Financial firms will increase their spending on data integration from an estimated $1.76 billion this year to almost $2 billion by 2012, according to a report issued by Boston-based research firm Aite Group on Tuesday.

“Data integration enables the full potential of business applications to support key business drivers, and remains a key step in successful application implementations and data management projects,” said the report commissioned by data management software firm Asset Control.

Aite Group said that the data integration projects include personnel, hardware, and internal and external software. Large sell-side firms require data management staff of of more than 50 people to support over 100 applications while small and medium firms have about 5 to 15 staffers supporting 5 to 15 applications.

As a result, spending on data integration projects differ widely. A Tier One bulge-bracket brokerage or global bank might spend from $7 million to $23 million to accommodate multiple business lines and data vendors; Tier Two midsized asset manager and larger hedge fund with $50 billion to $250 billion in assets under management will spend $3 million to $4 million. A Tier Three asset manager or hedge fund with less than $50 million in assets under management will spend between $250,000 to $500,000.

Aite Group said that firms use a combination of batch; request/reply and publish/subscribe methods to integrate data in multiple applications but such a process creates challenges related to the structure of the data, delivery mechanisms and timing. Although service-oriented architecture (SOA) is an alternative used to overcome integration challenges, it is often necessary to augment it with business logic to address specific application needs. In addition, messaging architectures come with their own overhead, causing additional support and maintenance challenges.

Aite Group’s report entitled: Integration: Data Management’s Last Mile was released on the same day Asset Control announced the launch of AC Connect, a new integration software tool as a new module of its AC Plus data cleansing software.

Asset Control says that AC Connect will eliminate the previous cumbersome coding work firms needed to do to ensure the delivery of clean data from a centralized data repository to multiple internal applications. Because AC Connect supports a service-oriented architecture, it will  speed up the time it takes for data to migrate from the centralized repository to firm-wide applications; allow firms to quickly add new applications to receive the data and expand the types of data which can be included in their central repository to include client account data and business entity data.

This article first appeared in Securities Industry News.


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