A study of technology strategies has found little correlation between financial institutions' spending and profitability.
Basing its analysis on interviews with more than 25 chief information officers at banks and nonbank financial companies, Meridien Research of Needham, Mass., concluded that investments in technology must be more carefully aligned with business strategy.
Preliminary findings were unveiled Monday at the American Banker Online '97 conference, and a full report is due to be published next month by Meridien and American Banker.
Companies that spent less on information technology relative to total expenditures tended to achieve moderate returns on assets, Meridien found. Companies that spent higher percentages on technology exhibited a far broader array of results. Some were "high spenders with high impact," others "high spenders with low impact," said Meridien research director Octavio Marenzi.
Those in the latter group "played and lost," he said. "They gambled and have done very badly."
The study also differentiated between routine and strategic technology expenditures. The former permit a bank, brokerage, or insurance company to keep core systems and processes up and running. Strategic expenditures increase competitiveness and distinguish an institution or its technology in the eyes of customers.
Meridien said less than 15% of the $45 billion being spent on financial services technology this year qualifies as strategic, but that portion is growing 18% a year, versus routine expenditures' 4.7%.
Of the $45 billion, banks account for about $17.6 billion, insurance companies $16.1 billion, and securities companies $11.3 billion.