SmartAdvice: Match IT Spending To Growth Areas - InformationWeek
IoT
IoT
Business & Finance
Commentary
5/11/2004
07:02 PM
Commentary
Commentary
Commentary
50%
50%
RELATED EVENTS
[Dark Reading Crash Course] Finding & Fixing Application Security Vulnerabilitie
Sep 14, 2017
Hear from a top applications security expert as he discusses key practices for scanning and securi ...Read More>>

SmartAdvice: Match IT Spending To Growth Areas

Overall levels of spending on IT are usually 4% to 7% of revenue, with key focus areas varying by industry, The Advisory Council says. Also, watch VoIP and other emerging telecommunications technologies for the next wave of innovation to transform your business; and clearly understand your company's business needs before determining IT's role.

Editor's Note: Welcome to SmartAdvice, a weekly column by The Advisory Council (TAC), an advisory service firm. The feature answers three questions of core interest to you, ranging from career advice to enterprise strategies to how to deal with vendors. Submit questions directly to smartadvice@tacadvisory.com


Question A: What level of IT spending is appropriate for a midsize to large financial organization?

Our advice: The financial-services industries have reduced most IT spending due to the economic downturn of the last few years. In general, they have focused on short-term investments, such as outsourcing of IT services and applications consolidation to save long-term costs. Operational spending for financial industries is usually well-aligned with business operations, since these industries have stringent oversight and regulatory requirements.


Related Links

Bank Systems & Technology

Wall Street & Technology

Insurance & Technology


Financial Organizations Overview
Typically, financial-services organizations are divided into three broad categories:

  • Banking and savings (credit intermediation)


  • Investments and securities trading


  • Insurance

The overall levels of spending on IT are typically 4% to 7% of revenue, with banking and savings on the high end, and insurance on the low end. The focus of IT spending in each of these institutions varies in detail, but the typical spending is in these general categories:

  • Telecommunications


  • Hardware


  • Software


  • Internal operations support


  • Consulting and professional services


  • Regulatory compliance

IT spending is usually aligned with the growth areas in each of the industries. Financial organizations use technology to save cost and to stay competitive. Because of regulatory oversight of financial institutions, the goals of cost savings are usually better scrutinized then other industries. Key focus areas for particular financial industries that seem to be attractive for IT spending these days include:


Banking and savings

  • ATM services


  • Workstations and branch support


  • Regulatory compliance


  • Mergers and acquisitions


  • Service quality

  • Investments and securities trading

  • Electronic trading and Web services


  • Wealth management systems


  • Regulatory compliance


  • Mergers and acquisitions


  • Expansion into other financial services

  • Insurance

  • Claims management


  • Web portals for customer self-service


  • Field sales systems


  • Service quality
  • Due to consolidation among financial services companies, large organizations are emerging that offer a full range of financial services. This has prompted a large investment in merger-related activities. In addition, a flurry of new privacy regulations, combined with Internet security issues, has necessitated investment in technology for compliance and protection. These trends will continue in the foreseeable future, and will continue to require additional funding.

    Contingency and risk management also have taken on unique importance since the threat of terrorism and other disasters has become a more public concern since Sept. 11, 2001. Investment in technology to maintain business continuity has emerged as a major focus area in the last few years.

    Investment in technology for financial institutions can bring a large payback in competitive advantage and increased efficiency. The focus of investment, however, has to be tightly aligned with business objectives and goals.

    -- Humayun Beg

    Previous
    1 of 3
    Next
    Comment  | 
    Print  | 
    More Insights
    Comments
    Newest First  |  Oldest First  |  Threaded View
    How Enterprises Are Attacking the IT Security Enterprise
    How Enterprises Are Attacking the IT Security Enterprise
    To learn more about what organizations are doing to tackle attacks and threats we surveyed a group of 300 IT and infosec professionals to find out what their biggest IT security challenges are and what they're doing to defend against today's threats. Download the report to see what they're saying.
    Register for InformationWeek Newsletters
    White Papers
    Current Issue
    2017 State of IT Report
    In today's technology-driven world, "innovation" has become a basic expectation. IT leaders are tasked with making technical magic, improving customer experience, and boosting the bottom line -- yet often without any increase to the IT budget. How are organizations striking the balance between new initiatives and cost control? Download our report to learn about the biggest challenges and how savvy IT executives are overcoming them.
    Video
    Slideshows
    Twitter Feed
    Sponsored Live Streaming Video
    Everything You've Been Told About Mobility Is Wrong
    Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.
    Flash Poll