Bank spending on operational risk management (ORM) software and services is set to grow at a compound annual growth rate of 4.7% to reach $1.38bn by 2010, according to an annual study released by Chartis Research.
Chartis says the ORM software market - estimated to be $163m in 2006 - is set to grow at a compound annual growth rate of 7.7% to hit $219m by 2010.
Meanwhile ORM related consulting services will continue to grow at a healthy 10.2% compound annual rate. This will be fuelled by Sarbanes-Oxley, Basel II and other risk or governance regulations. As the second wave emerges, Chartis says it expects systems integrators to increase their activity in this area and derive increased revenue from it.
Helen Townsley, director of research at Chartis, says: "The growth in the operational risk management market is fuelled by replacement spend and new demand from the insurance and fund management sectors."
Townsley says there is also increased demand for ORM technology from the emerging markets such as Asia Pacific, Middle East and Eastern Europe.
But Chartis forecasts that the overall ORM market will not be big enough to justify the existence of the current number of 'niche' software vendors and expects further consolidation in the market.
Recent moves in the ORM software market - including i-flex's acquisition of Ortos, FRS' acquisition of Providus and Financial Objects' acquisition of Raft - have shown that the market is still immature and fragmented, says Chartis.
Overall ORM software market standings by vendor show SAS in the top spot. Chartis says the vendor has managed to hold on to its top ranking while making significant product enhancements and market penetration.
Algorithmics held on to its second place ranking, with its First database driving its market share. Ci3, Methodware and OpenPages have also made significant progress to be included in the top five. However Agena, Horizon, SAP and Cognos exited the top 15.