If the securities industry is spending money on IT anywhere at present, it is in cutting costs by increasing efficiency. With front office revenues geared to plunging stock markets, the only way to widen margins is to cut costs. Further evidence that CTOs have a strong appetite for increased efficiency in transaction processing – and that they are prepared, often for the first time, to consider buying solutions from vendors – comes in a report on order management systems, published today by consultants Celent Communications.
“For the first time in roughly a decade, buy-side firms are no longer producing double digit returns ,” says Celent.
” While sell-side has traditionally been the first to take up new technology, since they have the underlying trading volumes. The buy-side is in a position right now to benefit operationally from increased automation, regardless of volumes. A great example of this growth is the buy-side order management system marketplace. While it is now several years old, interest in order management systems is growing again. ” Celent estimates that buy-side firms will be spending US $700 million on order management systems by 2005.
It is not hard to see why. Fund managers are notoriously slow to adopt new technology, and always reluctant to pay for it, but the current environment is forcing them to cut costs by raising rates of STP. Order management systems are the quickest way to do that throughout the front and middle office. “This trend is beginning to change, as a result of the deterioration of market conditions since the spring of 2000 ,” explains Fritz McCormick, author of the Celent report, which is entitled Buy-Side Order Management Systems: Automating the Front Office. “These firms are looking for new technologies to cut costs and increase efficiency.”
The Celent report discusses major trends in the order management marketplace, and examines the key features a system needs to include .It looks at all the top players in the marketplace, including Advent, Charles River Development, Eze Castle, Indata, Linedata, Macgregor, SunGard and Thomson Financial. “Celent believes this marketplace is poised for continued growth, and we expect that growth to come from a buy-side community that, for the first time in a great while, needs technological tools to help increase efficiency, reduce costs and increase their competitiveness as clients, grown wary of low returns, begin to seek alternatives,” says McCormick.