Economic, Competitive, Regulatory Forces Lead to Rising Investments in Technology; Next Generation IT Solutions are a Key Investment Priority
DALLAS, July 3, 2013 — A declining market for Banking, Financial Services, and Insurance (BFSI) deals masks a fundamental shift in how large application outsourcing (AO) deals are procured and managed, according to a report just released by Everest Group, an advisory and research firm on global services.
The report, IT Outsourcing in Banking – Annual Report 2013, provides an overview of the AO market for the banking industry, through an analysis of AO contracts over US$25 million in total contract value and more than three years in duration. The report analyzes key trends in market size and growth, demand drivers, adoption and scope trends, emerging priorities of buyers, key investment themes and outlook with regard to large banking AO deals.
In 2012, BFSI buyers continued to remain under pressure to increase revenue, enhance customer experience, reduce costs, replace legacy systems, and meet regulatory requirements. To address these challenges, most banks focused on investments in next-generation technologies such as social media, mobility, big data and analytics, and cloud computing in order to enhance customer experience while simultaneously reducing their operational costs, better managing risk, and improving shareholder returns.
“As financial institutions gear up for new changes, they are making investments in next-generation solutions that enhance customer intimacy and drive efficiency,” said Jimit Arora, vice president of Everest Group. “As technology transformation becomes a key priority for financial institutions, the nature of AO contracts in this segment is witnessing a steady evolution.”
Findings in the report include:
- The US$100-110 billion BFSI ITO market continues to be the largest industry segment of the global ITO industry. While the number of BFSI outsourcing transactions remained flat, total contract value (TCV) witnessed a 25 percent decline as compared to last year.
- A majority of BFSI ITO deals originated from EMEA (Europe, Middle East, and Africa) while North America witnessed continuous decline in BFSI ITO deals over the past three years.
- Bucking the trend in the broader BFSI market, TCV specific to the Banking segment was at its highest level in three years despite flat transaction volumes. Outsourcing activity in retail and commercial banking declined in 2012. Outsourcing in the cards and lending business segments increased.
- Increasing profitability and improving customer experience are the most important objectives impacting the IT investment strategy for the banking industry in 2013.
- Social media, mobility, analytics, and cloud computing emerged as key technological themes for banks for the next 12-18 months.