Tech budgets to fall, but insurance keeps spending

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The financial crisis means that appetite for spending on technology is likely to diminish going into 2009, and the pinch could continue for as long as four years, according to a new study. However, in spite of increasing concerns over the insurance industry, it is the one area of financial services which remains in positive territory.

Technology research firm IDC has adjusted its growth expectations for technology budgets in Western Europe in 2009 from 4% to just 1%, saying the outlook is very grim indeed.

Marcel Warmerdam, research director, European IT markets, at IDC, says: "Many are already resetting priorities in view of tougher times, with many projects being postponed or cancelled."

Worldwide IT spending is likely to slow to 2.6% growth a year, with the US particularly badly affected - predicted to rise by just 0.9% in 2009. The global figure is buoyed by strong growth predictions in the Middle East, which is expected to increase tech spend by 9% in 2009.

IDC anticipates growth rates will recover fully by 2012.

The IDC report echoes research by the likes of Tabb Group and Celent, which reckon IT budgets in investment banks could face double-digit reductions next year.

One area of financial services where IT budgets are likely to remain in positive territory (albeit only just) is the insurance sector, which will spend 1.9% more on technology in 2009, according to Gartner.

Howard Mills, chief adviser of Deloitte's insurance industry group, says: "Cutting IT spending is not a viable option. There is too much risk in not updating infrastructure."

Craig Weber, insurance practice leader at Celent, adds: "IT spending is a necessary catalyst for efficiency. In addition, there is so much work going on that carries over one budget season to another; all the easy-to-kill projects were dumped years ago."

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