Securities Investments IT Spending Update:Navigating the New Volatility

According to a report published by Celent, as capital markets firms recede, reorganize, and seek safe harbors, IT spending and priorities are coming into focus. Firms are considering their competitive position, capital base, and growth prospects. The weakening economy will have a significant impact on IT spending in 2009 and 2010. In the new report, Securities Investments IT Spending Update: Navigating the New Volatility, Celent examines structural developments related to the economic crisis as well as its impact on IT spending levels, priorities, and trends in North America, Europe, and Asia. This report provides IT firms a weather map of the current climate. C-level executives across the capital markets industry are revising their IT budgets downward. The fall is budget season, and capital markets firms are bracing themselves for the long winter ahead. Based on this pessimistic scenario and the impact of the crisis, Celent is trimming our IT spending forecast for all types of capital markets firms. Although we predict capital markets global IT budgets (including maintenance and new spending) to shrink 7% in 2009 and grow only modestly in 2010 (4% growth), we do expect a recovery in spending levels (8% growth) in 2011.

"While spending is likely to be weaker and move to a lower overall base in the near term, volatility is likely to be an even bigger challenge for IT vendors," says David Easthope, senior analyst with Celent's Securities Investments group and co-author of the report. For example, some longstanding clients of IT vendors may suddenly freeze IT budgets, while potential clients may take longer on spending decisions or even prefer shorter contract commitments. Securities and Investments IT spending may become more difficult to predict, with wild swings. As a result, financial firms and their vendors must not only manage lower spending levels but also equip themselves to navigate this more difficult environment. "Flexibility, competitive pricing, modularity, leveraging cross-product opportunities, and exploiting core areas like operational trade infrastructure and risk management are essential in staying afloat," says Cubillas Ding, senior analyst with Celent's Securities Investments group and co-author of the report. Firms must decidedly adopt a more cautious approach to their IT budgets, but yet can still be smart about consolidating insightful data/information, and building out capabilities that can position themselves favorably for a recovery, he said.