US banks to raise IT spend by $5 billion in 2005

US banks to raise IT spend by $5 billion in 2005

US financial institutions will spend approximately $117.8 billion on IT in 2005, up $5 billion from 2004, forecasts TowerGroup.

The research house finds that US institutions are making both organic growth and operational efficiency top management priorities, with IT serving as a critical link between the two.

TowerGroup believes that many US financial institutions are abandoning pure IT cost-cutting tactics as a way of driving short-term operational efficiency. Instead, they are looking to opportunities for sustainable operational efficiency as a strategic objective of the total business.

Virginia Garcia, senior TowerGroup analyst, says: "In 2005, US financial institutions will be less interested in simply driving down IT costs, as they emphasise investing more effectively in IT as a vital driver for growth."

Having reached the boundaries of innovation with aging, siloed and poorly integrated IT architectures, some financial institutions are now addressing the major "plumbing" issues that hinder growth. In 2005, TowerGroup expects the predominant theme in financial services IT spending to be enterprise investments at the architectural level in data, content and business process management - as well as integration technologies.

The challenge, says Garcia, is "to elevate the role of IT and transform it into strategic equity and competitive advantage. To do so, line of business owners must help take the lead in setting IT strategy and make transformation a top business priority."

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