Buy Side to Exit Businesses, Improve Integration

In a breakfast meeting this morning, Sinan Baskan, financial markets director at Sybase, and Sean O’Dowd, capital markets senior analyst at Financial Insights, offered the result of a survey of 200 IT and line of business decisions makers from the buy and sell side. The survey was conducted via an email form between January and March. The goal of the survey was to find where the opportunities might arise post credit crisis.

More than half of the buy side respondents said they did expect to alter their firm’s strategy as a result of the credit crisis, O’Dowd said. The survey found the changes in strategy would take the form of exiting some business segments as well as increasing the firm’s emphasis on tighter business integration. Similarly, the sell side respondents anticipated changes to their firms' strategies with over 65% saying they will also create tighter business unit integration, but would explore merger and acquisition opportunities as well.

When asked what would enable their firms to succeed, both groups answered: client service, innovation, the ability to raise capital and IT investment. The buy side anticipates a moderate increase in IT investments in the areas of Risk (credit risk and compliance) and client focused technologies such as increasing consistency and accuracy of customer data and customer relationship management.

After years of debate over the misalignment between business and IT, this survey found that both line of business and heads of IT were in sync with each other—both groups emphasizing the same goals and plans. O’Dowd noted that this may be because the organizations are smaller now so business and technology professionals are wearing many hats, or just because the emphasis on communicating and creating a tighter alliance among the two groups has paid off.

When looking at investment in trading technologies, the survey found that both buy and sell side will invest in some trading technologies. The buy side is likely to invest moderately in direct market access, portfolio management and execution management systems. And although it deems this next set of technologies important, they did not plan to invest in them at this time. These trading areas include smart order routing, algorithmic strategies and customized algorithmic trading tools, hedge fund automation/integration and transaction cost analysis.

As for the sell side, it plans to make moderate investments in direct market access, execution management systems, expanded trading partner connectivity and portfolio management, but plans to hold off on investing in hedge fund automation/integration, TCA, multi-asset class trading systems and order management systems.