Artificial intelligence, cloud, blockchain technologies driving digital disruption of capital markets ITO industry.
Capital market IT outsourcing (ITO) deals experienced double-digit growth in 2016; legacy modernization and adoption of digital technologies drove a 29 percent increase in the number of capital market ITO deals, with the average total contract value rising 23 percent, according to Everest Group.
Technologies such as artificial intelligence (AI), cloud and blockchain were key components of digital adoptions. The demand for virtual assistants, automated investment advisory capabilities, and improved agent/broker and customer experiences drove a 64 percent uptick in the number of capital markets ITO deals that included AI in their scope. Similarly, the impetus to improve agility and reduce costs led to a 47 percent surge in cloud-based initiatives in capital markets ITO deals.
Another major driver of capital market ITO deals in 2016 was risk and regulatory compliance initiatives. These saw a 58 percent increase over 2015, largely attributed to an overall tightening of regulatory grip in the capital markets industry, especially in Europe.
“Everest Group anticipates that the capital markets IT outsourcing market will grow modestly in the next 12 months, as many of the trends we have documented in 2016 continue,” said Ronak Doshi, practice director at Everest Group. “Risk and regulatory compliance will remain a primary focus; deal sizes will shrink as enterprises demand cost-reductions through automation; and artificial intelligence, cloud, and blockchain technologies will drive the next wave of digital disruption.”
These recommendations and research findings are explored in “Simpler, Smarter, and Seamless Capital Markets – The Digital Revolution: Capital Markets ITO Annual Report 2017.” This report examines the global activity and trends in the capital markets segment and the implications for enterprises and service providers.
Other key findings:
- Brokerage and investment sub-vertical witnessed an increase in transaction activity, led with a central theme of adopting digital to enhance the front-office user experience.
- The capital markets industry witnessed a decline in demand for traditional IT application development and maintenance service while the demand for consulting and integration services surged in 2016.
- Asia remained the most lucrative destination for application outsourcing service delivery, despite improvement in the cost effectiveness of Central Eastern Europe and Latin America owing to currency depreciation.
- The capital markets vertical witnessed a significant increase in the number of small-ticket size and short-duration deals in 2016.
- Deals over US$14 billion will be coming up for renewal in the next four years.
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