The Hindu Business Line : ‘Global spending on products, services will rebound’

Global IT spending by financial services institutions will reach $342.1 billion in 2007, representing an increase of 5.9 per cent over 2006 which is substantially lower than the 8.7 per cent growth achieved in 2006.

Our Bureau

Mumbai, Jan. 1 Despite emerging challenges this year and the next, global spending on information technology (IT) products and services is set to grow at a healthy pace till 2009, according to Celent, a Boston-based financial research and consultancy firm.

In its new report titled ‘IT Spending in Financial Services: A Global Perspective’, Celent has aggregated financial services IT spending trends across regions, industry verticals and around the world.

Key findings of the report include an estimate that global IT spending by financial services institutions will reach $342.1 billion in 2007, representing an increase of 5.9 per cent over 2006 which is substantially lower than the 8.7 per cent growth achieved in 2006.

Although the next couple of years may be challenging, Celent expects global spending on IT products and services to grow to $386.7 billion by 2009, a compounded annual growth rate of 6.3 per cent from 2007 to 2009.

Asia-Pacific growth

Forecasting that financial services institutions in Asia-Pacific will witness fastest growth among all regions, the report estimated IT spending to increase at 7.6 per cent in 2007 and a CAGR of 9.3 per cent from 2007 to 2009.

Growth will continue to rise in this region and total spending in Asia-Pacific is expected to reach $94.5 billon in 2009, the report said.

Sector-wise forecasts

Among industry verticals, IT spending on banking activities accounts for the largest portion of the total, nearly 50 per cent; and is estimated to reach $153.1 billion in 2007, with European banks making up the lion’s share at $60.2 billion.

The report predicts that IT spending on insurance and securities and investment activities is expected to reach $95.8 billion and $74 billion, respectively.

In the medium term, insurance firms are expected to increase their spending in IT at a faster rate than the other industry verticals.

Region-wise estimates

According to Celent, across industry groups and regions, securities firms in Asia-Pacific, and insurance companies in Europe will experience the fastest growth from 2007 to 2009 (CAGRs of 12.4 per cent and 11.5 per cent, respectively), while the slowest growth will be found in the European and North American banking industries.

The report notes that currently, European and North American financial institutions spend an almost equal amount on IT. Firms in Europe and North America account for 37.1 per cent and 34.2 per cent, respectively of the global IT investments by financial services institutions.

Firms in Asia-Pacific account for 23.1 per cent, and Latin America and Africa account for the remaining 5.6 per cent.

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