Lehman bankruptcy and Merrill buy-out shrinks industry IT budget

Lehman bankruptcy and Merrill buy-out shrinks industry IT budget

From a technology perspective, the US securities industry has shrunk by around six per cent in recent days following Lehman Brothers' bankruptcy and the acquisition of Merrill Lynch by Bank of America, according to analysis by Financial Insights.

Up until recently, Lehman represented approximately 3.1% of the overall technology spending - including hardware, software and services - in the US securities and investment Services industry, while Merrill represented around 2.9% of the IT spending.

However among the top 10 securities firms Lehman represented approximately 17.5% of total technology spending, while Merrill accounted for an 18% share.

Add to this the impact of the fall of Bear Stearns earlier this year - which accounted for around seven per cent of the top 10 firms' spend - the selling opportunity for vendors has shrunk by around a third (32.8%), says Financial Insights.

For IT vendors considering sales strategies, the former top 10 US securities have become a much smaller opportunity. Vendors should expect continued difficult market conditions and consolidation, says Financial Insights.

One development will be that Bank of America will be well positioned to white label and provide wealth management services to smaller banks. Also, vendors of risk-oriented intellectual property and decision support technology will see demand for data to originate loans will decline over the next year.

But firms that supply risk software tied to analytics should see stability and some growth, says Financial Insights.

Financial Insights also points out that the integration of Merrill with Bank of America may present opportunities for vendors and other institutions. It is thought the integration will lead to investment in services and IT management tools in the short term.

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