For some time, those commenting on the investment management industry have focused on the pace of change – debating whether firms are evolving quickly enough, and what happens to those that are not. Much of that commentary centres on technology: which systems firms should adopt, which to retire, and how to remain competitive in an industry that is shifting. What gets less attention is what all of that technology adoption means for a firm’s operating model.
That gap matters. You can invest in the best tools on the market, but if your operating model does not change around them, the benefits will be limited. And if your model is too rigid, even sound technology choices can become obstacles rather than enablers.
What is a target operating model?
A target operating model (TOM) is the agreed description of how a firm intends to operate in the future. It covers people, processes, systems, data and governance – the full picture of how the organisation will function once it has completed a defined set of changes. The TOM gives leadership a shared reference point and drives decisions about which projects to prioritise, how to allocate budgets and what the organisation is ultimately building towards.
In investment management, TOMs are often produced through a significant consulting exercise. Internal teams or external advisers spend considerable time mapping the current state, agreeing the desired future state and producing a document that management can review and approve. The expectation is that this plan then drives a programme of work – technology, process and cultural change – that delivers the agreed future state.
Why a fixed TOM is difficult to hit
The problem with this approach is that the moment the document is agreed, it begins to date. Investment management is not a slow-moving industry. Client expectations shift, regulatory requirements evolve, technology capabilities change, and competitive pressures can move in unexpected directions. A TOM built around a fixed future state struggles to account for any of this.
Adding new technology to an operating model is also rarely as straightforward as software companies suggest. Decisions about systems are not made in isolation – they interact with people, process, data flows and governance structures across the organisation. A change that looks clean on paper often turns out to be deeply entangled with other elements of how the firm runs. By the time the plan is fully executed, the world it was designed for may have already moved on.
This is not an argument against planning. It is an argument against treating the TOM as a fixed destination rather than a direction of travel.
The case for a flexible, iterative approach
If the pace of change is constant, then flexibility needs to be built into the operating model itself – not treated as a feature to be added later. That means designing an operating model that can shift, adapt and respond to changing client needs and market conditions without requiring a large-scale change every time something moves.
This requires a different starting point. Rather than asking “what will our firm look like in five years?”, the more useful question is “how do we build an organisation that can respond to whatever the next five years bring?” The answer will typically involve reducing fixed operational overhead, increasing the use of flexible specialist suppliers, and keeping core in-house capability focused on what truly differentiates the firm.
The networked operating model in practice
One approach that addresses this challenge is what is sometimes called a networked operating model. Rather than owning and operating every function in-house, the investment firm concentrates on its genuine areas of expertise – principally, investment decision-making and client relationships – and uses a network of specialist suppliers to deliver everything else.
In practical terms, this means working with external providers for functions such as trade settlement, pricing, reconciliation, IT infrastructure and – crucially – client and fund reporting. Each provider focuses on its own area, develops genuine expertise in it, and delivers it at a level of quality and scale that an internal team would struggle to match. The investment firm, in turn, can adjust its supplier network far more quickly than it could restructure its own operations.
This model also reduces duplication across the industry. When multiple investment firms use the same high-quality specialist providers, those providers can invest in their platforms at scale, driving up quality while managing costs. Firms can still differentiate on investment capability and client service – the things that matter most to their clients – without competing on which firm has the best in-house reporting infrastructure.
How client and fund reporting fits in
Client and fund reporting is one of the clearest examples of a function that investment firms no longer need to own end-to-end. Data gathered by the investment manager can be passed to a specialist reporting system, which handles the entire production and distribution process – producing reports to the firm’s exact content, layout and brand – without requiring the investment firm to maintain the underlying system or infrastructure.
This is the model Opus Nebula’s Reporting as a Service solution provides. It is cloud-based, scalable and flexible – designed to grow and adapt as a firm’s reporting requirements change, without the need for large internal change projects or significant IT investment. The investment firm retains full control over its reporting while the operational and technical overhead sits with the specialist provider.
For firms rethinking their operating model, reporting is often one of the first and most productive areas to address. The benefits – reduced cost, better quality, greater flexibility – are achievable relatively quickly, and the transition to a cloud-based reporting model is a practical demonstration of what a networked approach can deliver.
Frequently asked questions
What is a target operating model (TOM) in investment management?
A target operating model describes the future state of how an investment firm intends to run – covering people, processes, systems, data and governance. It is used to guide decisions about which changes to prioritise and how to move the organisation from its current state towards its desired future state.
Why do target operating models become outdated so quickly?
Investment management operates in a fast-changing environment. Regulatory requirements, technology capabilities, client expectations and competitive dynamics all shift over time. A TOM built around a fixed future state can struggle to keep pace with those changes, especially when technology decisions interact with many other parts of the operating model.
What is a networked operating model?
A networked operating model is one where the investment firm focuses on its core areas of expertise – typically investment management and client relationships – and uses specialist external suppliers to deliver other functions. This gives the firm greater flexibility to adapt, and access to high-quality specialist capability without the overhead of building and maintaining it internally.
Which functions should investment firms consider outsourcing under a networked model?
Functions that are not core to the investment firm’s competitive advantage are typically candidates for a specialist supplier model. These can include trade settlement, data management, IT infrastructure and client reporting. The key question is whether the function is something the firm needs to own, or whether a specialist provider can deliver it better, more flexibly and at lower cost.
How does Reporting as a Service support a flexible operating model?
Reporting as a Service provides the full client and fund reporting function through a cloud-based platform managed by a specialist provider. The investment firm’s team controls the reporting process and outputs, while the technical infrastructure, maintenance and development sit with the provider. This allows the firm to scale its reporting up or down as needed without corresponding changes to internal headcount or IT infrastructure.