US Securities Industry's Current High Spending Levels on Business Continuity Planning (BCP) will Plateau and Begin Decline by 2006

TowerGroup Finds Focus on BCP Leads to Greater Resiliency for US Securities Industry

NEEDHAM, Mass., March 24, 2004 -- US securities industry technology spending on business continuity planning (BCP) rose considerably during 2001 to 2003 to $2.5 billion, an increase of $895 million or 57%. But new research from TowerGroup finds that IT spending on BCP will rise only marginally in 2005 and will likely decline in 2006-2007 due to greater economies of scale as firms complete building out their core BCP infrastructure. BCP spending will grow a marginal 1.4% over 2004-2005 and will decline 1.3% in 2006 -- assuming threats to the global financial system do not significantly escalate in this period.

"TowerGroup's analysis of the US securities industry's IT spending on BCP indicates that the rapid ramp-up in preparedness is behind us," said Dushyant Shahrawat, senior analyst in the Securities & Capital Markets practice at TowerGroup and author of the research. "Further to this, firms do not have plans to grow their spending much in the BCP arena in coming years."

Additional highlights of the research include:

-- Overall, BCP is evolving from an IT-centric, technology-intensive function focused on "getting the application back up" to a more comprehensive process of ensuring business functions and departments are restored during a disruption

-- that is, "getting the entire business process back up." This involves a much broader and concerted focus on the application in question, accompanying technology, people operating the application, and the business process of which the application is a part.

-- Since 9/11, the BCP function at securities firms has been forced to undertake significantly greater responsibility, with a few firms creating large central departments with BCP responsibility. However, TowerGroup believes the right approach for broker/dealers and buy-side firms is to create centralized guidelines that map to industry benchmarks

-- and then to decentralize BCP efforts to ensure they are incorporated within the regular decision-making process at a business unit level.

"The good news is that the US securities industry stands more adequately prepared to face disasters, even of a considerable magnitude, than it has been at any time in the past," noted Shahrawat. "Our research into the specific plans of individual brokers and investment managers reveals that most firms are operationally resilient, indicating the success of the considerable effort undertaken after 9/11. There is also newfound recognition that BCP is not a one-time fix or set goal for the industry, but a long-term process like total quality management. This realization is important, as it means BCP is being ingrained and 'institutionalized' into the industry's regular decision making process."

Two recent TowerGroup reports on BCP in the US securities industry

-- "Business Continuity Planning in the US Securities Industry: From 'Duct Tape' to 'Predictive Modeling'" and "BCP Spending and Other Perspectives in the US Securities Industry"

-- are available to qualified members of the press for review. Those interested in purchasing a copy of these reports may contact TowerGroup at +1.781.292.5200 or service-info@towergroup.com.

About TowerGroup:

TowerGroup is the leading research and consulting firm focused on the global financial services industry. A respected source for trusted information and advice, TowerGroup brings many of the world's largest financial services, technology 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 New York, London, and Kuala Lumpur, TowerGroup serves a global client base. Visit TowerGroup online at http://www.towergroup.com.

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SOURCE TowerGroup
Web Site: http://www.towergroup.com