Sell-side is waking up to the impact of underinvestment in OMS technology.
Consider the headlines in “Trader’s Magazine”:
Since 2008, however, budgets have tightened, many large-scale IT expansion projects have been put on hold, and an operational culture of “doing more with less” has taken root. As a result, according to TABB Group, 75 percent of private wealth brokers and 66 percent of regional investment banks are still postponing upgrades to their equity OMS technology for at least another two years. The same goes for more than a quarter of global investment banks and more than 40 percent of boutique sellside firms.
That’s the opinion of Tabb Group, who via SunGard, a technology provider (including OMSs), has released a new research report that reveals both large and small investment banks and brokers are sacrificing OMS functionality in exchange for aggressive cost cutting. Brokers have been cutting costs in recent years thanks to the drop in U.S. equity commissions over the last five years, which has also included staff.
Sell-side firms, in a misguided attempt to consider their OMS systems feature complete and in maintenance mode cut their OMS development teams to just skeleton crews. Underinvestment didn’t just impact development teams. Testing teams were cut and eliminated, business analysts were let go, run time controls were not implemented, etc. Even after the August 2012 disaster at Knight Capital it still took two full years for Traders Magazine to acknowledge the problem.
Software rots if not maintained is the reality of the situation. When management declares a system “in maintenance mode” and cuts staff it is often the brightest members of the team that move on. Meanwhile the operating systems, the JVM, evolve, but your software rots. Your enterprise users grumble and continue using it, but even they might start defecting to competitors that actually value their IT. So don’t declare your system to be “in maintenance mode” – unless you are prepared to declare your business to be in that mode as well.