Financial Insights Europe Predicts 4% CAGR Core Banking IT Spending Increase; Total Spending Hit $7.6 Billion in 2005

MILAN, ITALY and FRAMINGHAM, MA – FEBRUARY 1, 2006 – Global independent research and advisory firm, Financial Insights, an IDC company, has announced the release of a new report focused on core banking solutions IT spend during the period 2005-2009.

Financial Insights forecasts total spending for retail solutions to reach $7.6 billion in 2005, with a compound annual growth rate (CAGR) over the next four years of 4%. Core banking platforms are just a part of the total spending for retail solutions, but they are expected to absorb an increasingly larger part of the spending.

Western European banks' infrastructure never grew by design; rather, it expanded in response to the latest technology trends, changing business needs, government regulations, or through geographic or business expansion. The result is legacy spaghetti junctions, business and IT silos, and fragmented customer views: a complex architecture that cannot keep up with the pace of change.

Core system replacement is a major challenge that can create disruption of service, customer dissatisfaction, and employee disappointment. However, banks should embrace core banking transformation because they perceive that the risk of not changing core systems is greater than the risk of going ahead with the existing system, and for many European banks, this moment is increasingly close.

According to Daniele Bonfanti, program manager for Financial Insights' European IT Opportunity: Financial Services research, "There is a sea change in the industry, with banks eager to replace their core banking systems. However, internal IT departments still play a central role in core banking initiatives, and the only way IT vendors can compete is to demonstrate a technology advantage and really strong banking competences. For this reason, service oriented architecture (SOA) should be part of the evolutionary plans of every ISV that wants to compete in this market."

Core banking replacement is becoming increasingly key to remain successful in the banking arena. Several banks have this clearly in mind and are starting major banking transformation projects that will enable them to be better positioned to face the future market challenges.

In this study, Financial Insights explores primary factors affecting the demand for core banking systems, including business, structural, and technological aspects (and their interactions), and identifies key market opportunities for core banking platforms compared with home grown systems.

Through a Financial Insights primary end-user survey and historic IT spending forecast numbers, this research provides a complete picture of the current situation and the expected future evolution.

This Financial Insights study, Western Europe Core Banking Solutions 2005-2009 Forecast: Is It Time for Western European Banks to Hurry Up? by Daniele Bonfanti and Rachel Hunt (Financial Insights #FIN1709, January 2005), analyzes the demand for and offering of core banking systems in Western Europe. Primary factors affecting the demand for core banking systems, including business, structural, and technological aspects (and their interactions), are explored, and key market opportunities for packaged core systems compared with homemade systems are identified. Some of the existing offerings for core banking systems are provided through vendor profiles, positioning them and identifying potential evolutionary paths.

For more information on obtaining this study, please contact: sales@financial-insights.com.

About Financial Insights, an IDC Company

Financial Insights provides independent research, custom consulting, and detailed multiclient studies on the technology issues and challenges facing the financial services industry. Our global research covers topics of strategic importance to corporate and retail banks, insurance carriers, asset management firms, securities and brokerage firms. Our local practices in Asia Pacific, Europe, Latin America and Canada add an in-depth regional viewpoint. Financial Insights, an IDC company, is headquartered in Framingham, Massachusetts, USA. IDC is a subsidiary of IDG, the world's leading IT media, research, and exposition company. For more information visit: www.financial-insights.com .

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