INTRODUCTION

The Banking, Financial Services, and Insurance (BFSI) industry has been the largest adopter of global services and was key to the rebound in the global sourcing market post the recession. Growth objectives post the economic recession, advent of new technology paradigms, and the desire to create a globally integrated multi-channel environment are placing demands on financial institutions to ensure that their applications portfolio is aligned to industry best practices and is future-ready for this rapidly evolving industry.

As financial institutions strive to maintain and modernize their applications portfolio, they are consolidating their IT service provider base and are signing larger and more strategic AO deals with a fewer number of service providers – a phenomenon that has the potential to meaningfully alter the BFSI AO services landscape.

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:

• ITO trends in the BFSI segment
• Market trends and activity for large Banking AO relationships
• Drivers for change and future outlook for Banking AO
• Implications for banking buyers and service providers

The focus in 2012 is also to capture the key movements in volumes/values 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, wholesale banking, credit cards, loans and mortgages); excludes capital markets and insurance
• Services: Large (TCV >US$25 million), multi-year (>3 years), annuity-based applications outsourcing
• Geography: Global
• Sourcing model: Third-party AO deals; excludes shared services or captive

CONTENT

This report is structured across three key sections, each containing insights on application outsourcing in 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, scope)
  • Market activity and adoption trends (e.g., by geography, sub-verticals, functions)

• Banking AO market overview: Analysis specific to the Banking AO market with a focus on large transactions:
  • Transactions activity and growth trends
  • Demand characteristics for Banking AO services by geography, line of business, AO sub-functions, and buyer size
  • Offshore leverage
  • Global delivery locations
  • Renewal activity and pricing trends

• Emerging themes and implications: Analysis of emerging trends and their influence on the future of Banking AO:
  • Factors altering the demand profile for banking AO
  • Major technology investment in the banking sector
  • Implications for key stakeholders – buyers and service providers

Some of the findings in this report, among others, are:

• While BFSI remained one of the largest verticals in terms of IT adoption, overall growth of IT outsourcing industry continued to be modest due to global economic pressures
• The total number of BFSI IT outsourcing contracts declined in 2011 (over 2010); while the total value of contracts remained almost flat
• Banking dominated the absolute number of ITO deals signed, however, its percentage contribution declined in 2011. Capital markets subvertical witnessed significant growth in its deal volume contribution in 2011
• Europe is the most active region in BFSI ITO; AO is in scope in majority of all BFSI ITO transactions
• The market for large banking application outsourcing continued to grow at a sluggish pace; Retail and commercial banking segments led the transaction activity among banking lines of business (LoBs)
• Small and mid-sized banking firms drove the demand for application outsourcing in the banking segment
• In terms of pricing structures, 2011 witnessed increased adoption of fixed-price deals
• Managing regulatory complexity, new customer acquisition, existing customer retention and innovation in product offerings to expand top-line are the key priorities for most banks as the industry looks to recover from the effects of the slowdown