Spending on information systems in banking and financial companies should grow more than 12% annually over the next two years, according to a recently released report.

The report, "Client-Server Applications Trends -- Banking and Finance," published by input, a Mountain View, Calif., market research firm, cited significant growth in client-server computing in financial firms as major reason for the spending jump.

Client-server involves using networks of personal computers to perform tasks once relegated to mainframes or midrange systems. The results are part of a study on the use of client-server systems in 15 industries.

"Despite the turmoil in the industry, rates of investment in systems appear to be quite high. As the current limitations of the technology are overcome, and appropriate infrastructure is put in place, the use of client-server will grow significantly," the report stated.

140 Managers Interviewed

Results were based on telephone interviews with 140 line, staff, and information systems managers, nearly 70% of whom came from the banking industry. Seventy-eight percent of those surveyed were not information systems managers.

According to the report, total planned spending on information systems will increase by 12.4% over each of the next two years, with applications development spending growing by 13.3% during that time.

By contrast, the American Banker/Ernst & Young 1993 survey of technology in banking, which measured budgeted expenditures, forecast only a 6.5% increase in spending from 1992 to 1993.

"The growth rate in banking is among the highest in the vertical markets we've studied so far," said Denny Wayson, author of the study. "There's enough total restructuring going on that higher expenditures are becoming inevitable."

Input expects the bulk of client-server development to occur in areas removed from core banking applications. "All sorts of activity related to customer service and information utilization is being overseen by line managers," Mr. Wayson said.

He said the report results show no indication that banks are in any hurry to replace their mainframes. "The scale and transaction integrity banks require is beyond the scope of existing client-server technology," said Mr. Wayson. "There's simply not much motivation for them to move at this point."

Focusing on Responsiveness

Respondents to the report said the leading issue in systems development was responsiveness -- broadly defined as the both performance of a given system and the ability to respond to customer demands and other in the business environment. Systems upgrades, systems integration, skills improvement, standardization, and client-server migration were the other concerns mentioned by respondents.

Applications development is focused on client-server and mainframe platforms. Only 7% of planned development work is creating systems for midrange systems.

The report results show that in small to medium-size institutions -- those with under $1 billion in annual sales -- client-server will be the dominant development architecture. Institutions beyond that threshold will continue to rely on mainframe architectures for the fore-seeable; the Input study said.

For example within institutions with $500 million to $1 billion in assets, an estimated 70% of the development work will be for client-server systems. In firms over $5 billion, that figure drops to 36%

The applications where client-server will the architecture of choice, according to the report results, include sales and marketing management, branch automation, customer information file, management information systems, and accounts payable-receivable.

"Although current penetration levels for client-server technology are lower than those in many other industry sectors, planned implementations for the next two to three years indicate a strong movement to client-server architecture," the report concluded.

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