NEEDHAM, Mass., March 21, 2007 -- New research from TowerGroup finds that the Web 2.0 movement is poised to dramatically change the software applications used by securities firms, both internally- and externally-facing, by promoting greater collaboration and participation. The term "Web 2.0," coined by O'Reilly Media in 2004, refers to the second generation of Internet- based services that use the Web as a platform, employ rich user interfaces, involve some level of collaboration, and rely heavily on user-contributed data.

TowerGroup projects that leading securities firms will benefit from Web 2.0, along with its offspring Enterprise 2.0, by adopting a variety of new tools and technologies for knowledge management and collaboration, data gathering and distribution, and interactions with clients and business partners. Forward-thinking securities firms will analyze the potential for tools like blogs and wikis to augment their service and support infrastructure, potentially providing customers with better self-service capabilities. TowerGroup believes that opportunity for investment managers also exists in applications such as risk and analytics, performance and attribution, and portfolio accounting.

"The most obvious potential for Web 2.0 within securities firms, as well as other business enterprises, is in knowledge management and collaboration," said Matt Nelson, senior analyst in the TowerGroup Investment Management practice and author of the research. "Enhancing a company's current data repository tools with a wiki or blogging platform can greatly improve the quality, timeliness, and collective power of the data, as well as reduce corporate e-mail volumes, improve customer satisfaction and retention rates, and improve time to market with new products. TowerGroup sees several other areas for fruitful application of Web 2.0 in the securities and investments context, including investment research, information distribution, client interaction, and business partner interaction."

Highlights from the research include:

-- Data Gathering and Investment Research -- A key area for Web 2.0 development is in gathering data and idea generation. Some securities firms now consider blogs as valuable a source of information as any traditional media outlet. Investment managers and analysts should be monitoring this arena, if for no other reason than to gauge sentiment toward the companies they follow and hear what actual customers are saying.

-- Information Distribution -- While use of Web 2.0 tools for information and idea distribution is the lowest-hanging fruit for Web 2.0 in the securities industry, it is also the lowest-value application. Several prominent investment firms have begun to leverage tools like podcasts, blog posts, and really simple syndication (RSS) feeds. This flow of information is unilateral, not allowing the client or user to participate and comment. However, it taps the growing use of RSS and other emerging distribution methods that are being embedded on the consumer desktop.

-- Client Interaction -- Though TowerGroup does not expect securities firms to develop social networking capabilities within their client portals, the usability and functionality of these channels can be greatly enhanced through Web 2.0 technologies. With the Internet moving toward what's called the "programmable Web," allowing customers to build their own views of portfolios, news, and other user-specific content in a lightweight interface will prove to be extremely valuable.

-- Business Partner Interaction -- Vendor software applications can also benefit from Web 2.0 technologies. Forward thinking software firms are developing user interfaces as lightweight, Web clients. Web 2.0 technologies allow them to do so without sacrificing the performance and functionality associated with installed desktop applications.

"Clearly, regulatory compliance represents a major challenge, given that Web 2.0 tools are designed to break down walls, both functional and geographical, and to allow freeform collaboration between colleagues and business partners," said Nelson. "But within securities firms, certain walls must be maintained between units or laws are broken. TowerGroup recommends that a standardized platform for collaboration be developed and championed by the firm, with actual collaboration occurring in segmented silos based on functional teams."

At TowerGroup, Nelson examines the technology trends impacting the investment management sector. His research covers a variety of functions in the back, middle, and front office including portfolio accounting, data management, performance measurement, attribution, and analytics.

About TowerGroup: TowerGroup is the leading research and advisory services firm focused exclusively on the financial services industry. A respected source for trusted information and advice, TowerGroup brings many of the world's leading financial institutions, technology companies, and professional services firms a deeper understanding of the business and technology issues impacting their organizations. Headquartered near Boston in Needham, Massachusetts, and with offices in North America and Europe, TowerGroup serves a global client base. Visit http://www.towergroup.com for more information.