Global IT spending on reconciliation exception management will hit $700 million this year, with around half of this making its way to third party software vendors, according to research house Celent.
The rest of the expenditure will go on specialised providers ($90 million), external resources ($200 million to $250 million) and maintenance and upgrades ($150 million).
This spending is also expected to accelerate over the next few years, growing at a CAGR of nine per cent and reaching $829 million in 2012.
The main customers are tier one and two banks and brokers accounting for 45%, followed by asset management with 38% and custodians with 17%. Geographically, Asia is far behind North America and Europe, which account respectively for 45% and 43% of overall spending in reconciliation exception systems.
Celent says the demand for reconciliation and exception management systems is being driven by the evolution of the capital markets industry, citing rising trade volumes and exceptions, an increase in instrument complexity, derivatives usage, multisided reconciliation, compliance needs and a reduction in total cost of ownership and the development of shared services.
It argues vendors are beginning to punt more attractive hosted and on demand systems to help drive down costs and claims that SmartStream (29% market share) and recent Broadrdige acquisition City Networks (nine per cent) offer the most flexible and complete reconciliation engines on the market.
Axel Pierron, SVP, Celent, says: "Vendor functionality is fairly undifferentiated, but customer preferences are for smart, rule-driven reconciliation engines with a high degree of flexibility and the ability to customise. Exception management is viewed as a core part of any solution."