Financial Regulation Will Boost IT Infrastructure Needs in 2010, Says Analyst

IT vendors will have new opportunities in financial markets institutions in 2010, according to research firm Ovum, thanks to increased need for IT infrastructure that can monitor and handle increased government regulations and compliance requirements. At the same time, however, continuing concerns over spending will limit the ability of these IT vendors to fully capitalize on growing needs for governance and compliance software. Both IT vendors and their client base have been wrestling with the effects of a global recession.

It will be the best and worst of times for IT vendors targeting the financial-markets space, according to a new research report from research firm Ovum. Government intervention will necessitate that companies add new layers of IT infrastructure to handle regulation and compliance issues; at the same time, though, the effects of the recession are still being felt, with belt-tightening very much front-and-center for corporate decision-makers.

"This will create new IT opportunities for vendors in 2010," Daniel Mayo, analyst for Ovum's Financial Services Technology team, wrote in a Feb. 1 statement. "However, vendors will need to deal with flat overall IT market as IT cost management remains the order of the day."

Financial companies' strategies in 2010 will revolve around renewed regulatory focus on issue such as liquidity and risk management, necessitating in turn an embrace of analytics and business-intelligence software platforms that allow those companies to respond to changes in compliance and regulation requirements; in addition, the frequency of reports to regulatory bodies will likely increase.

"This will require institutions to adopt a transformative approach to governance, risk management and compliance, rather than attempt to deal with demands on a one-on-one basis," Mayo added.

Compounding matters will be continued pressure on the part of these companies to keep costs down, even as revenue growth likely returns with an expanding economy.

While prices and the recession have affected potential customers for business-intelligence platforms and other enterprise software, it has also affected the vendors providing those products. In January, SAP announced that it would offer a tiered pricing model for customer support, an apparent stand-down from the business-software maker's earlier plan to raise its entire user base's maintenance fees.

On Dec. 1, SAP had announced that it would delay a decision on increasing customers' maintenance fees until January, following negative feedback from its customer base. In a Jan. 14 conference call, SAP CEO Leo Apotheker suggested that its customers had been facing "strong pricing pressures" thanks to the recessionary environment.

At the same time, seeking a new customer base for their applications, companies such as SAP and Oracle have been targeting their business-intelligence software at SMBs (small and midsize businesses) in addition to the enterprise; according to this rationale, the scalable nature of these BI modules and other programs allows them to be flexibly deployed for small in addition to large companies.