In a Webinar hosted by Celent, David Easthope, senior analyst in the firm’s securities and investment practices, discussed his latest research report entitled, “IT Spending Update: Navigating the New Volatility.”
According to Easthope, the crisis of IT spending is poised to accelerate as we move into 2009, with the North American market the most severely impacted. “New investment globally will fall sharply in 2009 and continue until mid-2010 when the markets will begin to recover,” he said.
Easthope added that spending will be slashed, “to the bare bones,” particularly at firms most affected by the credit crisis. Overall capital markets IT spend in North America is expected to decline by 12.4 percent in 2009 to $31.7 billion.
“Buy side firms will scale back, but it will be less dramatic than the sell side,” said Easthope. “There will still be selective investment in advanced trading architecture.” He added that the buy side typically invests more in third party solutions than sell side by percentage.
The top three areas for buy side spend going forward in North America including reducing counterparty risk, automating OTC derivatives and straight-through processing, and risk management and compliance.
In Europe, Easthope says IT spend is expected to decrease by 5 percent in 2009 with continuing investment in electronic execution, straight-through processing and the development of systems for cross-asset investment strategies. He sees the top three areas for buy side spend in cross-investment product strategies, derivatives automation and STP, data management and integration projects.
As for Asia, spending has been “quite strong,” says Easthope, reaching $12.3 billion in 2008. But he does see spending slow to 4 percent growth in 2009 before picking up speed again in 2010.
In Asia Easthope sees buy side spend focused on continuing expansion of hedge funds, a steady increase in electronic and algorithmic trading and direct market access.