Buy side firms will spend $586 million on research technology this year and $1.1 billion in 2010 -- a compound annual growth rate of 22%, according to a report put out today by the Tower Group. The reasons for all this investment are diverse: "Instead of depending largely on broker research, buy-side research has become a complicated process that aggregates internal analysis, broker research, independent research, outsourced, analysis, and use of other research tools," said Dushyant Shahrawat in the report. "Managing this complicated process efficiently and ensuring that client dollars are used effectively requires buy-side firms to develop a new technology infrastructure instead of managing it in Microsoft Word and linked Excel spreadsheeets." Brokers, on the other hand, are investing in new research tools to become more cost-efficient, to distribute research to the buy-side under new commission arrangements, and to work with the changes going on on the buy side.What types of technology are these firms buying? The report identifies six categories of research tools: intelligent search and data mining, research performance measurement and management, fundamental data (meaning data aggregation), trading idea platforms, research management, and commission allocation and management systems. Most buy-side firms use at least two of these software types, Shahrawat says -- most commonly search, data mining and data aggregation.