As mentioned previously, Data as a Service (DaaS) can be used to provide a single source of authoritative (or golden) data for use in a firm’s critical applications, particularly when data is needed from multiple sources or it is ‘siloed’ in the organization.
DaaS provides the ability to use a single mechanism to deliver data from both internal or external data sources in a consistent format and to monitor its quality and use. The choice of whether to utilize internal or external providers depends on the proprietary nature of your data or unique requirements.
External providers are appropriate when data is ‘commoditized’, or readily available and accessible, where there is no competitive advantage to generate the data. Securities Master and other reference data, like currency codes and exchange tickers, are examples of external data that can be provided via DaaS. Here you can rely upon a third party to provide the information in a usable form that can be plugged into the DaaS framework and delivered to users.
It may also make sense to turn to an external source when a third-party data provider has a particular expertise in data, such as a specialized data feed of prepayment or economic data, vendor indexes, or universal identifier information, such as the Legal Entity Identifier (LEI). Independence requirements for items like securities pricing and valuations will often dictate use of an external service, too.
The benefit of using external providers for data delivered via DaaS is that it frees your internal teams up to focus on derived data and value-added activities, such as analyzing the data and developing products. It also be used to ensure independence for items like third party pricing.
Communication and transparency with your external provider are essential, though. External providers have to be made aware of what exactly a company needs to ensure it is accurate. Both internal and external data subject to regulatory scrutiny, for example, usually must be 100% correct, understandably, while data for internal use only – such as a client’s dining preferences or where unstructured data is used to identify trends for marketing and product development, might not need the same level of scrutiny (although any personal data still requires security and privacy protection.)
If using an external data, don’t get so dependent on that supplier that you can’t substitute one for another— you may need to switch suppliers down the road because of changes in needs or to improve data quality. Instead, adapt it to your own interface so that another provider can be inserted easily, if need be, in your own format. That is the power of DaaS. A standardized framework will make additions and substitutions easier. It can also assist in tracking the use of data as required to meet regulatory requirements, such as the Global Data Protection Requirement (GDPR).
Regardless of whether you use an internal or external DaaS service, companies have to be prepared to give a clear definition of the data and metadata to ensure the correct use and interpretation of the data and to assist in its use and management. This will assist answering queries from regulators or third parties, including data providers.
Dessa Glasser is a Principal with the Financial Risk Group, and an independent board member of Oppenheimer & Company, who assists Virtual Clarity, Ltd. on data solutions as an Associate.
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