Worldwide banking and investment services IT spending is forecast to total $652.1 billion in 2023, an increase of 8.1% from 2022, according to Gartner, Inc. Spending on software will see the largest growth with an increase of 13.5% in 2023.
“Current economic headwinds have changed the context for technology investments in banking and investment services this year,” said Debbie Buckland, Director Analyst at Gartner. “Rather than cutting IT budgets, organizations are spending more on the types of technologies that generate significantly higher business outcomes. Spending on software, for example, is shifting away from building it in-house, in favor of buying solutions that generate value from investments more rapidly.”
Investment In Cloud Continues Unabated
According to the Gartner 2023 CIO and Technology Executive Survey, banking and investment services CIOs will spend the largest amount of new or additional funding in 2023 on cybersecurity, data and analytics, integration technologies and cloud.
More than half plan to increase investments in cloud, while reducing IT spending in their own data centers. This is reflected by slower growth in data center systems spending from 13.2% in 2022 to 5.7% in 2023 (see Table 1). Banks are disengaging from tangible assets and capital expenditure (capex) in favor of adopting services and operating expenditure (opex), to meet evolving customer and market expectations.
“To deal with the current economic climate, banking and investment services CIOs are now prioritizing more conservative objectives that support resilient and sustainable growth, such as a better customer experience (CX) and more efficient operations,” said Pete Redshaw, VP Analyst at Gartner. “This is a change from previous years when outright growth – new territories, new customers, new lines of business – was the primary objective of banking CEOs.”
IT Services Remains Largest Spending Segment
Driven by the increased use of consulting services and infrastructure as a service (IaaS), IT services will be the largest spending category, forecast to reach almost $270 billion in 2023. This is an increase of 9.3% over 2022, reflecting the increasingly important role IT service providers play in helping banking and investment services organizations navigate emerging opportunities and challenges.
“Economic uncertainty is leading organizations to break down long-term contracts into multiple shorter projects,” said Buckland. “They’re also reluctant to sign new contracts, commit to long-term initiatives or take on new technology partners, which is driving an increase in the use of IT consulting services.”
Talent Shortage Driving Spend in Internal Services
With the global talent shortage impacting banking and investment services organizations, spending on internal services will increase by 4.2% in 2023 to support the increased costs of hiring and retaining talent.
“Even after the recent widespread redundancies at many of the technology giants, banks are no longer seen automatically by top talent as the most desirable, rewarding or stimulating destinations,” said Redshaw. “More innovative solutions are needed, such as dropping the requirement for university education and adding benefits such as lifetime retraining, hybrid teams, agile methods and fintech partnerships.”