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Predicting ITO in the BFSI Sector
ID: ERI-2010-4-W-0458
Soumit Banerjee, Yugal Joshi, Chirajeet Sengupta, Ross Tisnovsky
12 pages
Executive Summary
With recent business events signifying an inflexion point in the fortunes of the Banking, Financial Services and Insurance (BFSI) industry, significant opportunities for IT outsourcing (ITO) are predicted. While the economic recovery is still not complete and concerns around a potential W-shaped recession remain alive, the prevailing mood is one of cautious optimism.
As organizations recover from a tough business environment, a combination of factors will likely drive ITO activity:
- Changes in senior management
- Increased cost pressures
- M&A activity and the need to realize scale opportunities within the IT organization of firms
- In many cases, regulatory pressures to perform and the spectre of government funding rollback
In essence, for the recovery to be complete, BFSI organizations will likely be faced with increased pressures to stay competitive. This is likely to trigger a fresh look at IT structures and the potential for outsourcing.
Such an outlook is borne out by the fact that ITO suppliers are increasingly reporting the BFSI sector as the source for deals – for both Application Development and Management (ADM) and Infrastructure Outsourcing (IO) segments. As an example, the sector’s contribution to Infosys’s revenues jumped from 33.6% (Q109) to 36.1% (Q110). Analysis of top ITO deals for the year 2009 also shows a similar trend. The contribution of the BFSI sector to IO deals grew from 16% (2008) to 22% (2009) for multinational corporation (MNC) suppliers and from 27% (2008) to 38% (2009) for offshore players. Corresponding numbers for the ADM tower were 21% to 30% for MNCs. However, the share of the BFSI sector‘s contribution to top ADM deals for offshore suppliers fell marginally from 35% to 34% over 2008-09.
However, with individual deal sizes contracting, suppliers will have to generate greater efficiencies in their targeting mechanisms. This research suggests that ITO events can be predicted as an outcome of Business Events (BEs), both in terms of likelihood and timing, with a 40 percent improvement in the accuracy of the targeting mechanism.
This paper discusses:
- How the current scenario in the BFSI sector is prone to increased ITO activity
- The need for ITO suppliers to have an efficient targeting mechanism to capitalize on the BFSI opportunity
- How to analyze business events to successfully predict the likelihood and timing of ITO activity
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