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Disaster Recovery and EBPP Spending To Rise In 2002

Heightened sensitivity to IT security post-September 11 and the need to boost technology ROI will lead to an increase in disaster recovery and EBPP spending at banks, according to Datamonitor.

Despite the slumping economy, security and disaster recovery spending will rise in 2002 due to a heightened sensitivity to IT security post-September 11.

Companies are increasingly aware of the significant business disruption that can result from insufficient IT security, and many are reevaluating their backup networks and investing in security and decentralized disaster recovery systems.

"Various experts have predicted that a major attack will be made on the nation's financial system sometime in the not too distant future," said Michael McNamara, an analyst at Datamonitor. "This vulnerability on the financial services systems is causing increases in spending on such security solutions as antivirus and authentication software as well as decentralized solutions such as storage area networks (SANs) and virtual private networks (VPNs)."

eSecurity is one of the few areas in retail banking that will witness an increase in spending, according to Datamonitor. In fact, overall IT retail banking spend is estimated to increase by only 2.05 percent in the next four years. As the slumping economy continues to highlight IT failures, financial services institutions must prove a measurable near-term ROI in order to achieve successful technology project funding.

In an effort to generate returns on legacy technology investments, banks and billers will be increasing their marketing and education budgets for services such as electronic bill payment and presentment (EBPP). With over 30 billion payment transactions occurring each year, Datamonitor forecasts that upwards of ten percent of bills will be paid electronically by 2006. Nine out of the top ten banks currently offer electronic bill payment and presentment.

Banks and billers are rolling out new marketing campaigns to lure customers to their Web sites and EBPP processes. Research shows that consumers express great interest in EBPP, as retention rates frequently track upwards of 95 percent among customers who use the service. These leaders will begin to gain traction in this market, nudging their competitors out of the ePayments arena.

Due to the industry-wide phenomenon of decision makers dictating how IT dollars will be spent, vendors must now communicate both the technical aspects and the business logic behind their products.

Technology vendor success in 2002 will largely depend on measuring the improvements their technology can deliver within targeted business processes. These tangible measurements will enable business decision makers to link technology spending to ROI and lead to new project funding.

"Due to the recent market slumps, information technology investments are under much greater scrutiny," said McNamara. "Ventures or products that are discretionary in nature, such as mobile retail distribution platforms, will have difficulty gaining budget approval unless hard evidence is provided that they will either directly save or make the institution money."

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