Financial service organizations, insurers included, expect to increase IT operational spending by a modest 2.1 percent this year, according to the annual Computer Economics IT spending and staffing benchmarks study.

The study, which includes a range of industries from manufacturing to retail, states that the 2.1-percent increase is in line with the 2.3-percent rise forecast for the composite sample. IT operational spending makes up the lion's share of IT spending by organizations because it includes salaries and benefits for IT workers, the research and advisory firm said. Other operational cost components include data and telecom service, outsourced services, depreciation, software maintenance and leased equipment.

"We are somewhat surprised by the muted plans for IT spending in this sector," said Frank Scavo, president of Computer Economics. “While the outlook for operational spending is average, the outlook for capital spending seems to lack conviction. Financial services organizations are being cautious in their hiring and spending on capital projects."

IT capital budgets are declining 6.9 percent from the previous year at the median, a finding that is well below the composite trend. Capital spending plans tend to be far more variable than IT operational spending across sectors, which means this outlook could change as the year progresses.

An average increase also is seen in financial service organization headcount plans. About 45 percent are increasing headcount. That is about 2 percent higher than the composite.

Confidence level is one indicator of future spending trends, according to the report. Another is the degree to which IT executives find their spending plans are adequate to support the business. Forty-four percent of IT executives feel their IT budgets are adequate/more than adequate to meet the needs of the business. This is worse than the prior year, when 53 percent of the respondents were in the adequate/more-than-adequate columns. Computer Economics concludes that this signals pressure to increase IT spending is rising, which is a potentially bullish indicator for the years ahead.

This story originally appeared at Insurance Networking News.

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