What it takes to build an ERP System for Your Investment Firm in Saudi Arabia

Background

We have contributed to building many algorithmic systems in the financial and Health sectors. Different industries, but the same lesson every time: the hard part is rarely the code. You will need the people, processes and ongoing maintenance that keep it running. In this article, our focus is on what it takes to build the investor and fund operations side of an enterprise resource planning system, or ERP, for a capital or investment firm in Saudi Arabia. This covers onboarding, internal reviews and fund activity. Wider functions, such as company accounting, HR and payroll, need their own scope. If you are a CEO, operations manager, compliance officer or CTO, understanding this work will help you decide what to build internally and where a service such as VillaTech can help.

How Capital and Investment Firms Do Their Work Today

If you walk into most investment firms in the Kingdom today and ask to see the system, you will usually be shown a set of tools rather than one system. Client onboarding starts in email. KYC forms arrive as PDFs and get re-typed by hand. The suitability assessment is a document someone reviews and files. Subscriptions, redemptions and the unit register live in Excel spreadsheets that one or two people know how to maintain. Compliance approvals happen in a meeting or a mail thread, and the evidence of that approval sits wherever the person who approved it decided to keep it.

This works, until it does not. It works while you have a small number of investors and one or two products. It stops working the moment the regulator asks you to show — not describe — how a specific client was screened, who approved the upgrade of a certified investor and on what date and what was their approval document. And it stops working when you want to grow, because with this setup every new investor adds manual hours instead of adding almost nothing.

So the decision reaches the table: we need a proper system. And most firms start by asking how to build one. The purpose of a connected system is to bring this work together. Your clients should have a clear journey, and your team should be able to follow what is happening behind it.

Building a System From Scratch, Around the Regulations

Building something from scratch always has its journey, especially when the system has to be built around the regulations. You will need the right software engineering skills and the right regulatory skills — someone who is genuinely involved with the regulations produced by the CMA, SAMA and the other authorities, and who follows the latest news and updates.

These two skill sets rarely sit in the same person, and that is the first hidden cost of building. An engineer who does not understand the regulation will build a flow that is clean but not compliant. A compliance officer who cannot describe the rule as a flow will sign off on a requirement that the engineers understood in a different way. Everything you build is going to sit between those two people.

Knowing the regulations is one part. Turning them into a working process is another. Your business and compliance teams need to explain who can approve an application, what information must be collected and what should happen when a client needs to update it. Your technology team then needs to build/test/maintain these steps.

The Big Picture: Front Office, Middle Office and Back Office

Our focus in this article is to explain what a financial system costs to build. A system that will include, at minimum:

• Back office & middle office services — where your team manages the operations coming from your clients and investors. This includes application reviews, compliance checks, approvals, fund operations and reporting..
• Front office services — where your clients can see your investment products and go through your firm's onboarding process.

The middle & back office

What the middle and back office include depends on your investment firm and the investment products you offer. Your team may need to review KYC documents, manage permissions, process subscription and redemption orders, enter NAV {Net-Assets-Value} and prepare reports. Each action needs a clear owner and a record of what happened.

Take into account the third parties you will connect your system to, such as a client-screening provider or a service that retrieves and verifies client information, including names, identity details and ID expiry dates. These connections need to be configured, tested and maintained.

The connection between the two sides matters. An application submitted by an investor should appear where the right team can review it. The investor should then be able to follow its status. You can see how VillaTech connects these experiences through its SaaS services at villatech.sa.

The front office

This is one of the most important parts of development. Here is where your clients will get onboarded, complete their Know Your Customer (KYC) information and suitability assessment, and submit orders to subscribe to or redeem fund units. They can also see the private and public funds they are eligible to access or any investment products that your firm may operate.

At each part of this journey, you will need to consider the applicable regulations. For example, when a client's ID expires, the system needs a flow for updating their information and applying the required account restrictions. Freezing an account does not mean every transaction is prohibited, so the rules need to distinguish between permitted and restricted actions. The CMA Investment Accounts Instructions explain account updates and freezing requirements.

You will also need to inform clients. This alone involves another integration: an SMS or email provider connected to your system. Sending SMS messages has its own requirements&regulations from Saudi Arabia's Communications, Space and Technology Commission (CST), including its SMS service regulations. Your notification process needs to be planned alongside the investor journey.

Cost and Human Resources Needed

In regard to human resources, you will need professional software engineers with a financial background. Otherwise, you will need to invest time in giving them the financial knowledge and understanding of market regulations they need before they work on the system.

You will also need a business and compliance team that follows technology releases for each part of the system and checks that the implementation matches the applicable requirements. This means the team needs regulatory knowledge and experience in translating that knowledge into clear requirements for the technology team.

You will need a development operations resource to manage hosting and releases, and cybersecurity expertise to protect such a financial system. A system integrator may also be needed to connect the services and cloud environment. Your team must confirm the hosting location, data handling and security requirements that apply to your firm, including any requirements for hosting within the Kingdom.

Testing, backups, recovery planning and user training also need time and a budget. As you can see, many requirements are involved. Take into account that you already have human resources expenses that are essential for running your investment firm.

An illustrative development budget

The market shows that building a complete infrastructure for a system designed for an investment firm ranges from $150,000 to $180,000 for each year of development, and the range needed for a complete system is about 1.5 years. So we are talking about roughly $250,000 of spending to get something to the market. After that, you will also be spending on technology maintenance, which costs around $130,000 a year.

And there is one number that never appears in the budget: time. A year and a half is a year and a half of onboarding investors exactly the way you onboard them today.

What Is Technology Maintenance?

Technology maintenance is a process that starts from the first day your engineers begin building the infrastructure for your investment firm's system. They fix errors and bugs that appear, change the flow of a function and keep the system working as regulations and requirements develop.

After launch, this work continues through security updates, monitoring, backups, integration changes and support. A system that works today still needs a team looking after it tomorrow. When comparing costs, be clear about which of these activities are already included in the development budget so they are not counted twice.

How VillaTech SaaS services can help

This is exactly the problem we built VillaTech for

Onboarding & Verification

If your immediate need is bringing investors online, VillaTech's Onboarding & Verification service connects registration, identity verification, KYC and application review. It supports journeys for Saudi individuals, residents, foreign investors and local businesses, with the required checks and documents agreed for your firm. Your clients use a branded onboarding platform under your brand. Your authorized teams use the Operations Portal to review applications, request further information and record approval decisions. Configurable KYC questions, SMS and email notifications, and application reporting help keep the process connected. The service includes Saudi-based data hosting. This can be a starting point if your firm already manages funds elsewhere and needs a clearer onboarding process. Explore VillaTech's onboarding service.

Full Assets Management

If your needs go beyond onboarding, VillaTech's Full Asset Management service brings the investor journey and fund operations together. Onboarding is already included, alongside support for open and closed funds and subscription and redemption orders. Your operations team can process orders in sessions, enter the unit price at session close and access reports covering orders, amounts, fees and status. In the custodian-based model, money moves directly from the investor's bank account to the fund's IBAN held by a licensed custodian. VillaTech provides the technology supporting this workflow. Explore VillaTech's onboarding service.

You can see both services, and how each one is structured, at villatech.sa. or book a demo and one of our team will be delighted to have a meeting with you discussing the pain points your investment firm may have. Book a Demo

The Expected Savings