January 2013: Robbing Peter to Pay Paul

Waters readers are no doubt tired of hearing about how tough 2013 is set to be for financial services firms. I wish I had reason to doubt everyone’s predictions, but I’m afraid I don’t—this year, if anything, is going to be tougher than 2012. Capital markets CIOs are in the eye of this particular storm, and have been for some time now, given that they are charged with providing all parts of the business with better, more effective technology to negotiate this uncertain period, an unenviable task even for the most battle-hardened technologists.

And, if the sentiments of the three panellists—Richard Anfang, CIO of JPMorgan Worldwide Securities; Scott Condron, CTO of BlackRock; and Adam Broun, CIO, front office, Credit Suisse—from last month’s CIOs panel discussion at Waters USA are used as a proxy for the wider industry, technology budgets for the next 12 months have either been set flat or are marginally down compared to those of 2012. Of course, you can’t take the examples cited by three CIOs as a reliable barometer of what will definitely transpire across the industry, regardless of how large the institutions are that they represent, but they are food for thought.

A common theme we have witnessed across the capital markets since the financial crisis of 2008 and the ensuing slowdown, is that firms are being forced to do more with less, and in this respect, nothing has changed—buy-side and sell-side firms are more so than ever having to deploy software and hardware to support increasingly diverse businesses. This means that with flat technology budgets, CIOs’ tough spending decisions will become that much more acute, forcing them to cut what is deemed non-critical spending in some areas, while at the same time loosening the purse strings to support others—in other words, robbing Peter to pay Paul.

This challenge is succinctly expressed by Max Bowie in his column on page 54. “I believe net industry spending will continue flat, but that this will actually represent a growth in spending on new projects as firms get serious about laying the foundation for sustainable and organic business growth, while also representing a Weight Watchers-like approach to spending management that demands any increases in expenditure be matched by corresponding cuts from elsewhere,” Max writes.

Max’s Weight Watchers analogy is spot on: Firms will be increasingly be looking to trim fat (expenditure) wherever possible, while simultaneously ensuring that whatever changes they make are in the interest of the long-term health of the firm. Perhaps wholesale lifestyle changes for our industry are in order?