Despite the massive upheavals occurring in the stock exchange business, from mergers and alliances to competition from electronic start-ups, expenditure by exchanges on technology is not growing as fast as might be expected in a business that needs to reinvent itself, find new revenue streams, and expand into new geographies.
So concludes TowerGroup in a new study of IT spending among exchanges It found total IT spending across the global exchange market is growing only slowly.
TowerGroup estimates exchanges globally spent US$2.72 billion on IT in 2006 and that this spending will grow at a rate of 3% through 2009 – breaking down to 4% in 2007 and then slowing to 2-3% from 2007 to 2009.
Spending in Europe is growing moderately, while the US is growing the slowest and Asia growing the fastest, says TowerGroup.
Underlying this spending is major change, say the consultants. TowerGroup points out that stock exchange CIOs are facing the daunting challenge of transforming IT departments into responsive, dynamic, and fast moving organisations. This entails a huge cultural shift and better alignment of technology strategy with overarching corporate goals, such as supporting new products and expanding into new geographies.
Yet CIOs must also focus on gaining efficiencies and developing greater responsiveness to changing market requirements, says TowerGroup. As CIOs begin aligning IT strategy with corporate goals, pressures on IT cost are building.
Of all the public exchanges, TowerGroup reckons those in the United States are currently under the greatest pressure to reduce costs as they go electronic, in order to get their IT expense / revenue ratio in line with that of other financial firms and European counterparts.
The TowerGroup report titled, “Will Exchanges Represent the Next IT Spending Boom?” by Dushyant Shahrawat, research area director in the Securities & Capital Markets research service at TowerGroup, examines changes in IT spending in the exchange sector – analysing the factors driving technology decisions and providing spending estimates by each major geographical region.