Financial firms to spend $450bn on IT by 2010

The global finance industry is set to spend $450bn on IT by 2010, according to analyst research.

The Tower Group said IT spending by banks will reach $361bn by the end of 2005, and grow by $90bn within five years.

The analyst house has predicted that banks will reduce spending on maintenance and legacy systems by only 4.2 per cent, which means just over half of IT budgets will be dedicated to the upkeep of old technology.

Virgina Garcia, a director at Tower Group, told silicon.com: "Banks spend a huge amount of money on maintaining systems. They have no choice in spending on redundant equipment. All banks have legacy systems, which are becoming exceedingly expensive in coding costs."

Spending will also result from acquisitions, which are making it difficult for banks to standardise their networks as some have as many as 10 disparate systems in place, Garcia added.

"Any financial institution is so large because of mergers that they have not developed a single deposit system. But spending is also rising because the power of IT budgets and economies is improving," she said.

Tower Group predicted growth in both software and outsourcing spending. Financial institutions are expected to annually spend 8.7 per cent more on external software, 6.2 per cent more on professional services and an additional 11.7 per cent on outsourcing until 2008.