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Banks and investment firms will increase their spend on IT to $652bn globally despite the current economic doom and gloom, with a focus on technologies that can create a business return faster.
The latest figures from Gartner revealed an 8% increase in IT spending globally, with software seeing the biggest increase compared to last year and IT services spending accounting for the largest share, according to Gartner.
With the finance firms focused on IT investments with a faster return on investment, more are buying software from suppliers rather than building in-house, driving a 13.5% increase in spending, which Gartner called “the fastest-growing segment”.
Debbie Buckland, director analyst at Gartner, said the current economic headwinds have changed the context for technology investments in banking and investment services.
“Rather than cutting IT budgets, organisations are spending more on the types of technologies that generate significantly higher business outcomes. Spending on software, for example, is shifting away from building it in-house, in favour of buying solutions that generate value from investments more rapidly,” she added.
Software spending will reach $174bn in 2023, according to Gartner, with only the IT services segment higher at $270bn, after a 9.3% increase on the spend in 2022.
Gartner said demand for consulting services and infrastructure as a service has fuelled the IT services category, which it said reflects the increasingly important role of IT service providers helping organisations in the sector amid emerging opportunities and challenges.
Buckland said that the services sector is, however, being shaped by economic uncertainty, which is leading organisations to break down long-term contracts into multiple shorter agreements.
“They’re also reluctant to sign new contracts, commit to long-term initiatives or take on new technology partners, which is driving an increase in the use of IT consulting services,” she said.
Pete Redshaw, vice-president analyst at Gartner, said a global talent shortage affecting banking and investment services with increased costs in hiring and retaining talent.
“Even after the recent widespread redundancies at many of the technology giants, banks are no longer seen automatically by top talent as the most desirable, rewarding or stimulating destinations,” said Redshaw.
“More innovative solutions are needed, such as dropping the requirement for university education and adding benefits such as lifetime retraining, hybrid teams, agile methods and fintech partnerships.”
Redshaw added that CIOs are “prioritising more conservative objectives that support resilient and sustainable growth, such as a better customer experience and more efficient operations”.
He said this is in stark contrast to recent years when “outright growth – new territories, new customers, new lines of business – was the primary objective of banking CEOs”.
Read more about IT spending in banking
- Banks are missing out on additional revenues through payment services because they are stuck with inflexible legacy payments systems.
- Citigroup’s US Personal Banking business has created a repository of customer data and is rolling out a decision engine to provide customers with personalised services.
- Banks are increasingly partnering with fintechs to gain access to their platforms, with few interested in developing such capabilities in-house.