 "Financial services defy IT trend")
According to a recent report by Everest Group, new large application outsourcing (AO) deals in the financial services space hit a record five-year high in 2015 when 54 new transactions with a contract value of $5.9 billion were signed. In volume terms, in was an impressive 45 per cent increase over the previous year while in value terms the rise was 25 per cent.
Everest Group is a consulting and research firm focused on strategic IT, business services and sourcing. The report said that the spending by the sector was largely caused by clients driving simplification of their business processes in order to turn more customer-centric.
The research firm also said that this growth in AO in the banking industry is reflective of the recovery in global banking, whose profitability hit an all-time high in 2015, recovering from the lows of 2009 in the aftermath of the financial crisis. The recovery was led by North America and China; however, the effects of the financial crisis can still be seen in Western Europe.
In a recent report, technology research and analyst firm Gartner had said that the worldwide IT spending in 2016 is expected to be flat as compared to negative growth last year.
Amid tightening regulations, macro-economic uncertainty and technological disruption leading to increased competition from non-traditional sources, banks are looking at new technology investments that yield cost savings and free up budgets to spend on change initiatives. The Everest report said simplification of systems and processes by the financial services businesses is expected to become a trend in 2016. Led by consumer demand for simplicity in financial interactions, easy-to-understand products and the demand for speed, banks are now faced with the challenge of dealing with the new-age consumer who is willing to switch her banking relationship more quickly than ever.
“Banking IT has become complex over the years, for a variety of reasons, not the least of which is a broad array of products that increases cost of sales and service,” said Jimit Arora, partner at Everest Group. “Banks need to move away from a product-centric view to a customer-centric view and provide a simple, easy-to-understand customer experience. This requires simplification across the bank, including shedding the burden of legacy systems and embracing new technologies.”
Banking, financial services and insurance (BFSI) is so far the largest vertical for the export-driven Indian IT services companies, accounting for over 40 per cent of the total revenues.