While META Group's annual Worldwide IT Trends & Benchmark Report reveals a lukewarm IT economy at large, the financial services sector is on pace for significant increases in IT spending. The report, published by META Group, a leading provider of IT research, advisory services and strategic consulting, reveals a new IT reality in which cautious technology spending has fundamentally altered how organizations invest their IT dollars. However, this new steady state of IT has done little to suppress the enthusiasm for IT in the financial services sector, an industry which now leads many of its peers in terms of traditional IT intensity measures.
Financial services IT spending in 2005 is projected to increase by seven percent - with smaller (under $10B) financial services companies accounting for the majority of that growth. Companies over $10B have projections of 4 percent or less spending growth in 2004. Overall spending projections across all industries is 4 to 5 percent on average. META Group analysts confirm that such benchmarking is a critical measure for financial services executives with far reaching implications on organizational health, agility and scalability.
According to META Group, there are five critical categories by which industry IT intensity can be measured. While IT spending growth is the measure most often highlighted, analysts argue that it is also the measure that provides the least contextual information regarding the role that IT plays within a given industry or organization. For more contextual relevance META Group examines IT spending as a percentage of revenue and as a percentage of operational expense.
In both cases, the financial services industry is well above overall averages, with projected IT spending of six percent of revenue in 2005, compared to an average of just over four percent and projected spend of 13 percent of operational expenses, compared to an average of five percent. The latter figure is particularly telling as it means that next year, the financial services sector will devote a higher proportion of its business investments to IT than any other industry surveyed in the report.
The report also measures the relative importance and priority assigned to IT based on human capital expenditures. These "workforce" benchmarks paint a similar picture of IT intensity. While the average organization is projected to dedicate $14,107 to technology spending in 2005, per employee, the financial services industry will allocate significantly more per worker ($21,096). Not only does the sector spend more per employee, but it also has a larger percentage of IT employees than most other industries. Across the board, the average company's IT organization represents roughly five percent of the total worker population; in the financial services sector, that figure is closer to eight percent.
However, META Group acknowledges that these benchmarks may not be the most accurate means of measuring IT intensity in this new IT reality. Instead, the new steady state of IT may demand "velocity" benchmarking by which organizations can measure IT spending changes relative to business metric (revenue, operational expense) changes. Such "agility" measures demonstrate the relationship between IT investments and other business investments/costs, providing insight into whether industries are realizing the value of their IT infrastructure.
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