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Capital markets set to increase cloud investment, predicts Ovum

Archana Venkatraman

Both the buy side and sell side of the capital markets are set to increase their IT spend on cloud computing services while other financial markets firms will increase their spending on IT infrastructure, according to analyst firm Ovum.

Ovum’s research analysts have forecast that due to improvements in cloud security and a wider variety of applications, investment in cloud, by capital market sector, will accelerate. Until now, financial segment was considered to be one of the late adopters of cloud services because of security fears of cloud platforms and stringent compliance regulations.

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The researchers highlighted that although the capital markets aren’t fully integrated with the cloud currently, this situation is set to change in the coming years.

Within the capital market segment, currently the buy side 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, according to Ovum.

Meanwhile, portfolio management systems (PMS) are now commonly hosted solely in the cloud, the analyst firm’s study found.

“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 at 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,” Turner said.

But IT investment and spending is not restricted solely to the capital markets. Ovum’s ICT Enterprise Insights 2013 study has revealed 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 (Foreign Account Tax Compliance Act) 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.

Recently, a Vanson Bourne research also found that hybrid cloud is the next step for most enterprises. As the limitations of using public cloud as a one-size-fits-all service are becoming more apparent, a growing number of enterprises are looking to adopt a hybrid cloud infrastructure instead, it found.

But according to Ovum, there are still obstacles -- such as a lack of standards and deterministic latency -- to overcome before a hybrid cloud infrastructure can be used effectively.

Another area with potential is the adoption of software-as-a-service (SaaS) for vertical-specific functionality, pointed Ovum analysts. This goes beyond generic applications such as customer relationship management (CRM) software, and companies are beginning to capitalise on this market.

“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 sector’s future evolution,” Turner added.


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