Banking giant HSBC is increasing the amount it spends on IT innovation because of an expected $200m (£106m) reduction in operating costs.
HSBC’s global chief information officer (CIO) Ken Harvey told investors last week that the bank’s plan to cut 10 per cent from per-transaction operating costs is on track because of unprecedented IT investment.
‘We will now be spending less than half our money to run the shop, and the rest will be spent on innovation, new software and new deployment,’ he said.
Operating costs have decreased from 52 per cent of the IT budget in 2005 to an expected 48 per cent in 2007.
‘Every time you move operating costs down one per cent, that is $50m (£26m) that goes into innovation,’ said Harvey.
Investment in application development and innovation for global and regional systems has increased, he says, with further savings arising from 40 per cent of development taking place in countries such as India, which can offer a cost-competitive and reliable workforce.
Harvey says HSBC grew IT budgets by nine per cent during 2005-6, and expects a four per cent increase next year.
‘We have invested significantly in IT and we are now in the implementation and yield stage, so you will start to see a deceleration in spend,’ he said.
HSBC has achieved economies of scale and reduced operational costs by consolidating four global and two regional data centres.
‘Without the data consolidation programme we would now have 126 data centres,’ said Harvey. ‘We have reduced the cost of operation through standardisation and process improvement.’
The bank also saves operational costs by running systems on a proprietary global data network, which costs one-seventh of the equivalent public network.
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