IT Spending in the US Securities Industry

A new report from Celent predicts that IT spending in the US securities industry will decline in 2003 for the second year running, representing the first two year decline in the industry’s history.

For the second year in a row, total IT spending in the US securities industry is set to decline. This might not appear exceptional, since markets are broadly down and it has become much more difficult to eke out profits. Budgets across the board are strained, not only in the securities industry. However, the decline in IT spending is dramatic for the simple reason that the securities industry has never before seen a year-on-year decline in its IT spending levels. Individual firms have certainly trimmed budgets in the past. However, at an industry level, IT year-on-year spending has increased continuously since the 1970s. Even in previous downturns, such as the market crash of 1987, or the recession of the early 1990s, IT budgets at an aggregate level continued to increase.

The report outlines IT spending patterns amongst US securities firms and shows the priorities and challenges facing market participants. The report highlights how some of the cuts in spending are impacting day-to-day operations. According to Octavio Marenzi, managing director at Celent,"a number of firms have cut their technology and operations budgets to such an extent, that they are running serious risks in terms of processing trades correctly. In some instances, more complex trades have been badly mishandled in the back office, typically because layoffs have led to the elimination of the staff with the necessary experience to handle these transactions."