Digital Force Multiplier: A Cloud Adoption Story in Banking and Financial Services | Market Insights™
October 25, 2017
Digital Force Multiplier: A cloud adoption story in banking and financial services
Digital Force Multiplier: A cloud adoption story in banking and financial services
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:
***Download complimentary report abstract here***
Capital markets BPO (Business Process Outsourcing) is one of the fastest growing industry-specific verticals within the BFSI segment, with a market size of over $2 billion in 2016. Investment banking is the largest line of business within the capital markets BPO. Asset management, custody and fund administration, and brokerage are the other key lines of business in this space.
Enterprises typically look to partner with third-party pureplay service providers such as Cognizant, EXL, Genpact, Infosys, and TCS to remain competitive in the marketplace, and simultaneously manage their regulatory, risk, and cost concerns. But the BPO majors are facing stiff competition from specialist capital markets BPO providers such as Avaloq, eClerx, and Xchanging, which are more focused and have deeper domain expertise.
Against this backdrop, what pricing considerations should enterprises take into account when selecting a specialist or a pureplay Business Process Outsourcing provider?
Net-net, specialist providers, which at least as of today handle more high-value services, come at a higher price than their pureplay BPO peers. And, at least as of today, buyers appear ready and willing to pay this premium.
Enterprises in this space typically tend to value and favor specialists when it comes to finding a partner for their capital markets BPO operations. And they tend to be particularly selective, as most service providers – both pureplay and specialist— do not play in all the segments, but instead focus on building deep capabilities around one or two of the four key business lines.
Are you working with a pureplay or specialist provider in the capital markets BPO space? To what extent did pricing play into your provider selection? Do you think specialists have an edge over pureplay BPO providers in terms of capabilities?
High cost pressures, market uncertainty drive decline in application outsourcing deals and rise in vendor consolidation.
Capital market firms—which are operating under difficult market conditions, facing an increasingly complex regulatory environment and competing with aggressive new financial technology entrants—find themselves needing to invest in next-generation technologies while holding IT budgets steady, according to new research from Everest Group. This implies that the only plausible way to continue technological advancement will be to fund change initiatives with money saved by run-the-business initiatives.
“Capital markets firms are struggling with increasing costs, increasing regulation, and a period of low growth,” said Jimit Arora, partner at Everest Group. “In addition, technological advancement, especially digital, has created a new set of competitors that are not weighed down by the burden of legacy in their product portfolio, customer relationships and IT setup. The imperative for capital market firms is to focus on growth, profitability and managing risk, and their IT investment must be focused on cost optimization and improving the customer experience.
“As a result, the implications for IT service providers serving capital market firms are to tailor their offerings with next-generation technologies and offer utility-based services that help clients achieve their business objectives quickly. They also should look to collaborate with clients to invest in innovation and form alliances with leading platform providers.”
These recommendations and research findings are explored in two recently published Everest Group reports available at https://www.everestgrp.com/:
In the 2016 PEAK Matrix™ Assessment of IT outsourcing in global capital markets, Everest Group identifies seven Leaders among the 27 firms assessed: Accenture, Cognizant, HCL Technologies, IBM, Infosys, TCS and Wipro.
In addition, the report identifies five service providers—Capgemini, EPAM, Hexaware, Luxoft and VirtusaPolaris—as the Star Performers based on their positive forward movement over time in terms of both market success and capability advancements.
Other key findings in the reports:
IT Outsourcing in Global Capital Markets – Service Provider Landscape with PEAK Matrix™ Assessment 2016
With no rest for the weary, a wave of regulatory overhaul and technological disruptions made the first half of 2015 very busy for enterprises in the banking, financial services, and insurance (BFSI) sector. Indeed, rather than being an enabler of efficiencies and operations, technology is now the fundamental differentiator for banks to grow their revenue and increase market share.
To keep up with all the activity, Everest Group in the past six months published a number of research reports examining the health of the market, the service provider landscape, and the digital effectiveness of BFSI organizations.
Following are some key insights and highlights from our research.
So what is in store for the next few months? Lots! Our upcoming reports through the end of 2015 include:
Everest Group’s goal is to help ensure enterprises and service providers achieve maximum success from their sourcing initiatives. Thus, we encourage you to reach out to us directly with your questions and comments.
Jimit Arora, VP and Global Head of IT Services Practice, [email protected]
Aaditya Jain, Senior Analyst, [email protected]
Archit Mishra, Senior Analyst, [email protected]
Ronak Doshi, Senior Analyst, [email protected]
Capital markets BPO solution adoption by business line: investment banking, custody and fund administration, asset management, brokerage
©2023 Everest Global, Inc. Privacy Notice Terms of Use Do Not Sell My Information
"*" indicates required fields
