IT Spending Trends: A Global Financial Services Review

November 13, 2006

Abstract

New York, NY, USA November 13, 2006

Celent aggregates financial services IT spending trends across regions, across the industry, and around the world.

In a new report, , analyzes IT spending trends across different industry verticals (banking, insurance, and securities and investments) and different regions (North America, Europe, and the Asia-Pacific region) in addition to an overview of Latin America and Africa. The prime focus of the report is to compare and contrast to pinpoint and understand the direction of IT spending among financial services institutions.

Celent estimates that global information technology spending by financial services institutions stands at US$317.7 billion. This represents an increase of 8% over 2005. Although the US economic forecast is relatively upbeat, the growth in IT spending by financial services firms is expected to curtail starting in 2007. The financial services community is anticipated to spend US$351.2 billion on global IT products and services in 2008, or a growth rate of 5.1% per annum.

Financial services institutions in Asia-Pacific are expected to increase their investments in IT at a significantly faster rate compared to firms in other parts of the world from 2006 to 2008, a compound annual growth rate of 11.4%.

"Globally, financial services firms are heavily dependent on an IT infrastructure that is flexible and reliable. In the fast-paced world of financial services institutions, it is critical to seek sustainable operational efficiencies. As the 'new investment initiatives' tally can tell, financial services institutions worldwide are keen to spend money to replace old systems, thus reducing IT maintenance expenses," states Louise Westerlind, analyst in the Institutional Securities & Investments group at Celent and co-author of the report.

Around the globe, financial services firms have invested heavily in IT for some years. It is starting to pay off and the growth of spending in maintenance will stabilize somewhat. On the other hand, the growth in new investments will not taper as extensively.

The financial services institutions continue to invest briskly in maintenance rather than in new investments. 74.5% of the total IT investments is in maintenance. Nevertheless, firms are looking at their current IT structure and will invest a larger portion in new investments in 2007 and 2008. Financial services firms in Asia Pacific will contribute to the highest regional growth in new IT projects, which is a compound annual growth rate of 13.0%.The more rapid increase in new investments is at least partly a result of needed system upgrades.

Frequently, financial institutions are running systems that are too obsolete, too slow, and inflexible. Systems like these are impediments to achieving optimum operational efficiency as well as new product deployment. Slowly, but surely, many financial services firms, that oftentimes relies on technologies that are nearly thirty years old, are realizing the competitive advantage of modernizing their antiquated core systems.

The 60-page report contains 43 charts and six tables. A table of contents is available online.

 

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

New York, NY, USA November 13, 2006

 

Executive Summary 3
Introduction 6
Definition of IT Spending 7
Compare and Contrast 9
Banking 14
  North America 18
  Europe 22
  Asia-Pacific 25
Insurance 29
  North America 33
  Europe 36
  Asia-Pacific 39
Securities & Investments 42
  North America 47
  Europe 50
  Asia-Pacific 53
The Rest of the World 56
Conclusion 57
IT Spending Reports 58
Objectivity and Methodology 59

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