A 5% Tech Spending Increase? How About 20%

February 16, 2011 – (MIAMI) The forecasting firms are fairly unified about their expectations for information technology spending by financial services firms in 2011:

IDC: 5% up, versus 3% (in computing spend)
Gartner: 4.7% up, versus 2% (in telecom spend)
Celent: 3.7% up, versus 2.5%
Computer Economics: 2.0% up, versus 0.0%

Then there's Brad Lyman, director of technology at Matthews International Capital Management, an independent, privately owned firm in San Francisco that is the largest dedicated Asia-only investment specialist in the U.S. He expects to quadruple that.

He's expecting to spend 20 percent more on information technology this year, he told attendees during a CIOs Roundtable Tuesday morning at the National Investment Company Service Association 2011 Conference & Expo.

"When I see percentages of IT spend going up 3 or 5 percent, I think that's a little understated,'' he said.

He said cost pressures and the way vendors are restructuring their pricing models are going to push that higher. And delayed projects, internally, are going to get started up.

"We're seeing pressure from vendors that increase not only (fees) per data license or per (software) license, but the number of licenses, the way vendors are looking for revenue,'' he said. "I would expect our total spend to be more like increasing 20 percent this year."

There are some projects that have been held off, that will get attention, and other internal initiatives, that will get funded.

And he expects other firms to follow suit. "I would expect other firms would start to spend money more, start hiring more,'' he said. "I hope that we've all learned from this past recession how to spend money wisely."

Lyman's 20 percent forecast for his firm's technology spending was not seconded by other panelists on the roundtable, who indicated that 5 percent was more in line with their expectations. These included Peter N. Johnson, Chief Technology Officer at BNY Mellon; Stanley J. Wasilauski, Senior Managing Director at State Street Global Advisors and Vercie Lark, chief information officer of software supplier DST Systems

Specifically backing the 5 percent estimate was Wasilausky of State Street, which, overall, has a $1 billion a year tech spend. SsGA is trying to retire old hardware and old applications, it's outsourcing technology support around the globe, and spreading its software development around the world, as well, including at a tech center in China.

"It's not all about saving money. It's about going faster,'' including being able to develop software around the clock, all week long, he said. Among its own software projects: code that allows it to 'virtualize' the use of its computing projects, on its own.

The company buys best available software, such as the Fidessa LatentZero trade order management system.

But, "it always tastes better if it's free,'' he said.

Lark also backed the 5 percent figure, expecting to spend on data centers, infrastructure and capacity to serve financial services customers domestically and elsehwere, as it tries to grow.

This story originally appeared on Securities Technology Monitor.

Tom Steinert-Threlkeld is the editor-in-chief of Securities Technology Monitor.

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