Enterprise data management (EDM) initiatives will account for $1.67 billion of spending by financial services firms in 2007, driven in the US by securities reference data challenges and data silos, and in Europe by the requirement to control client and counterparty data to comply with regulation such as MiFID and Basel II. So says analyst Aite Group in its new report, Capital Markets IT Spending Priorities in 2007. Fifty-four per cent of the firms surveyed by Aite said they anticipate implementing an EDM solution this year, with 38 per cent uncertain and only eight per cent saying they wouldn’t be undertaking an EDM project.
Some 12 per cent of the EDM spend – $201 million – will go on corporate actions processing, Aite reckons. Its findings suggest another 17 per cent of the EDM expenditure ($285 million) is earmarked for managing reference data. While “many tier one projects have been met with limited success due to lack of downstream integration”, the analyst says, firms “are revisiting that effort this year with a focus on removing multiple security masters and other duplicitous data silos”.
Firms’ spending on all aspects of IT will amount to $38.1 billion this year, Aite predicts, and growth in IT budgets will continue through to 2010. In line with this, EDM spend will top $2 billion in 2009, with corporate actions management spending hitting $141.5 million and spend on reference data management reaching $218.7 million.
The analyst also identifies a growing interest in outsourcing technology and business processing needs – with post-trade processing and reference data services being of particular interest to firms. Of the 2007 total spend of $38.1 billion, 57 per cent ($21.7 billion) will be dedicated to external resources, Aite reckons. “With the marriage of business and IT, outsourcing the complete plumbing makes sense in a lot of cases,” it writes. “Reference data vendors, standing settlement instruction (SSI) support and other areas are popular in this arena.”
Nearly 70 per cent of firms surveyed by Aite expect to implement some form of process automation improvements in 2007, and these tools have a key role to play in data efficiency efforts, the analyst believes. “CIOs are leveraging process tools to create efficiencies around core data scrubbing and maintenance,” it says in the report. “Client data, counterparty data and securities reference data are all seeing a focus on data ownership and improvements in process and auditing capabilities.” Among the uses of business intelligence systems for reporting – also proving popular this year according to Aite – is for analysis on reference data services.
Less positive news for EDM proponents comes in Aite’s findings on staffing priorities. Fewer than a quarter of firms plan to appoint a chief data officer, it says, and fewer than half plan to grow their database administration capabilities.