The buy- and sellside are increasingly investing in cloud-based technologies, while other financial firms are expected to increase their information technology infrastructure.
The capital markets are set to increase investment in cloud services, continuing the trend of technology adoption in the industry, according to Ovum, a London-based research firm. New research indicated that due to improvements in cloud security and a wider variety of applications, investment in cloud, by both the buy side and the sell side, is set for further growth.
The research highlights that although the capital markets arent fully integrated with the cloud, this situation is set to change in the coming years, the firm writes.
Currently, the buyside has more integration with cloud services. Order management systems (OMS) are increasingly hosted and managed services delivered by third parties, rather than in-house applications, although they are not yet wholly cloud services. Meanwhile, portfolio management systems (PMS) are now commonly hosted solely in the cloud.
The buy side tends to be an easier target for cloud than the sell side, given that more of its participants are smaller firms with limited IT budgets, says Rik Turner, senior analyst, financial services technology, Ovum. That said, the sell side is changing. With budgets and headcount under more constraints since the global financial crisis, there are clearly opportunities on that side of the business too.
Investment in IT infrastructure is not restricted solely to the capital markets. Ovums reserch reveals that financial markets firms in general are set to increase their spending on IT systems. As with capital markets firms, changing regulation, the introduction of FATCA and continued IT failures are driving spend on risk and compliance.
As capital markets participants deploy more of their internal IT infrastructure in the cloud, some see the hybrid cloud as the next logical step. However, there are still obstacles to overcome before this can be utilised effectively, such as a lack of standards and deterministic latency. Another area with potential is the adoption of software-as-a-service (SaaS) for vertical-specific functionality. This goes beyond generic applications such as customer relationship management (CRM) software, and companies are beginning to capitalise on this market.
Turner concludes: Cloud services adoption in the capital markets has increased in the last few years. In the future, there will be an even faster uptake of cloud services. Although the process of migrating services to the cloud is often driven by cost constraints, there is also now a dimension of preparing a platform for the sectors future evolution.
