Back in January, the Capital Markets team presented its annual list of “Top 10 Technology Initiatives for 2012,” and one of the leading initiatives that we identified was the adoption of new technology and the implementation of innovative IT. Prior to the financial crisis, securities firms were spending about three percent per annum on new innovative technology projects; by 2011, that amount was reduced to half a percent, and zero for many firms. This year, however, the combination of a challenging macroeconomic environment and a business landscape being redrawn by regulations will spur financial institutions to adopt new IT approaches.
While social media, mobility, and tablets, garner headlines in other segments of the market, it is our view that cloud computing will receive the undivided attention of capital markets firms this year. As securities firms continue to grapple with economic uncertainty, volatile financial markets, and shrinking profit margins, some institutions are responding by slashing their IT budgets. Consequently, CTOs are actively encouraging their firms to outsource parts of their technology infrastructure to the cloud. In a CEB survey with 45 heads of infrastructure, 82% of respondents indicated that their firm is planning to develop a private cloud by 2013 and about half of these companies plan to have more than 25% of their application base running on the private cloud by next year.
The long-term appeal of cloud computing – scalability, cost effectiveness, ease of deployment, ease of service provision, and consistency of software code – is far too compelling to ignore. Service providers such as Microsoft, Amazon, and VMWare are leading the charge toward offering a cloud computing infrastructure on which other applications can be built. Business application vendors in the capital markets space like SimCorp, Advent Software, and SunGard will build their software-as-a-service solutions on this cloud infrastructure. Yet, Wall Street firms will exercise caution while implementing cloud projects and will choose to place mission-critical applications in private cloud infrastructures for now. To learn more, join our upcoming webinar, Cloud Computing Opportunities in Capital Markets.
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Turning New Frontiers Into Business Advantage in 2012
Roundtable Discussion and Networking Reception Sponsored by CEB TowerGroup, Microsoft, EMC and SAP.