A new report from financial research group Celent predicts that brokerage firms will continue to invest in IT services despite the current financial crisis.
The report, titled, ‘Brokerage IT spending and priorities: finding a way through lean times’, suggests that the introduction of MiFID and Reg NMS has meant that brokerage firms need to place long-term IT priorities high on the list in order to prove best execution for their clients.
In addition, Celent believe that back and middle offices will have to focus on greater integration and consolidation of applications and services along with an overall streamlining of processes. Areas like risk management, compliance and portfolio valuation will also continue to be of high importance.
In North America, Celent projects that brokerage IT spending for 2008-2011 will move forward at a compound annual growth rate (CAGR) of 1.3%, down significantly on the 8.5% reported in the period 2004-2007.
This is compared to other key findings of the report, which show that IT spending for European sell-side institutions will reach $21.3 billion by 2009.
For IT vendors, the report predicts that they will have to be prepared to meet the needs of the sell-side for cost efficient and flexible services and systems during these turbulent times. Celent believe this flexibility will be an important differentiator for vendors in the years to come.
The credit crisis has now seen three consecutive quarters of writedowns of almost $150 billion, with further losses forecast. Projections for continued weakening in the markets are set for another six quarters at least, contends the report. To combat the current and expected hit on revenue and profits, brokerages are adjusting their technological priorities in the short run and possibly in the long run.