Financial institutions are increasingly having to make strategic choices about which systems to develop in-house and which to outsource.
A useful analogy can be found in Formula 1, where every competitive team has mastered the balance between building bespoke performance capabilities and buying specialised systems that cannot fail, claims Scott Nice of Label.
In F1, racing organisations focus their internal time and resources on areas that genuinely influence competitive advantage. They design their own aerodynamics to maximise efficiency, develop chassis concepts that give drivers an edge on the track, and refine race strategy models to adapt quickly to changing conditions. These systems are built internally because they are integral to performance and can mean the difference between a podium finish and the middle of the pack.
However, even the most successful teams draw the line when it comes to ultra-complex components that require deep technical expertise. Gearboxes, control electronics and brake systems are typically purchased from specialists, because a small failure in these areas does not simply slow a car down — it ends the race entirely. That risk, and the enormous cost of maintaining constantly evolving technical standards, makes buying a strategic necessity rather than a luxury.
Financial services firms face precisely the same build-versus-buy dilemma. The parts of the business that define competitive edge — such as client experience, workflow design and investment logic — are areas where internal innovation can truly move the needle. These capabilities can offer differentiation in crowded markets and allow firms to shape customer journeys and commercial strategy on their own terms.
On the other hand, global tax reporting frameworks like FATCA, CRS and the emerging CARF standard demand accuracy, reliability and ongoing regulatory updates. The technology required to manage document validation, data checks and automated due diligence needs specialist knowledge and continuous investment. Trying to build and maintain that infrastructure internally would divert resources away from business growth and create unnecessary risk.
Institutions that get this equation right adopt a hybrid approach. They channel internal talent towards areas that strengthen their proposition while relying on trusted providers for essential compliance technologies. In an environment of constant regulatory change, outsourcing high-risk systems is not only logical, it ensures that failure simply isn’t an option.
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