Where would the technology industry be without the financial services sector? I was compelled to ask that question after learning that financial institutions will devote a higher proportion of their business investments to IT than will companies in any other industry, or so says META Group in its "Annual Worldwide IT Trends & Benchmarking Report." META also forecasts that financial services IT spending will increase in 2005 by 7 percent, with an emphasis on what report co-author Dr. Howard Rubin terms "application rationalization."
Apart from what this bodes for future systems initiatives ranging from core systems replacement to rollouts of cross-selling programs, there was another intriguing trend identified by META. Much of the spending growth will come from institutions with $10 billion or less in assets. Companies larger than that projected spending increases of 4 percent or less, according to META.
There are a number of possible reasons for this split. Many of the largest banks will be digesting acquisitions in the coming year; their spending will focus on integration, training and marketing. A lot of smaller banks are still playing catch-up in terms of technology spending. They must quickly increase their investments in IT if they hope to compete against larger and more tech-savvy organizations.
For every community bank that is scrambling to get up to speed, however, there are many more that already have figured out that: (a) effective technology deployment is key to success and survival; (b) smaller banks often have advantages (especially in terms of market knowledge and customer relationships) over their bigger competitors; and (c) with M&As still going strong, today's community bank could be tomorrow's Tier 2 or even Tier 1 institution.
To track these trends and delve into the tactics, applications and technologies that will drive growth in the banking industry, BS&T is launching "Growth Strategies," a new editorial supplement that will appear quarterly, starting in March. Our mission: Go beyond the rhetoric surrounding the ballyhooed "return to growth" and identify - through research, analysis, case studies and profiles - what truly characterizes growth institutions. Let me know if your bank has a growth story to tell.