As capital markets firms grapple with the challenges of complying with Dodd-Frank's plethora of rules while continuing to expand into other asset classes and emerging markets, they will globally raise their IT spending budgets by 6% this year, according to a study from Aite Group.
Globally, Aite Group expects capital markets firms to spend $44 billion on technology -- up from an expected $42 billion in 2010 and $39.7 billion in 2009. Wall Street & Technology helped Aite gather responses from financial services technology executives for this report.
With Wall Street firms facing a year of new and still fluctuating regulatory requirements, a huge focus for IT executives this year will include compliance in many technology spending areas, according to Adam Honore, research director at Aite Group and author of the report.
In a sign of the times, in 2010, only 10% of CIOs in 2010 ranked compliance their top priority. In 2011, 25% of CIOs ranked compliance their top priority.
Overall, client reporting and compliance were top of the list in terms of firms' priorities, followed by information security, systems integration and risk management systems. Reference data management, which firms will be expected to supply for regulatory purposes, made a comeback this year.
"Clients want more real-time reporting. Any hedge fund manager and prime broker will say that," Honore' said in an interview with WS&T. "Everyone wants more reporting on the shoulders of crisis, as well as market competitiveness."
Meanwhile, other big movers in priority rankings include imaging and document production, which jumped six positions from 2010, as well as wealth management solutions and mobile solutions. On the flip side, trade analytics dropped eight positions while EMS systems tumbled from fourth in 2010 to sixteenth place in 2011.
Aite also noted that first-time entrants making a respectable showing include colocation, crossing engines and network connectivity.
Cloud computing is now firmly on the radar of Wall Street firms, according to the study. In 2010, half of all respondents indicated they had no plans to explore cloud computing. In 2011, only 27% of CIOs have no plans. Instead, 46% of respondents are exploring the potential of cloud computing as opposed to 33% in 2010, Honore' noted in his report. Meanwhile, 18% of respondents are implementing a cloud strategy as opposed to 10% in 2010.
The fact that cloud computing is quickly maturing in the capital markets means the industry will need to talk about information security and cloud computing with regulators.
"They'll have to see what is and isn't acceptable behavior. And that discussion should start happening sooner rather than later," Honore' says.
For the second year, Aite Group asked CIOs in its survey to identify the key influencers in technology-buying decisions. Once again, business lines ranked highest in terms of influence, with 83% of CIOs indicating a significant influence. CIOs ranked their own organizations nearly identically to business units, but with declining influence. Meanwhile, operations moved up two spots from 2010, while finance shed three positions.
For staffing, 2011 looks nothing like 2010, Honore' says. In 2010, C++ developers dominated hiring, followed by network specialists, Java developers, and .NET developers. In 2011, virtualization specialists rank highest in hiring, followed by data warehouse developers and business analysts.
Honore' says he is excited to see that user experience engineers have moved up from number eleven in 2010 to number five in 2011. "User experience specialists are in dire need at many firms whether they know it or not," he says.
Taking stock of the survey, Honore says he is perhaps most impressed by the fact that the vendor community is finally "really on top of what's occurring the CIOs mind. They're not waiting for user demand to start development."
Third-party applications are making a significant push against internal development in 2011, Honore' says, suggesting that 2011 will be a vintage year for vendors.
In 2010, 38% of applications were being developed by vendors. In 2011, 58% of new applications will be vendor solutions, the first time vendors have crossed the 50% barrier. Further, the overseas development pendulum is swinging back, Honore says in his report. In 2010, IT services companies developed 2% of applications. In 2011, they will develop 7% of applications.
Honore' recommends that CIOs consider more managed solutions. "We are seeing strong offerings from both large and small providers," he says.
Still, with all the vendor consolidation that has occurred in recent months and more expected this year, Honore' urges capital markets firms to really pay attention when selecting a vendor.
"There have also been deals blowing up due to bad financials or ownership arrangements," he states in the report.
Wall Street firms must understand the companies they plan to conduct business with and whether or not they want to support their code should something happen, Honore suggests.
Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in April 2007, Melanie lived in Paris, where she worked for the International Herald ... View Full Bio