How Financial Firms Decide on Technology

(Abstract)

　　　
　　 The financial services industry is the major investor in information technology(IT) in the U.S. economy; the typical bank spends as much as 15% of non-intereste expenses on IT. A persistent finding of research into the performance of financial institutions is that performance and efficiency vary widely across institutions. Nowhere is this variability more visible than in the outcomes of the IT investment decisions in these institutions. This paper presents the results of an empirical investigation of IT investment decision processes in the banking industry. The purpose of this investigation is to uncover what, if anything, can be learned from the IT investment practices of banks that would help in understanding the cause of this variability in performance along with pointing toward management practices that lead to better investment decisions. Using PC banking and the development of corporate Internet sites as the case studies for this investigation, the paper reports on detailed field-based surveys of investment practices in several leading institutions.