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Reference Data Spending to Continue at Highs for Two Years

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Rest assured. The boom years aren’t over yet. Financial institutions will continue their high rate of spending on reference data projects for the next two years as drivers such as operational risk and regulation continue to force firms to clean up their data acts. That’s the conclusion of a new survey from TowerGroup, which said that the majority of firms surveyed reported that they already had funding in place or had budgeted for reference data management projects this year.

The survey suggested that overall per-institution spending on data management projects had declined, though, to $3.1 million last year from a high of $3.5 million in 2002. The marketplace appears to have matured since bursting onto the scene less than five years ago. The TowerGroup report suggests that failed trades have declined to below 10% of all trades, on average, a far cry from the 40% rates reported in some cases back then. The report says that inaccurate or inconsistent reference data and poor data management processes, however, continue to be a significant factor, featuring in almost 60% of the trades that do fail.

The report also points to the growing acceptance of the possibility of outsourcing reference data management, echoing the sentiments of a survey produced for SunGard Data Management Solutions by A-Team Group, publisher of Reference Data Review. That survey – Reference Data Management: Who Should Handle It? – published back in June last year, found that 95% of participating institutions would consider outsourcing at least part of their reference data management process.

The TowerGroup study pointed to the uptake of fully outsourced managed reference data solutions, offered by the likes of SunGard, Accenture and Capco, as evidence of this acceptance. Early adopters, TowerGroup said, have forged such outsourcing deals, instilling a sense of confidence in such solutions among the wider marketplace. It warned, though, that remain many unanswered questions about the details of this model.

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