The financial services sector continues to be a leading investor in customer-focused technology. In a recent report, “IT Spending on Customer Knowledge Technologies,” TowerGroup contends that companies are spending $5 billion worldwide on such technologies – a figure that will rise to $7.1 billion by 2008.
“The enduring strength of the CRM concept will continue to produce value for financial institutions around the globe in 2004,” said Kathleen Khirallah, senior analyst in the Retail Banking practice at TowerGroup and author of the research. “The race to acquire, retain, cross-sell and maximize the value of a customer base may have diminished in media visibility, but not in importance to financial institutions.” 
She claims that over the past few years spending has shifted away from “customer knowledge” investments toward “customer interaction” technologies (including all bank delivery channels). TowerGroup divides customer knowledge technologies into five subcategories: data repositories, data manipulation and business intelligence, decision support, sales support systems, and specialized marketing.
Data repositories, the largest subcategory, is expected to grow from $1.737 billion in 2003 to $2.335 billion in 2008, at a 6.1 percent CAGR. Business intelligence applications, including data mining query and reporting tools and online analytical processing tools, are forecast to grow at a 5.1 percent CAGR from $867 million in 2003 to $1.113 billion in 2008. Decision support applications, including multiple applications for customer profitability, predictive modeling, decision engines, real-time decision engines, and optimization, is expected to grow at a 7.5 percent CAGR from $1.095 billion in 2003 to $1.570 billion in 2008.
Within commercial banks, the three major IT spending categories include customer knowledge technologies, customer interaction technologies and core processing systems. Customer knowledge technologies represent 6% of total IT spending, while customer interaction represents approximately 40% and core systems 50%.
Unfortunately, the report doesn’t attempt to measure the relative payoffs associated with spending in each category. There is presently a fair amount of debate revolving around whether one should invest limited IT resources in analytical or operational systems. What’s clear is that money will continue to be spent. “As long as banks expect that growth in their institution will occur organically, customer knowledge technologies for CRM will continue to garner IT investment,” Khirallah added.
