For U.S. securities and investment firms, 2005 marks the end of cost cutting and tight IT budgets, according to a report by the new Boston-based research firm Aite Group. After a few recent years of financial prudence, Aite Group predicts that the industry will spend $26.4 billion on IT initiatives this year, representing a modest increase from 2004. The pace of IT spending is expected to increase each year, reaching nearly $30 billion by the end of 2008.
Most of the increase in IT spending will result from significant increases in external IT spending related to the purchase and leasing of third-party software, hardware and professional services. By 2008, Aite group estimates that close to 60 percent of all IT spending will be devoted to third-party, vendor-provided products and services.
"As firms begin focusing on more enterprisewide projects, especially in data management and compliance, we can expect a healthy spending growth rate beyond 2005," says Sang Lee, cofounder of Aite Group. "We believe that, starting this year, the industry will try to recapture the glory of the late 1990s."