News

Building societies shy away from in-house IT as banks just keep on spending

Business Focus is a weekly column providing at-a-glance statistics and commentary on spending priorities and trends in particular sectors. This week we look at building societies.

Spending on IT among large and small building societies mirrors closely the wider UK business average, with larger building societies spending an average of £8,897 annually per desktop, and their smaller counterparts spending £3,137.

The equivalent figures across all business are £8,455 and £3,132. But this level of spending is dramatically less than the level of investment elsewhere in financial services.

Larger retail banks, which compete across many product lines with building societies, are making nearly twice as much investment in IT as larger building societies, spending nearly £15,000 each year. Smaller retail banks are also spending £4,500 per desktop, or over 40% more than building societies of an equivalent size.

Many smaller building societies outsource their IT rather than manage it in-house, with some sourcing their technology needs from their fellow mutuals.

Skipton Building Society has offered IT bureau operations for 12 years, after developing an integrated core banking system using Jade, an object-oriented software language. Its primary market for those services is other building societies, and late last year Skipton signed its first complete IT management contract, with Loughborough Building Society.

For the most part, however, small and large building societies spend slightly more than the UK-wide business average on software and IT services, but slightly less than others on IT staff.

This suggests that building societies tend to rely on off-the-shelf packages more than most, particularly in comparison with others in financial services, and prefer to outsource some services while keeping in-house IT staffing to a minimum.

Stephen Peete, chief executive of Loughborough Building Society, offered a clue to the thinking of smaller building societies when he said last year that his decision to outsource IT to Skipton was primarily driven by the risk involved in keeping technology in-house.


Methodology

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 sector forecasts.

Further details: www.kewassociates.co.uk

 

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