In December each year I consider the possible impacts on our industry for the upcoming twelve months. Sometimes these are serious observations and occasionally they are frivolous.
Given where we are in the stream of time, and what the world continues to go through, it has been a struggle to see the future with any clarity. Another lockdown is imminent, government intervention again will be needed, taxation is the route to government revenues, inflation is rife with broken supply chains and the world is tired – very tired.
The 2022 scenario is precarious and considerations of the macro environment need to be pondered deeply and with respect.
Over the last 15 months we have seen an arms race to digital transformation in many financial markets sectors. This, in turn, has led to a war for talent and higher levels of innovation. However much like government intervention, there are limits to the investment funds available. Over the last six months we have seen (in our microcosm) a split in the industry. Sell Side banks have made considerable investments towards the end of 2020 and into Q3/2021, however this appears to now be flattening. Not a surprising event given the work is now moving into more of a maintenance mode. On the other hand, we have seen substantial additional investments being planned from Q4/21 into 2022 and beyond for Buy Side organizations, in particular within wealth management. There are also several major investments in flight or being planned in the CRM space in banking.
Overall, we see technology budgets for 2022 being down in sell side by perhaps 5% in 2022 compared to 2021 but still considerably up from 2020. For buy side the budgets seem to be higher. That said our conversations have shown more disparity this year than at any other time in our 15 year history, reflecting the uncertain nature of the economic environment. Indeed, I feel that budgets will be adapted to profits more readily in 2022 than in previous years, so get ready for in-year change. FinTechs however have an avalanche of cash available from private equity and VCs who can find little return for it outside of direct investment. So, if you feel you have the skills and innovative mind to disrupt the market now is the time.
So, what will the money be spent on:
Increased costs for the same work. Shocking I know and not what anyone wants to hear. However, since you created this war for talent it now needs to be paid for in increased salary costs. Expect anything from 5 – 10% across the board.
Things that touch the client. When the pandemic hit, people were content to follow the rules. Now patience has worn thin and complaining is the order of the day. In some places this has already led to protesting and the negative ambiance will influence customer perception about your services. True CRM will be vital along with its cousin data mining.
Being Fresh. You know how you feel when taking a long shower for the first time after a few days of illness? That is how people want to feel in 2022. The way to freshness however is not to change colour or adjust your logo, it is to be fresh. New services, new products, a new spirit of adventure. There are so many possibilities here and the FinTechs are already winning ground. Are you offering Micro-investing yet? Can I split my restaurant bill with a single click yet? How do I help my customers care for our beautiful planet? What am I telling my customers about Crypto and NFTs?
Where increased costs will keep the lights on and things that touch the client will mitigate churn, it is being fresh that will drive additional market share.
These are truly unique times and 2022 will be a landmark year. It is our hope that these few words of insight might be of some use to you as you consider your own organization’s plans for the coming year. Oh …… and please do let us know if you agree or where we are mistaken!
Written by Terry Boyland, CEO of CPQi