Cindy Murray's not alone among bank execs when uttering the following words, but she's not in a crowded room, either: "In 2009, we didn't cut the budget; in 2010 we are increasing our budget in areas of treasury and transaction banking...not only payment services but also liquidity," says Murray, a global corporate banking e-commerce executive at Bank of America.

Murray's in an enviable position for a bank technology exec-treasury management is considered by many bankers to be one of the few places where IT staffs are getting a green light on spending in 2010.

"Anything related to wholesale or corporate banking or transaction banking will get [IT investment] in 2010," says Jacob Jegher, a senior analyst for Celent. "Corporate banking will see an increase in IT spending to offset lackluster growth, if not negative growth on the retail side."

But these bright spots aside, looking for big time increases in IT spending will be like wishing for a home run derby during the dead ball era-a case of hope outpacing reality, with spending in most business lines flat or seeing nominal growth for least another year. And analysts say bank execs should be more alert than usual when it comes to over eager pronouncements from the tech community.

"There are signs the economy is turning over, but it's still going to be a tough environment," says Aite's Gwenn Bezard. "What's troubling is not the fact that spending and revenues are up this quarter, but vendors coming out and saying things are great when earnings are still low. Vendors are overshooting in their reading of the uptick. It's not very wise for vendors to make a big fuss around these early sings of optimism. Companies should remain focused on having reasonable expectations."

Slow and Steady Wins the Race

While analyst projections and spending totals differ based on specific definitions of what exactly constitutes an IT investment, they all paint a trendline of slow or stagnant growth. Celent's most recent projections for 2010 North American IT spending peg it at $50.9 billion by banks, up only $600 million from 2009's total. And spending on new bank IT investments-as opposed to maintenance-oriented spending-in North America will crawl northward to $11.1 billion, up from $10.5 billion in 2009 but below $11.8 billion in 2008. For all financial institutions, Celent says IT spending in North America will hit about $119.7 billion in 2010, up from $116 billion in 2009, but still just below 2008's levels of slightly less than $120 billion.

Ranjit Bawa, a senior director at Deloitte, says the rapid consolidation that accompanied the crisis provides cover to hold the line on future investment. "There's a lot of infrastructure that's not being optimally used," he says, adding IT spending growth in North America should be relatively slow, though organic bank expansion in Asia and Latin America should give the IT market a boost in those regions. "There's a lot of branches being opened in Asia, and banks will need to build infrastructure to support that."

Globally, Gartner's recently released projections puts financial institutions' IT spending at just less than $246 billion in 2010. That's an increase, but only if 2009's the only other year on the graph. 2009's total of $239.7 billion was down from $260.5 billion in 2008 and still a bit lower than 2007's $248.9 billion.

"Spending is mostly flat, a majority of banks will have flat or declining budgets in 2010," says Aite's Bezard, adding the downward push and subsequent focus on ROI have been dramatic enough to change corporate structure at many banks. "Finance executives and CEOs are getting more influence over IT decisions."

Beyond sharing decisions with other execs, the modest budgetary raises CIO will get to spend in the future will have to absorb the budget hemorrhages of the past couple of years, as well as the strategic mistakes made by the business units of many institutions that were part of the crisis. "Financial institutions are taking a one-two punch. Regulators have stepped on or curtailed some of the pricing practices of many banks, making it tougher to generate fees, and have also made risk-based pricing tougher," says Paul Christian, an svp at First Data. "So banks are going to feel pressure on revenue at the top line and, at the same time, they'll be looking for ways to maintain costs."

On top of that, some IT directors are playing catch up, with last year's technology staffing cuts slowing the deployment of many projects and increasing the rate of failed IT projects. Necessary and overdue upgrades of legacy systems will likely take precedence over new innovation even as the industry recovers. "[Banks] overreacted and clamped down on spending pretty strong," says Jim Washburn, a banking consulting practice leader for North America for Capgemini Financial Services. "But [the crisis] turned out better than a lot of people feared, so some tech spending is coming back."

Washburn is predicting growth in the two-to-three percent annual range over the next couple of years. That's pretty modest compared to earlier this decade, and certainly when compared to the 1990s, but it's still better than the eight percent decline he measures from peak spending levels of the 2007/2008 period. "We're still not even back to 2008 totals," Washburn says, projecting total financial services IT spending in North America will reach a total of about $150 billion by 2012 at its current pace.

The IT environment for the near future will also favor less risky customer retention initiatives based on aggregating and analyzing existing data, over tech plays that involved prospecting for new customers. "Many of the large acquisitions have happened and lot of banks are pushing up against their market caps," Washburn says. "So you have to see more products that leverage existing customers."

Even initiatives that sound forward-looking, such as mobile banking or Web 2.0, still come with a heavy focus on right-sizing overhead. "You can reach more people at less cost," Washburn says.

Not surprisingly, the rough fiscal environment can make for infighting at the office. Bezard says a big story in IT strategy is the migration toward business process outsourcing. The outsourcing industry has become more sophisticated-more mid-level management tasks are being shipped to overseas and domestic service providers. Future IT spending decisions will include decisions on BPO, which could make for tense times at many banks. "When you talk about BPO and IT, you are potentially cutting jobs," Bezard says. "It could be very political."

All in all, 2010 will be a decent news/bad news proposition for bank tech execs-there's some green shoots, but only in a few well-tended yards. "A lot of it comes down to profitability, banks are looking to where there's the most money to be made," Jegher says. "You see long cycles with tech projects on the retail side and projects competing for scarce IT dollars. The overwhelming spend is on maintenance, there's very little left over for discretionary spending after the vetting process. It's going to be tough to get projects through."

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