Though it is well known that technology projects should be driven by business priorities, a new study by Framingham, Mass.-based Financial Insights finds that the buy side is having a tough time with this concept.
The report, "North American Investment Management Survey 2003," written by Senior Analyst Gene Kim, suggests that investment-management firms are still struggling to align business issues with IT. The study surveyed 29 firms, including 11 top-50 North American investment-management firms.
The survey found that although the top business concerns were regulatory compliance and risk management, IT priorities were portfolio modeling and analytics and trading/order management systems. "What's striking is that there is a difference between top business concerns and what technology projects the firms are spending money on," Kim says.
He attributes this to the lag between the business environment and the IT marketplace. What you can do internally, he says, often doesn't line up with tactical initiatives. "Firms need to take a look at internal processes and make sure they are as flexible as they can be and react to important business initiatives," Kim asserts.
He adds that the dichotomy between business and technology issues illustrates a cultural change. Investment-management firms are focusing more on managing their businesses right now than on their core business of money management. This is a result of the recent scandals in the financial-services space, he says. For the first time, clients, particularly institutional clients, are asking their money managers questions about how they run their businesses, and they must be able to react to that.