North American securities and investment firms' spending will not return to 2007 levels until after 2012; spending on regulatory compliance will take precedence.
IT efficiencies will be led by reductions in proprietary development and a faster shift toward hosted software applications and further outsourcing/offshoring.
Brokerage and wealth management will reduce IT spending the least of any sector in the securities industry, allocating new investment to front-end tools and regulatory compliance.
Investment managers' three biggest business initiatives impacting IT budgets are improving firm margins (essentially by cutting costs), enhancing risk management, and preparing for compliance with new regulations.
The IT budgets of capital markets firms took the hardest hit of any in the industry, with deep cuts in investment banking spending as well as decreased spending on trading and processing technology.
As a percentage of total spend, the industry's spending on new technology declined by 6% from 2007 to 2009 and shifted toward maintenance, an allocation TowerGroup expects to remain fairly constant over the next three years.
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