Sungard, one of the leading technology providers for financial services, recently reported 11% organic growth for Q4. Meanwhile, the four major bank technology providers (Fiserv, Fidelity National, Metavante, and Jack Henry) all reported good quarters. They struggled to varying degrees with licensed software sales, but other components of revenue are holding up well. Moreover, the shortfall in license revenues may be deferrals rather than revenue that will never show up. These vendors largely serve the community bank market in the United States and so the woes of the largest banks do not impact them severely.
Gartner is reporting that global IT spending for financial services will be off 70 basis points in 2009 from last year’s spend. However, this may simply reflect that things in the U.S., bad as they are, are better than they are elsewhere in the world. Returning again to bank vendors, Temenos, one of the leading bank technology vendors outside the U.S., reported year-over-year decline in Q4 revenues and declined to give any guidance for 2009 earnings, citing market uncertainty. When contrasted with the U.S. bank technology vendors mentioned above, it points again to greater weakness outside the U.S. markets.
The assumption in my thinking, of course, is that as goes financial services, so goes its components (banking, insurance, capital markets). Health, which to some extent is a component of insurance, is projected by Gartner to show a 2.2% increase in IT spending for 2009.
All this published evidence is consistent with all the anecdotal evidence I’ve encountered. That anecdotal evidence is that while everyone speaks cautiously, they all report a continued interest IT investments for financial services including insurance. I’ve heard of no major shutdowns of IT spending. More thoughtful spending, yes; but no mindless moratoriums. Therefore, in spite of the doom and gloom pouring forth there’s ample reason for cautious optimism. The insurance industry needs technology – perhaps even more than ever in difficult economic times.
Tags: insurance IT spending
February 24, 2009 at 1:20 pm |
Mike, this is consistent with what we’re seeing. We just presented some research specific to Canada on this exact topic.
http://novarica.wordpress.com/2009/02/23/canadian-pc-insurers-full-speed-ahead-on-it-for-distribution-and-policy-admin/
February 24, 2009 at 2:26 pm |
Good to hear, Matt. And good link, which I posted as a News item on http://www.InnovationInInsurance.com.
February 25, 2009 at 10:02 am |
Readers, for more corroboration of the main post as well as further reference to Novarica’s research see Anthony O’Donnell’s Feb 23, 2009 commentary 2009 Will Be a Good Year for Technology Vendors
February 27, 2009 at 3:10 pm |
Budgets for ’09 were put in place, for a large number of corporations, in August and September of ’08, before the cascade of November’s and December’s dour economic performances. Now that companies have a better understanding of their ’09 financial profile, as the first quarter’s numbers are being pulled together, as companies begin to feel the impact of November’s, December’s and January’s economy, and as companies began to assess the government’s budget and tax changes, commitment to 2009’s IT budget is likely to be amended. Against this background, isn’t forty-five days into the year is too early to predict “…2009 promises to be a prosperous time for insurance IT vendors.”?
February 27, 2009 at 3:27 pm |
Well, Terry, my headline was “Recent Signs of IT Spending for Insurance Remain Encouraging.” This was indeed upbeat but not as bold as Anthony O’Donnell’s (Insurance & Technology) headline “2009 Will Be a Good Year for Technology Vendors.” You may be right to challenge him, but he does say in his post “As we head into the third month of 2009, it is clear that insurers are in fact going to be spending within a few percentage points of their 2008 budgets.” He offers as proof points very bullish comments by research firm Novarica. He also alludes to numerous interactions he’s had with carrier executives. Do I personally feel comfortable predicting a good year for vendors? No, because to me the economic climate is too volatile right now. That’s why my message was essentially, “So far, so good,” and thus I punted as far as making a prediction. Nonetheless, my fond hope is that I&T and Novarica have made the correct call. In fact, we all hope they’re right even though the variation of doubt among us may indeed be wide – as you have demonstrated.
March 1, 2009 at 5:19 pm |
[...] Spots for Insurance and IT in Buffett and IBM By Mike Given the comments to my recent post Recent Signs of IT Spending for Insurance Remain Encouraging, I know that many of us are watching developments week by week, if not day by day, looking for [...]