John Mason, CEO of SmartStream’s DClear Utilities, informed delegates to FIMA 2009 about the vendor’s plans to establish a reference data utility. As first revealed in Reference Data Review last year, the utility is aiming to provide firms with an on demand service for accurate reference data.

Mason discussed the development of outsourcing from the first wave of “lift and shift” implementations to the most recent incarnation, which involves a more niche approach. “The initial approach to outsourcing was to treat the transaction as a one off cost,” he said. “The outsourced service was a duplication of all the problems experienced within the firm’s in-house systems and implementation was a long process.”

The evolution from this approach to a more targeted approach has been driven by a number of challenges: the pain of outsourcing; the changing requirements of clients; and the shift in data culture as a result of web 2.0. “This has all spurred on a move from a monolithic approach to a niche one,” Mason contended. Clients want more from their outsourcing providers and they are happier to outsource areas of their business that are not value adding, rather are commodity services.

A utility is one step further than outsourcing and Mason conceded that the industry may not quite be ready for such a model at the moment, but that it will soon have its day in the sun. He elaborated on the benefits of adopting a utility approach that allows pricing based on usage rather than a set fee and the strength of the network in correcting the underlying problems around incorrect data from firms’ counterparties as well as within their own internal systems.

“If you look at the cost of bad data in terms of cost per trade, the benefits of a utility approach are obvious,” he concluded.