GLOBAL – As the trend towards outsourcing continues, service providers will not win business based on products, but rather on reputation and trust, says Ron Logue, president and chief operating officer at State Street.

While it has been common for investment management houses to outsource their back office activities, an increasing number are now looking to outsource parts of their middle office activities, such as performance measurement, compliance, risk management, trade support. This opens up a wealth of opportunities for global service providers, but focus will not be on products.

Says Logue: “We all provide good products, but it’s not about that. What a client wants to know is: Can we trust this provider? Can they be a partner? Will they still be here in six months time?

Winning such trust is essential for those service providers who wish to succeed. While companies know well that outsourcing can increase efficiency and cut costs, the trend towards outsourcing remains gradual due to nervousness about handing over control to a different party.

Logue believes that the trend towards outsourcing will result in a consolidation of the custody industry, with the middle players struggling hardest to keep their position.

Commenting on State Street, Logue said that increasing market share was still a focus. In particular, he sees France and Spain as areas of potential growth.