A Price Waterhouse survey of IT usage shows that the financial services industry is keeping up well with technology trends.
‘There’s a huge IT investment in this industry – it likes to implement new technology. Value is, however, an important issue,’ said PW financial services partner Alan Johnson.
But PW’s survey also revealed a key contradiction. While 63% of respondents planned to increase IT budgets, 25% reported that less than half their projects were completed successfully.
Asked about the key technology issues facing the financial services industry, IT directors prioritised delivery (59%), the improvement of systems development (48%) and skills (44%) over cost (33%). The report concluded: ‘This shift is not surprising in view of the deterioration in the success rate of IT projects.’
The average overall level of IT spending within the industry rose to 17% of companies’ costs, and almost 25% in investment banking.
‘The scale of increased expenditure was surprising,’ said Johnson. ‘The year 2000 and the single European currency regularly crop up in surveys as the drive behind the rise in spending. Given that these are issues that need to be faced, the cost of dealing with them is in fact less dramatic than the effect of not doing it.’
In terms of accounting systems, the PW survey team found confirmation that the year 2000 provided a rationale for upgrading and replacing ageing technology. ‘Installing systems to deal with the year 2000 can take the financial function into the next generation of technology,’ said Johnson.
‘In financial services, Oracle, SAP and PeopleSoft are the big names of this new breed.’
In tandem with increased expenditure the survey found that 52% of companies planned to increase staff budgets, giving rise to worries about skills shortages. One PW client, for example, has authorised the recruitment of 300 additional staff to cope with EMU and the millennium.
The survey suggested that sections of the financial services industry are imposing headcount ceilings to limit the increases. As labour shortages bite deeper, development work will be restricted to the main areas of commercial need.
Johnson concluded that the increased failure rate of IT projects in financial services should increase the focus on return of investment in IT. He added that, although 25% was a surprisingly high failure rate, ‘that means 75% of projects are successful. That is quite commendable, but there is room for improvement.’