coordinated fashion.
Part three in this series will describe the approach we recommend to delivering modernization, and invite you to participate in an industry survey on the current state of pension administration modernization in Canada.
Are you a pension administrator on the modernization journey? We’d love to hear about it, or share a copy of our playbook. Drop us a line at hi@fusestrategy.co.