In the Middle Ages, alchemists toiled to try to find the 'philosopher's stone': a mysterious substance which would allow them to transmute base metals into gold.

Today, pension funds and all other types of investment managers are starting to be able to benefit from revolutionary technological developments potentially far more valuable to them than even the philosopher's stone could have been.

One characteristic of computer software which is only now starting to be accorded the importance it deserves is software's ability to embody the expertise of the people who designed it. This is especially true of application software: the most important, 'business end' of any computer system: the part of the system that actually does what you want your computer to do. 1, application software can only work if other elements in the system, from the operating system down to actual electronics, do what they are supposed to do, but the application is what you most want.

The best application software has always been designed by practitioners in the activity in question, rather than simply by computer boffins. Knowing this, the most astute computer software companies ensure that as well as employing high-tech wizards, they also have on the payroll people who actually understand in detail what users want and know how to translate those desires into computer software which does the job.

The really important point is that if the application software embodies a high level of judgmental expertise, users can be confident about carrying out functions themselves which otherwise they would need to arrange for an external specialised organisation to carry out.

On the face of it this may not seem like such a revolutionary development, but it is. Why? Because if the function can be brought in-house rather than being outsourced to a specialist third-party, the cost savings can be enormous.

One of the most interesting pieces of application software which embodies a level of expertise that enables the user to adopt this DIY approach is produced by the London-based Total Systems.

A typical example of a financial systems software house which employs both application experts and pure programming specialists, Total Systems anticipates considerable success in the marketplace with its investment management and accounting system Optima2000+.

A recently-released sub-system of Optima2000+ offers users a comprehensive index tracking capability. The sub-system features an in-built Excel-based rebalancing capability specifically designed to automate the processes involved in ensuring that the constituent securities within an index fund accurately reflect the composition of the chosen index or benchmark (eg the FTSE 100). Such capabilities have been available to major institutional investors for some time but this new development means that it is now cost-effective for smaller institutional investors - and in particular all types of pension funds - to buy packaged software of sufficient sophistication to allow them to manage their own index-linked funds.

According to the company, the multi-function sub-system handles all aspects of the passive fund management process, enabling users to undertake this activity in-house for about £10,000 (the cost of the sub-system) rather than paying around fifteen basis points to an external specialist. The cost saving, again according to the company, can typically be up to £100,000 a year for a medium-sized fund, and even more substantial for a bigger fund. That is certainly a fair amount of gold.

IPE has not had an opportunity to see the sub-system in action, and so this mentionof it should in no way be regarded as a recommendation or testimonial. However, one major pension fund (they don't want to be named) is apparently very successfully making use of the sub-system, and the company's Jim Keaney - the Optima2000+ product manager - says he is confident others will be coming on-stream soon. The sub-system might at least be worth checking out.

Readers should keep a weather eye open for other software launched by software houses which lets users themselves handle complex functions which would otherwise need to be outsourced. With this new-style software, there's no need to resort to alchemy if you want to maximise your profits.

James Essinger is a specialist freelance writer.

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