IT Spending at Banks Increases, But Those Big Overhauls Aren’t Coming Soon

Financial services institutions worldwide expect to make substantial investments in IT this year, spending $363 billion on technology, up 3.7 percent from 2010, according research firm Celent. Last year, tech spending grew only 2.5 percent.

ServersThe report, IT Spending in Financial Services: A Global Perspective, says financial institutions will spend a larger portion of their earnings in hardware, software and technology-related services. Among banks, (as opposed to other financial institutions), global IT spending is expected to reach $169 billion this year, a gain of 4.1 percent from 2010.

“We are not completely out of the woods, but the good news is that the turnaround has begun,” observed Jacob Jegher senior analyst at Celent and co-author of the report.

While firms are willing to dole out money for specific projects and maintenance, few are looking into the serious overhauls many have been waiting for, technology executives say. “Banks are going to really look to that as one of the latter things they do when there’s uncertainty around their capital structure, credit quality or regulatory environment,” said Darrin Peller, a vice president who covers technology vendors for Barclays Capital.

The bulk of this year’s spending will go toward maintaining IT infrastructure, with $35.5 billion spent on IT maintenance. Internal IT will cost more than $16 billion – more than 36 percent of U.S. banks’ IT budgets. They’ll will spend an additional $6.9 billion on hardware, $8.6 billion on external software and $2.3 billion on external services.

Retail banking will spend the most on IT, with an estimated $28.8 billion going toward IT. Corporate banking follow with an estimated $12.4 billion. Most of that will go to upgrading aging cash management platforms.