TowerGroup says in 2005, banking, securities and insurance institutions will be united in their quest for organic growth, greater operational efficiency and networked services.
“TowerGroup sees fundamental shifts in the way financial institutions will manage their estimated $362 billion in IT investments in 2005, as technology affects the productivity of over $2 trillion in global operational expense,” said Guillermo Kopp, vice president of the TowerGroup Cross-Industry research practice. “Financial institutions will implement process and technology changes in more manageable chunks, and employ business process management and networked services as pivotal elements for strategic transformation.”
Kopp added that it will be increasingly critical for financial institutions to lay out a strategic road map to cut across organizational silos and fulfill their customers needs more proactively. “This is something the industry has talked about for years, but has been hard-pressed to implement effectively,” he said.
TowerGroup projects that technology spending by the banking industry in 2005 will represent at least a 4.4% increase over 2004 levels. Of this amount, the bulk of spending (72%) will occurs in the EU and North America – with consumer banking continuing to command the greatest share of overall IT spend across all regions of the world.
By comparison, TowerGroup projects overall IT spending in the US insurance industry to remain relatively flat from 2004 to 2005 – with important differences in the way each business line will direct its resources. 2005 will see a slight increase in total IT spending for property and casualty insurance, reflecting a pent-up demand for new technology, while life and annuity will remain flat as insurers work hard to capitalize on existing investments.
Overall, TowerGroup found the global securities industry is resuming growth in IT spending at a more measured rate. Between 2001 and 2003, technology spending dropped at a compound annual growth rate (CAGR) of negative-7%. From now through 2008, TowerGroup projects IT spending to rise across the global securities industry at a CAGR of 4%.