Two-thirds of financial services firms fear their analytics programs and infrastructures will not be able to handle increasing analytical complexity and data volume, according to a survey of financial services professionals. Completed in July 2010, the survey indicates that firms are hampered by a lack of scalability, inflexible architectures and inefficient use of existing computing capacity. Noteworthy differences exist in the challenges being faced by both buy- and sell-side firms, with sell-side institutions more likely to report a lack of a scalable environment, insufficient capacity to run complex analytics, and contention for computing resources as significant challenges.
According to the survey, data proliferation and the need to better manage it are at the root of many of the challenges being faced by financial institutions of all sizes. Two-thirds (66 percent) of buy-side firms and more than half (56 percent) of sell-side firms are grappling with siloed data sources. The silo problem is being exacerbated by organizational constraints, including policies prohibiting data sharing and access, network bandwidth issues and input/output (I/O) bottlenecks. Ever-increasing data growth is also cause for concern, with firms reporting that they are dealing with too much market data. Sixty-six percent of respondents were not confident that their analytics infrastructures would be able to keep pace with demand over time.
Both buy and sell side firms plan to increase their focus on liquidity and counterparty risk in the next twelve months. Counterparty risk management was ranked as the highest priority for the sell side (45 percent) with liquidity risk following at 43 percent. Liquidity risk and counterparty risk scored high for the buy side with 36 percent and 33 percent, respectively.
Comment from David M. Wallace, global financial services marketing manager at SAS: Siloed data sources have particularly impacted firms in the area of risk management as was evident during the recent financial crisis. The improved liquidity and counterparty risk management needed by both the buy and sell side, as reported in the survey, requires greater enterprise data integration across the firm.
Comment from Robert Iati, partner and global head of consulting at financial services research firm TABB Group: It's clear that organizations need more flexible infrastructures and platforms to enable them to manage the data issues that both buy- and sell-side firms have today, which includes managing an exponentially larger glut of data at compressed speeds.
Comment from Jeff Hong, head of financial services industry marketing at Platform Computing: We found that mid-sized firms are particularly affected by resource constrictions, where one in four respondents reported challenges around limited computing capacity, frequent contention for compute resources and the inability to complete calculations during peak demand periods.
To counter these challenges, financial institutions plan to turn to a combination of technologies including cloud computing and grid technologies. Within the next two years, 51 percent of all respondents are considering or likely to invest in cluster technology, 53 percent are considering or likely to buy grid technology, and 57 percent are considering or likely to purchase cloud technology.
About the survey: The survey was conducted by Wall Street & Technology in conjunction with Platform Computing, SAS and The TABB Group among 223 business technology decision makers, with approximately 45 percent of respondents from organizations with more than $50 billion in total assets or assets under management. Survey participants hold IT management positions, with approximately 23 percent holding C-level posts. The report ("The State of Business Analytics in Financial Services: Examining Current Preparedness for Future Demands") is freely available for download here.
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