Banks to spend over $14 billion replacing core systems

Banks to spend over $14 billion replacing core systems

The world's 100 largest financial institutions will spend more than $14 billion on replacing core banking systems by the end of 2005, according to forecasts from research company Celent Communications.

Celent says banks now believe the benefits of replacing core banking systems far outweigh the price, so this spending will take place despite current economic uncertainties and cost-cuts.

Spending on core banking systems is expected to increase steadily over the next three years, reaching $3bn in 2003, rising to over $4bn next year and over $6bn in 2005.

The report suggests that banks have been slow to replace legacy systems as they continue to be haunted by past failures, but Christine Barry, wholesale banking analyst at Celent and co-author of the report, says the risks as well as the costs are high but banks are finding they have little choice.

"Legacy systems, often installed during the 1960s and 1970s, have proven extremely inefficient, costly to maintain, and no longer flexible enough to handle system changes and new applications necessary to meet the growing needs and requirements of the marketplace," says Barry.

In addition, core systems replacement is likely be a major focus for IT spending over the next few years, with between 10 and 20 of the top 100 global financial institutions expected to replace core infrastructure each year for the next three years.

Celent says even the largest institutions with over $100 billion in assets, are expected to spend between $350 and $400 million on replacement projects and can expect to achieve a positive bottom line by the end of the fifth year.

Comments: (0)