Shake It Up

A new industry forecast from IBM anticipates major changes in the global financial markets by the year 2015.

Researchers from the IBM Institute of Business Value have looked into their crystal ball and what they see is troubling for many players in the global financial services industry. According to a new 10-year industry forecast, electronic trading, regulatory pressures and interest in emerging markets will change the very foundation of the world's capital markets businesses.

The convergence of market transparency, the speed of modern electronic markets and the investor's demand for greater returns will lead to a major market shakeout, claims Suzanne Dence, a senior consultant at the IBM Institute of Business Value and one of the authors of the report.

"The regional broker-dealers and regional exchanges are expected to lose and be shaken out," she said, offering that small firms have neither the expertise, nor the scale to handle the rigorous demands of the investor in ten years. "The winners are expected to be the universal banks."

Of the 402 business leaders surveyed for the report, representing 296 financial markets firms, nearly half lacked confidence in their organization's ability to address the forthcoming changes to the global financial services industry. "As far as how they're going to be able to handle this significant change, ... close to 50 percent said that they were only moderately able to respond to those forces," Dence reports.

The solution appears to be business process outsourcing, a strategy that can cut the cost of redundant process bloat and streamline an institution into an efficient, mission-oriented specialist, able to offer unique products and develop resilient client relationships.

"We think that partnering is going to be critically important going forward," explains Dence. "We're saying very optimistically, 'You can partner with other organizations that can provide a more effective service and help support you, and you yourself can strengthen as an organization instead of shrink.'"

In doing so, the firms with a global presence will prove more nimble, and by snapping up local and boutique ships along their way into emerging markets, bulge bracket firms will afford themselves a true competitive advantage -- the ability to duplicate the depth of local client relationships within a global footprint.