Bank IT spending to decline in 2009 - Financial Insights

Bank IT spending to decline in 2009 - Financial Insights

Financial Insights is predicting an overall reduction in IT spending for North American banking in 2009, and negative growth for five years afterwards.

Some of the drivers for the lower overall spend in the forecast are contraction of the industry, increased embrace of outsourcing and offshoring, continued data centre consolidation, and pressure on bank profits.

The analyst house says banks interviewed in October and November report halts in 2008 spending and smaller budgets for 2009.

Expenses will be lowered by reducing IT staff, continuing virtualisation projects, delaying planned hardware purchases, and stalling projects already underway.

The cut-back in IT spending by US banks is unprecedented for an industry that has proven unusually resilient in previous economic downturns.

The largest institutions, controlling more than 70% of the IT spend, will forgo innovation and instead focus on acquiring troubled assets and integrating systems of merged institutions, says Financial Insights.

"This will actually soften the decline in IT spending by injecting some new spend for 12-24 months post merger, but with a lower overall base for the merged institutions," says the report. " Smaller institutions that are well capitalised will find fintech vendors more willing than ever to strike deals in 2009."

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