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Banks IT Spending to Fall, Outsourcing to Rise, Says IDC Industry Insights

The Midwest could see an influx of East Cost bank work.

Banks will spend 3.2 percent less on technology this year than they did last year and they will try to trim costs with "domestic outsourcing" to areas such as the MidWest, according to an IDC Industry Insights forecast teleconference today, Jan. 5.

"There will be four key areas of focus for banks in 2009: expense reduction; risk management; M&As; and client acquisition and retention," David Potterton, vice president of global research in IDC's Financial Insights unit said.

IDC's pan-industry overview, the first in a weeklong series by sector, noted that industry wide technology spending was "almost flat," being up 0.9 percent.

However, that average was weighed down by the retraction in financial services where the securities industry IT spending is expected to fall 9.9 percent this year, having grown 5.6 percent last year. The second biggest IT spending decline forecast is for banking, down 3.2 percent this year, whereas it was up 3 percent in 2008.

Outsourcing to less expensive labor markets represents "an interesting dynamic," Potterton said, alluding to the Obama Administration's objections to offshoring. This may play out in the U.S. with East Coast banks outsourcing to the Midwest, he said.

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