What the TowerGroup experts have to say on the topic of IT spending
Despite the current market turmoil, financial institutions still face the task of creating company budgets for 2009. And firms are concerned about what the future holds for IT spending for the rest of 2008 and for 2009.
In a TowerGroup Webinar "A Week of Dramatic Change; Hear Our Perspective on the Future," held last Friday, analysts shared predictions of what IT spending trends will occur in the coming months.
IT spending is expected to decline between 9 to 10% just from 2008 to 2009, with the sell side taking the biggest hit, said Robert Hegarty, managing director and practice leader, Securities & Investments, and Insurance. And for 2009, IT spending will decline by 14 to 16% for the sell side and by 4 to 6% within the investment management and wealth management sectors.
There will be, however, some areas where IT spending will rise.
"We are going to see a significant up tick in risk management technology spending for the obvious reasons…," said Hegarty. "I think a lot of firms feel like they didn’t have both the information and the modeling to predict what’s happened here and they will be investing in that."
More money is expected to be spent in buy-side front office technology, and specifically portfolio analytics software, to help the front office in the selection of securities so they make better investment choices.
Last week’s events have also uncovered problems will scale. On Sept 18 the market, for the first time ever, saw 10 billion shares traded in a single day and for many financial institutions, this volume revealed significant cracks in existing infrastructure. Investment in technology will be required to improve scale of infrastructure, said Hegarty.
Also, the existing and ongoing consolidation activity in the market means an increase in services spending because integration of operations and technology will be required for the acquisitions.
Kathleen Khirallah, managing director and practice leader, Banking, suggests that regulatory and compliance will be another ‘bright spot’ for IT spending across all market sectors.
The regulatory landscape is changing on a global basis which will bring in new requirements for compliance functions such as reporting, she said. And some financial services institutions will find themselves ‘scrambling’ to meet new regulatory requirements as they come into being.
IT spending related to regulation will also be required for firms in the securities and investments sector, said Hegarty. But he expects the spending will happen the latter half of 2009 because regulatory changes will be delayed by the U.S. Presidential election and will not come into play until the new administration is in place.
* TowerGroup’s, "A Week of Dramatic Change; Hear Our Perspective on the Future," Webinar covered a range of topics, many of which are not included in this column. To find out more about the Webinar, please refer to the TowerGroup web site at http://www.towergroup.com/