Why It's Important: The need for business intelligence technology -- which can help firms understand counterparty exposures and operations risks and eliminate points of failure, as well as monitor performance and identify business opportunities -- came to light amid the collapses of several broker-dealers last fall. "The idea that you can have a valuations process that's discrete or distinct from a risk management process or even distinct from an operations process is being thrown out the window," says Stephen Bruel, research director, securities and capital markets, TowerGroup. "How do you know what instrument to value if you haven't confirmed a trade yet? If operations are behind, if you haven't done a reconciliation with the counterparty, how do you know what transactions you need to collateralize or don't need to collateralize? If you don't know, what assurance do you have, for example, as a buy-side shop that you're not overcollateralizing the transaction?"

Where the Industry Is Now: Although quants and research analysts make heavy use of reports and analytics, business intelligence is largely absent from areas such as operations, risk assessment, investment performance and customer service. Most firms have multiple, disparate customer databases, operations data sources, collateral management databases and trading data stores that make it impossible to optimize business intelligence tools, which require a solid data foundation (often called a data warehouse) or at least clean and consistent data sources. Some capital markets firms are working to integrate data stores to facilitate BI-style dashboards and reports. Large enterprise data management projects that were begun at many large Wall Street companies several years ago but abandoned when the recession hit and IT budgets and staffs were dramatically cut may see new life in 2010.

"The steps to create a robust enterprise data management process are difficult to map out and implement, and you have the challenges of who's going to pay for and manage it?" Bruel says. "And if we have trouble with data management in individual silos, what's going to happen at the enterprise level? It becomes a series of tactical decisions."

Business intelligence is also emerging in wealth management. For example, wealth management firm Janiczek & Co. recently chose hosted BI software from Mydials to monitor and manage portfolio management, relationship management, service management, sales management and business management results. "You get what you inspect, not what you expect," says Joseph Janiczek, the firm's founder and chairman. Some wealth management firms are seeking to provide better-looking and more sophisticated client reports, according to Craig O'Neill, SVP of Odyssey Financial, a provider of wealth and asset management software.

Focus in 2010: Some of the new rules Congress and regulators come up with likely will require business intelligence capabilities. For instance, regulators are certain to require firms to repeat the recent stress tests, according to TowerGroup's Bruel. "Broker-dealers are going to have to run internal stress tests for things like liquidity and report their findings back to the regulators," he says. Such activities should drive the purchasing of data management software and technology that provides more efficient access to information, such as in-memory databases. Further, complex event processing software will make its way into the back and middle offices to help firms answer questions about risk and valuations, Bruel adds.

At BNY Mellon, 2010 plans include making the new business intelligence software easier to use and to deliver more-intuitive charts and reports -- for instance, showing salespeople at-a-glance wins versus goals or showing regional CEOs which opportunities require decisions in the next month.

Industry Leaders: Bank of New York Mellon recently completed a number of customer data integration projects to build business intelligence reports (using Oracle software) for institutional sales groups. State Street is engaged in an ambitious enterprise data management initiative.

Technology Providers: IBM, Oracle, Sybase, SAP, Microsoft, Actuate and Mydials.

Price Tag: Open source (free) and inexpensive business intelligence tools are available, but the underlying data integration or data cleanup projects tend to run in the millions of dollars.