Everest Group PEAK Matrix identifies 5 Leaders in the Banking AO market; vertical expertise becoming critical to service provider differentiation

DALLAS, June 15, 2011 ─ In line with the broader, post-recessionary IT Outsourcing (ITO) trend, large banking Application Outsourcing (AO) transactions have revived to dominate the BFSI (banking, financial services and insurance) ITO market, according to Everest Group, a global consulting and research firm. A one-hour webinar will be held June 29, 9 a.m. CDT, to present study findings and insights about banking AO market trends and the service provider landscape.

According to Everest Group’s study, BFSI Outsourcing: IT Applications in Banking – Trends and Future Outlook, almost 60 percent of active BFSI AO deals are comprised of large-sized contracts valued upwards of US$25 million. Most large banking AO deals continue to be structured around application development, ongoing enhancements and maintenance. The BFSI ITO market, estimated by Everest Group at US$72-80 billion, has seen deal volume and total contract values (TCV) of deals increase while average deal duration has remained stable over the past few years.

In a companion study, BFSI Outsourcing: Application Outsourcing in Banking – Service Provider Landscape, Everest Group examined the performance and capabilities of BFSI AO service providers. More than 20 leading performers earned positions on Everest Group’s Performance/Experience/Ability/Knowledge (PEAK) matrix, led by five PEAK Leaders – Accenture, Cognizant, IBM, Infosys and TCS  – that collectively account for 70 percent of active annualized contract value (ACV) of large banking AO deals. PEAK Major Contenders are Atos Origin, Capgemini, CGI, CSC, Dell Services, HCL, HP, Polaris, Syntel and Wipro. PEAK Emerging Players are Hexaware, ITC Infotech, L&T Infotech, Luxoft, MindTree, Ness and Softtek.

“Managing growth and complexity, focusing on profitability by cost management and improving the customer experience are the key drivers for the banking AO market,” said Amneet Singh, vice president – Global Sourcing. “Key emerging technology investment themes in the banking AO space include mobility, social media, channel integration, risk management and regulatory compliance.”

Highlight observations of the banking AO market and its service provider landscape include:

  • North American banks sign fewer but larger deals compared to European banks.
  • Retail banking is the most active user of AO compared to other banking lines of business such as cards, lending and commercial banking.
  • A notable decline in offshoring occurred during the recession, but offshore leverage is back to pre-recession levels.
  • India dominates in offshore delivery; Brazil and China are emerging locations for Banking AO.
  • While global and offshore service provider majors focus on their broader presence across various geographies and serving multiple clients, Tier-2 Indian providers focus on growing their share within specific accounts. Regional players, expectedly, are successful in serving clients in target geographies or regions.
  • M&A activity is expected to accelerate among the PEAK Major Contenders and Emerging Players with a potential to reorder the PEAK positions.

With the return of the BFSI ITO market to pre-recessionary levels, new and emerging demand drivers and nearly US$10 billion of banking AO contracts due for renewal this year through 2015, service providers are intensely competing for share.

“The evolving service provider landscape in banking AO services provides a diverse set of options for banking majors. Buyer-driven portfolio consolidation, service provider M&A, and a rapidly advancing technology environment will drive further evolution in the service provider landscape,” said Jimit Arora, research director. “Service providers need to demonstrate deep domain skills and develop micro-vertical expertise to achieve differentiation and success in the banking IT applications outsourcing market.”

This year, Everest Group is releasing 15 BFSI outsourcing reports focused on ITO and BPO themes. This includes nine reports on AO: market trends and outlook, service provider landscape and service providers’ profiles compendiums for AO in banking, capital markets and insurance. Everest Group’s research studies are based upon analysis of about 350 large, multi-year BFSI AO contracts and ongoing analysis of more than 20 leading service providers.

The webinar will be held June 29, 9 a.m. CDT; 2 p.m. GMT Standard Time. To register, please visit: research.everestgrp.com/Events/Webinars.

For more information about the reports, BFSI Outsourcing: IT Applications in Banking – Trends and Future Outlook and BFSI Outsourcing: Application Outsourcing in Banking – Service Provider Landscape or other BFSI outsourcing research and services, please visit research.everestgrp.com, email info@everestgrp.com or call +1-214-451-3110.