Technology spending is dropping at securities firms, and some reps are starting to feel the pinch.
"We haven’t bought a computer or replaced a computer in three or four years," says a Raymond James rep., noting that his outdated hardware is keeping him from using the latest software that his firm makes available to him. "You hear rumors that they’re going to start [upgrading], but then I heard those rumors a year and a half ago."
Such statements come as no surprise to researchers at Celent Communications. According to a recent Celent study, IT Spending Trends in the US Securities Industry, the ever-upwards tech budgets of a few years ago have leveled off, and most available funds now are being channeled towards maintenance and infrastructure projects.
Celent expects tech spending by securities firms to amount to $25.6 billion this year, a 1 percent drop from 2002. However, spending on new-product initiatives has dropped much more precipitously–30 percent since 2002 to $7 billion in 2003–and is unlikely to bounce back any time soon.
Octavio Marenzi, author of the Celent report, says there are some interesting trends buried in the numbers, including an increased use of outsourcing. The amount of money securities firms spend in 2004 on "external" technology is expected to rise to $15 billion, from $13 billion last year. Meanwhile "internal" spending is expected to decrease from $12.5 billion in 2002 to just over $11 billion by 2004.
Spending was "moving in that direction already, but the market downturn has accelerated things quite dramatically," says Marenzi.
Another interesting subtext to the numbers: Wirehouse brokers seem to be suffering at the hands of the tech cuts more than independents.
"Historically captive brokers have had better technology than independent brokers. Today they’re about equal," says Chip Roame, managing principal of Tiburon Strategic Advisors. He added that the continued drain on the wirehouse tech resources could even give independents a leg up in the years ahead.
But in the meantime, maybe brokers of all stripes could use the spending slowdown to figure out how to use some of the technology they already have. As much our Raymond James broker yearns for a hardware upgrade, he admits that there’s plenty of technology already on his desktop that he hasn’t put to use yet.
"There’s so much software, hardware has to be added to handle it," he says. "On the other hand, I don’t want to have a hundred thousand things that I can access that I never use. "
