Calculator: Estimated I.T. Spending for Banks

Calculator: Estimated I.T. Spending for Banks

Paul A. Strassmann

How much cost cutting should JP Morgan Chase do? Banks include their technology expenses in their audited financial statements. In the case of JP Morgan Chase, theses expenses grew from $2.18 billion in 1999 to $2.84 billion in 2003.

Comparable data was obtained for Bank of America, Citicorp, US Bancorp, Wachovia, Wells Fargo and other banks. This model “explains” the banks’ I.T. spending levels after taking into consideration how the banks differ in revenue, profit, salaries, assets and head count was then constructed.

Compared to 30 other technology budgets (i.e., five years of data for each of the six banks), JP Morgan Chase should be spending $2.11 billion—in 2003. Its spending should not be any higher than in 1999.

Only a drastic restructuring in the bank’s organization can reduce that huge disparity. One step is to cut way back on technology spending, whether to ibm or to an in-house staff. Or both. In any case, the bank’s own excessive spending is what really doomed the IBM outsourcing contract.

Download this calculator to enter your own estimates and see if your retail bank is over or underspending on information technology.

Copyright © 2005 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in Baseline.