Financial, Health Care Sectors Lead IT Spending

By Nathan Eddy  |  Posted 2015-07-13 Print this article Print
it spending and computer economics

Other sectors fell closer to the composite median for all organizations, but process manufacturing remains a laggard, according to the report.

IT operational budgets in 2015 are up 5.5 percent at median in the financial services sector, with about three-quarters of the surveyed banks, insurers and other financial service firms planning to increase IT operational spending this year, compared to only 8 percent that are cutting budgets.

The Computer Economics survey of more than 200 IT executives in the United States and Canada found that health care services are continuing to modernize information systems while grappling with changes in the United States brought about by the Affordable Care Act.

"The rise in IT operational spending plans is tied to expectations for revenue growth. You cannot increase spending on IT without increasing revenue," John Longwell, vice president for research at Computer Economics, told eWEEK. "If interest rates rise, that will enable banks and insurers to increase IT spending. In terms of priorities, financial service organizations are more concerned about improving services than reducing costs today. They are tilting toward improving their IT."

Longwell explained that as with most sectors, the lion’s share of the financial services sector investment is going into business applications, but it is also increasing spending on network infrastructure at a higher rate than other sectors. He noted that they are also increasing spending on cloud applications and cloud infrastructure.

"Spending in the health care sector is continuing to rise for the same reasons as [it has in] previous years. On the plus side, there are more people with insurance, which is driving revenue, but there are also cost pressures due lower reimbursement levels," Longwell said. "Hospitals continue to see opportunities to invest in clinical and business systems to become more efficient and improve services. They are also investing in applications, but are less likely to be investing in cloud applications than other sectors."

Other sectors fall closer to the composite median for all organizations, which at 3 percent is the highest growth rate since the end of the recession, but process manufacturing remains a laggard, with only a 2 percent rise in IT operational spending.

"IT operational spending is growing in the process manufacturing sector, but just not as strongly as other sectors," Longwell noted. "Process manufacturing is facing some headwinds. The strong dollar makes it less competitive and puts pressure on revenue. Process manufacturing is also not as IT intense as financial services or health care, and they are not operating under the same imperative to continuously innovate. They are, however, embracing cloud applications at a higher rate than any other sector."

About 84 percent indicate they are increasing spending on cloud apps, Longwell pointed out, which means they can reduce spending on personnel and infrastructure.

"For companies that can move their basic IT systems and infrastructure into the cloud, we think a cloud strategy can reduce the cost of IT," he said.


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