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North American financial institutions will spend $73.8 billion on IT in 2014

Large North American financial institutions will spend $73.8 billion on IT improvements across software, hardware and professional services in 2014 as firms transition investments from “run the bank” to “change the bank,” according to TBR’s Banking and Financial Services Source IT report. 

The overall 2014 IT budget growth rate hovers at 2%, and large banking organizations are increasing investment in multichannel banking and data management to improve system performance to ultimately meet customer demand for improved service and an enhanced user experience.

“Our IT investment strategy is increasingly becoming more practical; we are looking at new business models that we do not run fully in-house and on-premises,” says a vice president of Enterprise and Infrastructure during a Source IT interview. “While we are not leading-edge, we are moving from lagging and ultra conservative to a more parity position, which I believe will evolve to more leading in the next two to five years. Our IT platforms can become a competitive distinction, and if modelled correctly, can free our resources to work on higher-value tasks.”

According to survey results, banks favour vendors established in the financial services industry and with which they have pre-existing relationships to implement the required improvements. This buyer behaviour signals significant opportunity for identified vendors, as the research shows that 74% of decision makers are at empowered organizations, which are highly aggressive IT adopters with highly distributed IT spending. This represents significant opportunity for vendors across software, hardware, networking and professional services.

TBR’s report provides deep business insights into the IT investments financial institutions are planning based on industry change, internal mandates and customer expectations. “IT is clearly becoming more strategic for financial services companies, helping them maintain the status quo and acting as an accelerator for strategic business shifts,” comments TBR Senior Analyst Allan Krans.

“Although budget increases are modest, we see strong commitment and funding for IT projects that positively impact the customer experience occurring during the next 18 months.”

The representative sample includes institutions of 950 employees or more with $1 billion or more in assets, across commercial and savings banks, financial transactions processing firms, insurance, credit unions, and reserve and clearinghouse services.

Respondents reported budget plans, decision drivers and vendor relationships across the enterprise software landscape. Key categories detailed in the report include industry applications, back-office business applications, productivity, BI and analytics, database and middleware, systems management and security. More than 35 vendors are covered including ADP, Dell, EMC, Equifax, Fair Isaac FICO, HP, IBM, Microsoft, Oracle, and SAP.

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