TALLAHASSEE, Fla. - The Florida State Board of Administration is poised to begin a $10 million overhaul of its dated internal operating system software that tracks the system's $89 billion in pension assets.
The upgrade is considered a major undertaking because of the size of the pension fund and the number of transactions involved.
According to one technology consultant, changing portfolio record-keeping and accounting systems "is sometimes equated to open heart surgery."
The board hired Los Angeles-based InvestTech Systems Consulting Inc. to conduct a top-to-bottom evaluation of its technology systems, although the operating system is the only one scheduled to be replaced. The re-engineering project at the SBA will result in scrapping its 9-year-old system and moving to new software systems for investment management accounting, record keeping, reporting and investment tracking.
The internal technology review under way is expected to result in several systems software vendor searches by mid-2002. Once the software vendors are selected, a search for a conversion and implementation consultant will follow, according to SBA officials. Fund executives hope to have the new internal system in place by 2003.
Real-time processing is goal
The Florida plan calls for a "state-of-the-art multicurrency system capable of handling high transaction volumes of virtually all types of investment products," according to board officials, and will be a major step toward real-time processing.
The current system involves overnight batch processing, a time-consuming undertaking for an organization that conducts 250,000 transactions each year in nearly 1,000 accounts.
Of Florida's $89 billion in assets, more than $36 billion is managed internally, and more than 60 external money managers are used for outside management.
"This project is designed to help the Board of Administration get off of its current platform and to make sure they are taking advantage of current technology," said Robert Leaper, managing director at InvestTech.
The current system no longer is supported by the previous vendor, Portfolioscope.com, according to Greg Mathes, director of information technology at the Florida system. In addition, he said, "there are some shortcomings that we've worked around ... We are limited in our ability to extract data, and the reporting features are somewhat antiquated. We are looking for a system that is more open and efficient with new technology, new features which are part of today's technology, not part of the past."
The SBA records all investment activity from its internally managed portfolios and from external managers into the current system, either from front-end trading system connections or directly from outside managers. The new system should provide quicker access and near real-time updates on portfolio holdings and transaction activity, said Robert Copeland, director of financial operations at the SBA. In addition, the new system will move SBA closer to complying with one-day trade settlement requirements.
The first phase will be confined to core portfolio accounting and record keeping, Mr. Copeland said. The next phase will involve selecting related applications such as performance measurement and attribution. However, if vendors include some or all of these operational support applications, "we would be willing to look at them now."
To reduce costs and help SBA staff begin using the new system sooner, Mr. Copeland said much of the process would be handled internally.
"We will take a little different approach to implementation," he said "We feel like there are a lot of efficiencies to gain by managing a lot of the conversion process internally. When we pull the trigger, everyone involved will already be up to speed without a lot of training, and it will also cut down on consulting fees (for implementation)."