In new research published today, TABB Group says that technology total cost of ownership (TCO) across capital markets firms is estimated to average as much as $461,000 per front office employee per year. Furthermore, TABB believes that IT executives lack a handle on what they are really spending on the tools in their technology toolkits, separate from explicit costs on invoices from their vendors.
The urgency for most capital markets firms to achieve a better understanding of their TCO has risen to the equivalent of a five-alarm fire, says Paul Rowady, a TABB principal and director of data and analytics (DnA) research, author of “Benchmarking TCO: Fueling the Debate.” Having specific metrics on TCO’s four primary areas of spending – hardware, software, data and human capital – is useful for evaluating the utility of existing solutions and more importantly for detailed comparison to new solutions, he adds. “This is imperative in a post global financial crisis (GFC) regulatory era.”
For this research, TABB examined SEC filings from ten tier 1 companies during the 2009-2013 period, including five US-headquartered, three European-headquartered banks and two US-headquartered asset managers employing a total aggregate 1.2 million people, spending a total aggregate $171.3 billion on compensation and benefits, and a total aggregate $28.4 billion on hardware, software and data in 2013 alone.
Based on calculations, TABB estimates that total technology spending for this sample was more than $114.1 billion in 2013, $85.6 billion of which – or 75.1% - is attributable to human capital costs. Based on how Rowady estimated staff category segmentation and usage intensity within those categories, the current benchmark for front office personnel per year was $461,222. According to Rowady, “It sticks out like a sore thumb relative to all other staffing categories.”
Writing this report for mid- to senior- level IT unit managers, CTOs, CFOs, CEOs and board of director members, Rowady says that how firms adopt new operating models and achieve continuous improvement in today’s “more-for-less ratios” will have everything to do with a combination of automation, rationalization, measurement, and specialization strategies.
The 27-page, 23-exhibit report is available for download by TABB Group Research Alliance DnA clients and qualified media athttp://www.tabbgroup.com/Login.aspx. For the Executive Summary or to order, write info@tabbgroup.com.