By Jo Best, 4 November 2009 12:58
NEWS
While the debate over bankers' bonuses may still be generating headlines, it seems the financial services industry has found one way to cut back - slash IT budgets.
Financial services firms' IT budgets fell by 8.3 per cent between 2008 and 2009, meaning the banks have cut their budgets more than other industries, and saw spending fall by 6.8 per cent year-on-year.
Financial services is not making the steepest cuts, however: that honour goes to the agriculture mining and construction industry with a 9.2 per cent year-on-year fall, followed by the discrete manufacturing industry with an 8.5 per cent drop, according to research by analyst house Gartner.
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While most industries have not had to curb their spending to such a degree, all the industries surveyed by Gartner saw their budgets reined in to some extent: retail experienced a fall of 7.2 per cent, for example, with transportation down eight per cent.
Not all sectors were so hard hit - government organisations saw their budgets decrease by a relatively modest 3.6 per cent, the smallest decline among the industries.
According to Gartner, spending growth will return next year with a bump in IT budgets of 2.3 per cent year-on-year with "sustained, positive growth" on the cards for 2011.
Comments
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1. Mitesh Patel
Simply slashing IT budgets is not going to be a long-term fix for the financial services industry, or indeed any organisation looking to cut back. Organisations must instead review IT spend, consider exactly where it has been allocated and reconfirm that the IT budget is going to support the business.
In part, the problem is one of culture. More often than not IT Directors in mid-market and SME businesses are long term employees who have progressed to senior status through longevity and loyalty. It is highly unlikely that the organisation has provided the support for this individual to have the resources, time or expertise to assess business risk or undertake strategic planning and long term IT budgeting.
It is only by taking a step back, assessing and understanding the current levels of risk associated with existing IT deployments, that an organisation can truly determine its ongoing IT requirements. It can then put in place the technology, skills and resources to reduce operational risk and bridge that gap between IT and the business to transform IT from a cost centre to business enabler.
Taking the decision to just slash the IT budget could restrict growth or have a higher negative impact on the business
Yours sincerely,
Mitesh Patel, Managing Director
Fifosys
2. Richard Barker
Over the past 18 months organisations have pared back costs to the bone, significantly cutting budgets in all areas of business. Yet, simply slashing IT budgets will not produce the long-term savings that the financial sector so desperately needs. When selected prudently and used economically, IT is the most effective business enabler industry has ever seen, aiding business processes and providing quantifiable ROI – but only when used efficiently and effectively. Senior managers must now stop looking at IT as a cost centre and take back control of spending to ensure that every penny spent on IT brings true business value.
IT upgrades or the acquisition of mobile devices are often deemed small scale and are routinely nodded through. Whilst the initial cost of the device may be quite minor, when the additional cost of supporting hardware and software is taken into consideration financial directors are faced with a much larger bill. The combined cost of these purchases over a single year will run to £10,000s – a cost that is simply not sustainable or justifiable for cash-strapped financial businesses in the current economic climate.
In addition, many organisations have little idea of how day-to-day activity and behaviour affects the cost of the IT infrastructure. Labouring under the misconception that ‘storage is cheap’, many companies’ storage requirements continue to go through the roof as employees recklessly download vast multimedia files and images. It’s all very well storing unlimited content, but if it takes more than a weekend to back it up, this could cost the business dearly, especially if systems fail under the strain.
Strategic investment in IT is vital, regardless of the state of the economy. Whatever the budget pressures, companies need to prioritise ‘value’ over ‘cost’. Senior management need to understand the implications of technology change and the real opportunities presented by new and innovative solutions, to ensure stability, productivity, cost efficiency and business continuity for the data that really matters.