24 December 2004 Banking, insurance and finance companies worldwide will spend $362 billion on IT in 2005, with a large share of this coming from the EU, according to analysts TowerGroup.

The banking industry will increase IT spending by 4.4%, while the securities and investment sector will increase spending by about 4%. IT spending in the insurance industry will be flat, despite facing a raft of regulatory and corporate governance challenges.

However, this will also be accompanied by the continued evolution in the way that IT investments are managed in 2005.

“Financial institutions will implement process and technology changes in more manageable chunks and employ business process management and networked services as pivotal elements for strategic transformation,” said Guillermo Kopp, vice president of the TowerGroup Cross-Industry research practice.

Increasingly, the CIOs of financial institutions will have to draw up strategic roadmaps to cut across their organisation’s historic IT ‘silos’ so that they can better serve customers, added Kopp.

Similarly, analysts at the Meta Group have suggested that the major driver of IT investment in the financial services sector will be, “maximizing the efficiency of IT infrastructure assets through cost-saving moves such as consolidating operations inherited through mergers and acquisitions, or co-locating data-center operations with other financial-services companies.”

However, there will also be increased pressure on the IT department to provide visibility and transparency in their operations. “CIOs are acutely aware of the need to relate actual costs incurred to business benefits achieved,” said Jed Rubin, co-author of the Meta Group report.