Report finds IT spending favours service development

Total IT spending by North American insurance firms is expected to reach US$31.2 billion by the year’s end, and is predicted to grow to US$36.3 billion in 2008, says a new global study.Celent, the company responsible for the report, compared and contrasted IT spending trends across different industries around the world to pinpoint and understand the direction of spending among financial services institutions.Nearly half US$15.3 billion by the end of 2006 of the spending among North American insurance firms is allocated to internal IT staff, the study’s authors noted.”Celent predicts that the spending on staff will stay essentially constant, while hardware and software decrease slightly in favour of services,” says the report.Internally, insurers are under pressure to compete with the rest of the “21st century service economy, which is used to real-time transactions and rapid information flow, in dealing with both customers and distributors” On average, 63% of firms’ IT budget goes to maintenance. “Nevertheless, the 2006-growth in IT spending of new investments is expected to be nearly double that of maintenance,” the report continues.The report suggests that the industry is moving towards a 60-40 average split in maintenance versus new projects.