Spending on IT among wholesale and retail banks far
outstrips the average spend across all UK business – and the
differential in spend is even more marked at the top end. Major
banks spend on average nearly £15,000 per desktop each year –
almost double the UK business average of nearly
£8,500.
By contrast, smaller banks spend a comparatively low £4,500 per
desktop – though, again, this is well up on overall SME average
spend of just over £3,000.
Among larger banks, nearly £6,000 of that £15,000 annual bill
goes on services, and in financial services that money is
increasingly going to outsourcers as banks look to cut the cost
base of their back offices.
It is worth remembering that retail and investment banks are
grappling with different issues in 2006. Regulatory compliance is
high on everyone’s agenda, with Basel 2’s capital allocation
requirements alone continuing to generate huge IT costs – estimated
by Accenture at £2bn in 2005.
But high street banks’ number one issue remains the patchwork
development and extension of their core banking systems over the
past 20 years.
In 2006, many are engaged with the issue of how best to renew
that existing infrastructure.
Investment banks, where many legacy systems have long since been
replaced, face different IT challenges, driven by the competing
demands of the regulatory environment and the need for ever-more
computing power to stay competitive in a market where processing
speed is crucial.
This leads wholesale banks to invest particularly heavily in
hardware, which pushes up major banks’ IT spend to nearly
£6,000.
The analysis is based on Computer Weekly’s database of more than
60,000 IT budget holders, twice yearly user IT expenditure surveys,
CBI/Kew senior executive surveys, government surveys, government
demographic data, HM Treasury economic forecasts and Cambridge
Econometrics industry segment forecasts.
Further
details www.kewassociates.co.uk