Where does the real genius sit in financial services and insurance (FSI) sector IT? Surely with the enterprise and its strategic CIOs, bankrolled by huge budgets and the freedom to choose any vendor technology they desire? I’m going to say no – look small to find the big thinking.
Our experience tells us that SMBs are smarter and much more strategic in IT planning than big vendors ever give them credit for. To make this more tangible, we tested these observations through research of 200 heads of IT at mid-market organisations by the independent technology market research specialist Vanson Bourne.
Small fish, big wallets
Unsurprisingly, financial sector interviewees are among the best-resourced. While the average revenue spent on IT for the survey as a whole was £17 million per year, financial services firms were the second biggest spender at £31 million (after healthcare at £37 million). Across the whole pool of companies, a majority (57 per cent) said that they had the IT skills but lacked the departmental resources to pursue the level of IT development they wanted, however only 27 per cent of financial sector small firms held this view.
It’s not just in opening wallets that FSI firms are leading lights. They’re pretty smart when it comes to guarding those wallets too. More than two-thirds (68 per cent) of the total research panel work with additional suppliers to extract extra value from their IT budget, however FSI firms eclipse this, with 91 per cent taking this approach. The average saving by smart supplier management was £2 million, but again FSIs shine through, saving a typical £4.6 million.
All-in-all, FSI firms show strong positive indicators for being smart with their IT. On average, IT executives say only 31 per cent of their IT estate delivers competitive advantage, yet financial services interviewees say 58 per cent of theirs does. And this figure is well ahead of both the innovation-minded technology industry (46 per cent) and consumer-focused retail, transport & distribution sector (43 per cent).
Innovation, despite regulatory strangleholds
It’s interesting how the financial sector’s heavy regulatory burden colours interviewees’ opinions. The majority (64 per cent) of total respondents said IT has to support the business, and not the other way around – but only 41 per cent of FSI IT leaders agreed. Our experience tells us that financial sector IT heads have to be compliance-driven and pragmatic. So the tick-box requirements of FSI regulations dampen their focus on the ‘IT as strategic enabler’ vision.
But this doesn’t mean they fail to explore new opportunities. The opposite in fact; better funded and resourced than other markets, they may have tested many more non-traditional IT products and their implications before their peers have done. Whilst a clear majority (79 per cent) of all IT leaders report that they’d examined open source and license-free software in the last year, this interest was even higher amongst FSI firms (86 per cent). It seems those FSI wallets still aren’t big enough to remove this need for smarter, more cost-effective technology.
Ahead of the pack
We were impressed (but not altogether surprised) that financial sector mid-market organisations are leading the way in using new infrastructure and software approaches for their business applications, reporting usage at 31 per cent, against 26 per cent for the survey as a whole.
Indeed this seems to be a trend that will shape the future of FSI IT. Mid-sized financial organisations are bullish about using open source and other non-traditional IT models in the future, predicting that 53 per cent of applications will be licence free by 2015 – well ahead of the average of 36 per cent.
All in all, the picture for FSI firms is very encouraging. They can brag to their peers about hearty budgets, yet they seem just (probably more) astute in how they spend it. But most encouragingly, rather than being suckered into paying through the nose what are little more than adequate IT tools, they’re looking at fresh approaches for technology to deliver what the business needs.
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