In addition to traditional IT spending, financial services institutions will invest another $100 billion in external spending on business process transformation by 2010, according to TowerGroup president and chief executive Karen Cone. "Forces are now converging to bring long-
discussed trends to fruition, where financial institutions are able to fully leverage the enterprise vision," Cone said at the research firm's 2005 annual conference in Boston. She also identified the following five "megatrends" to watch for in the coming years:
1. Mega-Brand Power. Banking institutions currently are consolidating technology platforms and initiating targeted entry into new markets through acquisitions or branding plays. Consequently, by 2010, the global banking scene will be dominated by a handful of mega-players that have the power to deploy resources to shifting high-growth markets rapidly and dynamically.
2. Niche Players Win. Highly focused firms will see great gains by 2010. TowerGroup expects leading securities and investments firms to have migrated to a business model that favors specialization in targeted segments, such as active traders, high-net-worth individuals and institutional clients.
3. Regulation Rules. Regulatory compliance becomes accepted as an inherent cost of doing business and as a means to gain and maintain customer trust. Winning financial institutions will build more-efficient enterprisewide infrastructures to address regulatory requirements and leverage these enhanced capabilities as a competitive weapon.
4. From Data to Predictive Information. Financial services firms will take advantage of predictive analytics and automated decision-support tools to manage business more effectively and deliver higher customer value.
5. Technology Becomes an Enterprise Differentiator. IT spending across all financial services sectors globally will reach $361 billion in 2005 and will increase to approximately $450 billion by 2010. The context around this growth reveals declining maintenance expenditures for legacy IT and, consequently, additional spending directed to new, differentiating IT investments. Firms that have created interoperable infrastructures with third parties - both internally and externally - will be the clear leaders in their industry.
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