MIAMI-The forecasting firms are fairly unified about their expectations for information technology spending by financial services firms in 2011.


* IDC: 5% up, versus 3% (in computing spend)

* Gartner: 4.7% up, versus 2% (in telecom spend)

* Celent: 3.7% up, versus 2.5%

* Computer Economics: 2.0% up, versus 0.0%


Then there's Brad Lyman, director of technology at Matthews International Capital Management, an independent, privately owned firm in San Francisco that is the largest dedicated Asia-only investment specialist in the United States.

He's expecting to spend 20% more on information technology this year, he told attendees during a CIOs Roundtable at the National Investment Company Service Association 2011 Conference & Expo.

"When I see percentages of IT spend going up 3% or 5%, I think that's a little understated,'" he said.

He said cost pressures and the way vendors are restructuring their pricing models are going to push that higher. And delayed projects, internally, are going to get started up.

"We're seeing pressure from vendors that increase not only (fees) per data license or per (software) license, but the number of licenses, the way vendors are looking for revenue," he said. "I would expect our total spend to be more like increasing 20% this year."

There are some projects that have been held off, that will get attention, and other internal initiatives, that will get funded.

And he expects other firms to follow suit. "I would expect other firms would start to spend money more, start hiring more," Lyman said. "I hope that we've all learned from this past recession how to spend money wisely."


5% Supporters

Lyman's 20% forecast for his firm's technology spending was not seconded by other panelists on the roundtable, who indicated that 5% was more in line with their expectations. These included Peter N. Johnson, chief technology officer at BNY Mellon; Stanley J. Wasilauski, senior managing director at State Street Global Advisors; and Vercie Lark, chief information officer of software supplier DST Systems.

Specifically backing the 5% estimate was Wasilauski of State Street, which, overall, has a $1 billion a year tech spend. SsGA is trying to retire old hardware and old applications. It's outsourcing technology support around the globe, and spreading its software development around the world, as well, including at a tech center in China.

"It's not all about saving money. It's about going faster," including being able to develop software around the clock, all week long, he said. Among its own software projects: code that allows it to 'virtualize' the use of its computing projects, on its own.

The company buys best available software, such as the Fidessa LatentZero trade order management system.

But, "it always tastes better if it's free," he said.

Lark also backed the 5% figure, expecting to spend on data centers, infrastructure and capacity to serve financial services customers domestically and elsewhere, as it tries to grow.

Not everyone expects to spend more. BNY Mellon, big securities services firm, spends $1 billion centrally on information technology and another $330 million in the field, each year.

Even with new tax regulations and security challenges, new bucks aren't necessarily getting tossed into the pot.

"I actually don't think we'll spend more on technology going forward. We're going to be more efficient about how we spend our technology dollars," said Peter N. Johnson, its chief technology officer.

"It's all about simplification,'' he said.


Making Clouds Private

One area that helps is putting services into the computing "cloud," paying only for capacity when needed. But that, he says, isn't really about financial discipline. It's about getting products and services developed faster.

"Cloud computing isn't so much about saving money. It's about time to market and agility," he said.

If you can provide computing capacity on demand to users, you need fewer people to intervene from an I.T. staff. And tasks get done faster.

"It's about getting servers provisioned more quickly," he said. "It's about getting application development and test environments provisioned more quickly."

Which, in turn, allows delivery of products and services to customers faster.

Where will the savings come from then?

Migration towards commodity hardware. Retiring proprietary forms of the Unix operating system, in favor of Linux or Windows. Taking functions off mainframes.

That's no small task for the world's largest custodian bank. It has huge custody systems that have been in place for decades. On "big old monolithic mainframes."

"You can't really retire those things in their entirety," he said. "However, you can systemically factor out portions of them" and modernize those pieces on a commodity platform.

Simplification also can mean consolidating and streamlining how you provide certain business functions. Capturing details of trades occurs in different ways in different lines of BNY Mellon's business. That can be consolidated and turned into a single online service.

State Street and DST Systems each are instituting what they call "private clouds."

Which, at first blush, sounds like a contradiction in terms. The reason, generally, you use clouds is to deal with temporary tasks or peak usage of systems that doesn't last. Instead of buying hardware, installing it and maintaining it for such evanescent purposes, you just pay for it as you go. Someone else owns, operates and maintains the equipment.

But Lark and Wasilauski both say the trick is in making better use of the capacity you already have. Applying "virtualization" and other techniques so that you have more capacity, when you actually need it.

Lark, for instance, estimates that DST only uses about 20% or 30% of its capacity. So if that is coalesced, it can be applied more efficiently to the company's growth objectives, without incurring more expenditure on hardware or software, necessarily.

But, to make this happen, the private cloud has to be shaped like a public cloud. Which means getting software and hardware vendors to act differently. Or at least write contracts differently.

So that, even in your own private cloud, you're only paying for computing power when you use it.

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