Rising IT costs will force capital markets firms to take ASP route

Rising IT costs will force capital markets firms to take ASP route

The application service provider model for information technology delivery is set to become a firm favourite among capital markets participants as the cost of buying and maintaining inhouse IT systems becomes unmanageable, says a new research report from Boston-based Tower Group.

Following initial limited adoption by the industry, vendors are now improving solutions based on customer feedback and are finding increasing success in matching offerings to the needs of capital markets players, the research reports. Under the ASP model, companies rent out applications on a need-to-use basis, rather than sourcing and running the technology infrastructure inhouse.

TowerGroup estimates that industry spending on ASPs in the US capital markets space will rise rapidly over the next few years predicting a growth rate of 108.4% each year.

The study concludes that spending will be largely driven by small and mid-size firms jumping quickly on the ASP bandwagon, with large, established firms exploring ASPs primarily for special trade-related tasks such as valuation analysis for risk management.

Dushyant Shahrawat, the TowerGroup analyst who conducted the research, argues that CIOs of both large and small financial firms will increasingly need to consider the ASP route. "The cost of buying and maintaining-in-house-the range of IT systems needed to support capital markets industry players is fast becoming unmanageable," he says. "At the same time, CEOs of these firms are increasingly recognising the competitive advantage of strategic outsourcing, particularly in the IT area."

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