The big spenders learn to budget
The days of promiscuous big spending on IT may be over for investment banks. However, because the splurge was often ill-directed and uncoordinated there’s still a lot to be done – and spent – to patch up old mistakes, deal with major developments such as T+1 clearance and upgrade neglected back-office systems. Worryingly, most banks still seem unwilling to cooperate with rivals on pooled systems and the development of common standards.
Over the past few years, the bulge-bracket investment banks have indulged in something of a tech-spending frenzy. There have been huge events to prepare for such as the euro, Y2K and Basle II compliance. In addition, post-merger integration has been a major headache and there have been compelling competitive pressures. The development of the internet as a new distribution channel, for example, was something that few banks believed they could ignore in the boom times without grave damage to their businesses.
Unfortunately the rise of online finance coincided with a bull market full of institutions flush with cash, big egos, big money and a tireless quest for the latest IT gadgetry.