Business Focus: Banks are the big spenders when it comes to IT

Business Focus is a new weekly column providing at-a-glance statistics and commentary on spending priorities and trends across particular industry sectors. This week we look at banking.

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.

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