Modest Growth in Information Technology Spending Seen in FTVentures’ Semi-Annual Survey Results
SAN FRANCISCO, CA – Global financial institutions are showing the first signs of an information technology (IT) spending recovery, with a focus on implementing variable cost structures, managing earnings volatility, and innovating new approaches for customer service and contacts. These are among the key findings of FTVentures’ Spring 2003 “IT Outlook” survey, which is conducted semi-annually among FTVentures’ 38 Limited Partners, that represent about $100 billion in projected IT spend in the global financial services industry this year. FTVentures conducts the survey to gather information and intelligence that helps shape its investment focus.
“In the last half of 2003 we expect to see less ‘under-spending’ in information technology among major companies with productivity savings used to fund modest IT growth,” said James Hale, managing partner of FTVentures. “After three down years of spending, this is encouraging news.”
Trends in IT spending that emerged from the survey show an upturn in infrastructure spending and a downturn in new application spending. Hardware and equipment IT spending has been driven primarily by the server replacement cycle. In purchased software, IT spending for applications is estimated to be down 6% versus 2002, although infrastructure security software has experienced approximately a 10 percent boost over a year ago.
“In the risk management area, we’ve seen the continuing need to reduce volatility in earnings drive IT spending, through increased spending on security, archiving and regulatory compliance,” said Hale. In addition, more than 20 percent of respondents indicated that they planned to increase spending for outsourcing. “Outsourcing and productivity software may help maintain a new variable cost structure for major companies,” said Hale. “Business process outsourcing and re-engineering will deliver operational strategic value and decrease operating costs, as will consolidation and standardization of technologies,” he said.
Data back-up, recovery and offsite disk farm services continue to rank high in importance among survey respondents, as does server consolidations, IT Asset management, anti-money laundering software and payment electronification.. Customer service is another critical area of importance to global financial services companies. The survey found that companies are working to enhance their platform and applications with cross platform enterprise initiatives, service upgrades such as bandwidth increases, and utilities and messaging infrastructure.
“While we are cautiously optimistic about these results, we believe that if the global companies that participated in our survey follow through with their plans for 2003, the IT sector could be starting its recovery at the end of the year, although the second half purchase orders will tell the story,” said Hale.
Founded in 1998, FTVentures was the first venture capital firm in the U.S. to focus on technologies that benefit the global financial services industry. FTVentures now has over $623 million in total capital under management and is a leading investor in information technologies. FTVentures invests primarily in companies developing products and services in software and business services, with a particular emphasis on companies that enable financial institutions worldwide to expand and to operate more efficiently.
FTVentures’ investors are 38 of the world’s leading financial institutions and include AIG, Bank of America, BNP Paribas, Charles Schwab, Citigroup, Credit Suisse Group, Deutsche Bank, DBS Bank, GE Capital, HSBC Holdings, Key Principal Partners, National City, Skandinaviska Enskilda Banken (SEB), Standard Chartered Bank, US Bancorp and Wells Fargo.
FTVentures-backed companies include 7-24 Solutions, Financial Engines, Exlservice, Mavent, Integrated Decision Systems, Corillian, Managed Objects, Banter, Vernier Networks, Verus Financial Management, Caplin Systems, Xign, CapitalStream, e-Security, E-LOAN, Synchrologic, ValiCert, and ClearCommerce.
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