Financial services companies will be very cautious about spending money on IT in 2005, and should prepare for a rough year, according to Forrester Research, Inc. (NASDAQ: FORR). Despite finance firms outstripping companies in other sectors during 2004 ¿ with up to 8.4% of their revenues dedicated to IT ¿ these companies will decrease their IT spending in 2005 by 2.1% ¿ quite a significant amount.

Forrester believes that, in this challenging environment, IT execs will focus on finishing existing infrastructure consolidation projects and looking at additional investments in two areas: enterprise mobility and data center automation. Sixty percent of the execs surveyed plan to invest in VPNs this year, and technologies like server virtualization and storage information life-cycle management will also be very high on the agenda.

Manuel Mendez, Associate Analyst, Technology Leadership at Forrester Research, comments: ¿To succeed with these priorities, IT departments will need to focus on generating more new IT investment budget for critical business objectives like customer acquisition and retention, and for key IT initiatives like configuration management.¿

As part of its Business Technographics research, Forrester surveyed 40 senior IT decision-makers at large European financial services firms to understand technology spending plans for 2005. The results show that: a majority of financial services firms face a challenging 2005 for IT, having to do more with less; high IT maintenance budgets keep infrastructure consolidation on the priority list; networking and data center automation technologies will be hot; and healthy IT outsourcing budgets will target application development.

With finance firms today dedicating just over 25% of their IT budgets to new IT investments, Forrester warns that these companies seriously risk delaying infrastructure consolidation and subsequent data center automation projects. To avoid this, it recommends that financial services companies should:

  • Refocus their IT department¿s goals. Financial services IT departments have been more effective than those in other companies in driving key corporate goals like cost reduction and product and business practices innovation. But with negative IT spending growth looming this year, IT will need to focus its business impact on other key areas ¿ like customer acquisition and retention ¿ where they still lag other companies.
  • Outsource part of maintenance to free up new IT investment budget. IT operating costs consume up to 70% of today¿s financial sector IT budget ¿ leaving scant room for new IT investments. Companies should look at more efficient ways to maintain their existing IT engines.
  • Secure configuration management to allow for future data center automation. Finance firms need to think ahead and plan their infrastructure consolidation today to allow future data center automation (DCA) activities to go forward.

Financial services companies today show strong interest in technologies like automated server patch management, server virtualization, and automated server management and provisioning. But according to Forrester, this is just the beginning of a long journey. To start planning for these investments, finance firms will customize their configuration management tools from different vendors and invest in Web services security to speed integration.

Mendez explains: ¿Only a few of the big data automation vendors, such as Computer Associates or BMC Software, offer a comprehensive set of change and configuration management tools. Therefore, financial services firms seeking to automate the dependencies between their applications and infrastructure will work with vendors that have strong CMDB offerings, such as IBM Tivoli or Tideway Systems, but they will turn to specialized vendors like AlterPoint or Intelliden for network device configuration.¿

The research mentioned in this release: European Financial Services IT Spending Profile is available to Forrester WholeView2 clients.

Other Recent Forrester Business Technographics Reports:

  • European Public Sector IT Spending Profile
  • IT Spending Plans: European SMB Retailers