INTRODUCTION

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 transforming themselves and increasing investments in technologies (such as social media, mobility, big data & 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 these changes, they are looking to identify strategic partners that can help them develop solutions that drive efficiency and sustain the pace of technological advancement in this rapidly-evolving industry. In addition, with the continued trend towards consolidation, financial institutions are signing larger and more strategic AO contracts with a fewer number of service providers, a phenomenon that is expected to meaningfully alter the AO services landscape in the BFSI segment.

In this research, we analyze the current trends and the future outlook for large, multi-year application outsourcing relationships for the global banking sector. We focus on:

• Trends in AO in the BFSI segment
• Market trends and activities for large AO relationships in banking
• Emerging priorities of buyers and key investment themes in banking AO
• Outlook for 2013

The research also captures key movements in volume/value of banking AO transactions, evolving trends, market dynamics, and emerging priorities of buyers in the last 12 months.

Scope of the analysis

• Industry: Banking (retail banking, commercial banking, credit cards, loans, and mortgages); excludes capital markets and insurance
• Services: Large (TCV > US$25 million), multi-year (>three years), and annuity-based application outsourcing
• Geography: Global
• Sourcing model: Third-party AO transactions; excludes shared services or Global In-house Centers (GICs)

CONTENT

This report is structured across three key sections, each containing insights on application outsourcing in the BFSI and banking sector, with a specific focus on large-sized contracts:

• BFSI ITO market overview: Analysis of the overall BFSI IT Outsourcing (ITO) market and transaction trends:
  • Market size and growth
  • Adoption drivers
  • Transaction characteristics (e.g., transaction volumes, value, frequency, and scope)
  • Market activity and adoption trends (e.g., by geography, subverticals, and functions)
• Banking AO overview: Analysis specific to the banking AO industry with a focus on large transactions:
  • Transactions activity and growth trends
  • Demand characteristics for banking AO services by:
    • Geography
    • Line of business: Banking (retail banking, commercial banking, cards, loans, and mortgages)
    • AO subfunctions
    • Buyer size
  • Offshore leverage
  • Global delivery locations
  • Renewal activity
• Emerging priorities of buyers and key investment themes in banking AO:
  • Factors altering the demand profile for banking AO services
  • Major technology investment themes in the banking sector
• Outlook for 2013

Some of the findings in this report are:

• The BFSI IT market overview:
  • 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 almost flat, TCV witnessed a decline as compared to last year
  • 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
• Banking AO overview:
  • Overall, the number of large application outsourcing deals remained almost flat in banking, while the value to total contracts increased significantly in 2012
  • Demand for application maintenance services increased, as banking buyers continued to focus on cost containment
  • Outsourcing 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