Securities & Investments IT Spending Update: Navigating the New Volatility

by Cubillas Ding, November 7, 2008

Abstract

New York, NY, USA November 7, 2008

Securities & Investments IT Spending Update: Navigating the New Volatility

As capital markets firms recede, reorganize, and seek safe harbors, IT spending and priorities come into focus. Firms are considering their competitive position, capital base, and growth prospects. The weakening economy will have a significant impact on IT spending in 2009 and 2010.

In a new report, Securities & Investments IT Spending Update: Navigating the New Volatility, Celent examines structural developments related to the economic crisis as well as its impact on IT spending levels, priorities, and trends in North America, Europe, and Asia. This report provides IT firms a weather map of the current climate.

C-level executives across the capital markets industry are revising their IT budgets downward. The fall is budget season, and capital markets firms are bracing themselves for the long winter ahead. Based on this pessimistic scenario and the impact of the crisis, Celent is trimming our IT spending forecast for all types of capital markets firms. Although we predict capital markets global IT budgets (including maintenance and new spending) to shrink 7% in 2009 and grow only modestly in 2010 (4% growth), we do expect a recovery in spending levels (8% growth) in 2011.

"While spending is likely to be weaker and move to a lower overall base in the near term, volatility is likely to be an even bigger challenge for IT vendors," says David Easthope, senior analyst with Celent's Securities & Investments group and co-author of the report. For example, some longstanding clients of IT vendors may suddenly freeze IT budgets, while potential clients may take longer on spending decisions or even prefer shorter contract commitments.

Securities and Investments IT spending may become more difficult to predict, with wild swings. As a result, financial firms and their vendors must not only manage lower spending levels but also equip themselves to navigate this more difficult environment. "Flexibility, competitive pricing, modularity, leveraging cross-product opportunities, and exploiting core areas like operational trade infrastructure and risk management are essential in staying afloat," says Cubillas Ding, senior analyst with Celent's Securities & Investments group and co-author of the report. Firms must decidedly adopt a more cautious approach to their IT budgets, but yet can still be smart about consolidating insightful data/information, and building out capabilities that can position themselves favorably for a recovery.

This 36-page update report contains 11 figures and five tables. A table of contents is available online.

of Celent's Capital Markets, Finance & Risk, and Wealth Management research services can download the report electronically by clicking on the icon to the left. Non-members should contact info@celent.com for more information.  

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

New York, NY, USA November 7, 2008

Securities & Investments IT Spending Update: Navigating the New Volatility

Executive Summary 3
Introduction 5
Financial Crisis Impact 6
  Short-Term Structural Developments 6
  Long-Term Structural Developments 9
  OTC Derivatives in the Spotlight 13
Securities & Investments IT Spending Trends 18
  Spending Components 18
  IT Spending Adjustments Scenario: 2009-2012 19
  Securities & Investments IT Expenditures and Projections 20
  Buy Side and Sell Side IT Spending 24
  IT Spending Priorities 27
  Strategic IT Spending Trends 28
Vendor Roadmap for the Weakened IT Spending Environment 32
  Positioning Products and Services 32
  Managing More Volatile Spending Patterns 32
  Suggestions for Facilitating IT Priorities 33
Conclusions 35

 

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