Financial services sector keep spending on IT

The financial services industry will spend US$350 billion worldwide in 2002, according to a prediction from Gartner Dataquest.

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By  Neil Denslow Published  June 2, 2002

The financial services industry will spend US$350 billion worldwide in 2002, according to a prediction from Gartner Dataquest.

This forecast represents a 7.3% increase on 2001’s total of US$326.1 billion. Gartner adds that there will be continued single-digit growth in the sector through 2005, when spending will surpass $474.4 billion.

“The double-digit industry growth rates common in the 1990’s are gone,” says Susan Cournoyer, senior analyst for Gartner Dataquest’s IT services group. “The slow transition from recession toward economic resurgence continues to put pressure on IT vendors to survive through lean times. In fact, 42% of financial services companies surveyed in late 2001 said that they plan to reduce the number of IT vendors they work with, compared to 22% of companies surveyed in 2000. Clearly the viability of the financial services practices of IT vendors is at stake.”

Much IT spending was put on hold last year because of the economic recession, re-evaluation of CRM spending, and concerns about inadequate infrastructure. However an incremental recovery is now under way, lead by investments in security in the aftermath of Sept. 11, and also in infrastructure and the optimisation of investments in e-business and CRM.

“Although payouts by financial companies related to Sept. 11 intensified the short-term downward pressure on spending, by late 2002 insurance companies in particular will step up IT spending to meet increased demand for insurance offerings. This will be related to a heightened awareness of risk by insurance buyers,” Cournoyer explains. “We’ll also see an increase in IT spending on application outsourcing and business process outsourcing, Web services, and financial services software, reflecting renewed attention to finance-specific business process improvement,” she adds.

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