Investing in the Financial Services Vertical

By Kelly Teal Comments
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Kelly TealThe financial sector's projected IT and telecom spending is staggering, topping $1 trillion over the next six years. The anticipated increases come as banks, trading firms, wealth management companies and other players recover from the financial crisis, adjust to a new era of government oversight and can once again anticipate the impact of that scrutiny on their operations. “The market is starting to get away from being frozen by regulation ... and so there is likely going to be a big push to get more strategically focused around where organizations think that they have the best ability to compete and win," said Bob Contri, vice chairman of auditing firm Deloitte LLP's banking and securities sector, in the company's "2013 Banking Industry Outlook." As a result, Deloitte and other industry observers predict significant jumps in the financial vertical's outlay on communications and IT services.

The Insight Research Corp., for example, said in a February 2013 report that the global financial services industry will spend more than $1 trillion on telecommunications services and equipment during the six-year period 2012-2017. The compound annual growth rate over that period is more than 8 percent, starting with $135 billion in 2012 and growing to $217 billion in 2017,  the research firm found. "This sector consumes practically everything that telecom companies can offer, including hardware, applications, connectivity, managed services, hosting services, disaster recovery, security management, backup and storage management, storage area networks — not to mention their huge appetite for wireless and wireline connectivity," said Robert Rosenberg, president of Insight Research.

At the same time, Celent said in January 2013 that IT spending among banks in the United States and Canada will grow by 4 percent this year, to $56.9 billion, and by another 4.4 percent next year to $59.4 billion.

So where are financial firms spending this money? Channel partners and vendors targeting this vertical say there are three hot-button areas: cybersecurity, big data storage and disaster recovery. Let's look at these opportunities one by one.

Cybersecurity. The need for cybersecurity protections among financial firms is growing. In its November 2012 report, Deloitte describes the problem this way: "On the back end, banks continue to operate fragile, undocumented legacy systems that are increasingly prone to operational failure. On the front end, bank websites have experienced a rash of service interruptions due to a variety of attacks, whether motivated by political agendas or the more typical theft of customer data." The solution, Deloitte noted, is to secure the platforms' operational stability.

Kevin Epstein, vice president of product marketing for email security provider Proofpoint, agreed. "Successful partners will examine the firm’s overall security needs — anti-spear-phishing, or archiving and compliance, for example — and make overall security suggestions for products that work to protect seamlessly across all devices, in-network and out-of-network, firm-owned or BYOD."

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