With the current scrutiny on budgets, it is inevitable that IT spending will come under some pressure. According to a recent report from consultancy Celent Communications: “Global information technology spending by financial services institutions will reach $358 billion in 2008.” While this is still a 4.5% increase over 2007, it is, says the firm, “substantially lower than the 6.4% growth achieved in 2007. The financial crisis and economic uncertainty have financial institutions tightening their belts.”
Celent states: “IT vendors looking for continued robust spending by new clients will be disappointed in 2009.” However, the consultancy highlights some of the areas that will be prioritised, and this includes derivatives pricing and valuation. “Accurate valuation of complex structure products like exotics has always been a priority for hedge funds, but the focus is now on utilizing third-party providers.”
Options pricing specialist SuperDerivatives will no doubt fully agree with this assessment, and although the company does not publish precise numbers, it does say it continued to see strong growth in the last quarter of 2008. The company claims demand has been driven by institutions seeking cost control – which raises once again the whole buy-versus-build debate – and the need for pricing transparency and accurate risk management.