My theory that financial IT spending is making a comeback has been reinforced by a new KPMG Banking Outlook Survey. In the survey, executives say they will make IT spending the priority to boost operational efficiency and cost-cutting. IT will help with their targets, but I predict that banks and other firms will be overwhelmed by pent-up demand.
In fact, the KPMG survey found that banks have a long list of IT needs. Primarily, they want better connections among their systems so that they can have “a more holistic view of their customers who may use several of the bank’s products and services,” according to a statement from Judd Caplain, national account leader of KPMG’s Banking and Capital Markets practice. “Projects that utilize data more effectively to inform risk management decisions, support strategic initiatives, and comply with regulations, as well as enhancing technology platforms that touch the customer, are also an area of focus,” Caplain says.
In addition, bank executives said they need platform simplification, including IT infrastructures and applications. A whopping 58 percent of those surveyed identified IT infrastructure as the most important IT-related project for their bank in the coming year.
So, this is where hosting, a.k.a. cloud computing, starts to make more sense.
Hosting offers a combination of cost-savings and the capability to acquire advanced technology, and this is swaying the buy side, according to another survey via IDG Research Services. (We ran a story earlier this week.)
The IDG survey found that half of the respondents say they will use the cloud for financial applications. Before they take that step, though, nearly two-thirds of the hedge funds, fund-of-funds, private equity and investment management firms questioned will put the cloud to work for basic business and office functions first. (Eze Castle Integration sponsored the survey, “Cloud Adoption Trends in the Investment Management Industry.”)
The survey also uncovered that a major factor in the cloud’s favor, cited by 83% of participants, is the speed of IT deployment that the cloud facilitates. Buy-side firms also like the simplification of IT management and support, and the flexibility of accessing IT resources—both noted by 82% of those surveyed.
So, when it comes to focusing on operational efficiency, the industry is at an odd juncture. Firms are looking at the expiration dates of the Band-Aids they have applied to their middle- and back-office systems, knowing that they need to upgrade a great deal. Moving to a hosting option offers a chance to leapfrog to state-of-the-art systems, hold the line on costs, and achieve the efficiencies they need to survive.
It would be too glib to say that we are seeing the next chapter for cloud computing, which has been damaged by hype. What we might be witnessing among financial services firms is a slow and steady move to the wide array of hosting options that are now available. That’s not as sexy as another marketing buzzword but it might be true.
It’s also too soon to know if this is a long-term trend or a stopgap measure for many firms, which do not care about trends. They want systems and solutions that work regardless of the vendor hype.