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 capital markets sector. We focus on:

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

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

Scope of the analysis

• Industry: Capital markets (investment banking, asset management custody and funds administration, and brokerage services); excludes retail and commercial banking, insurance (life, annuity, pensions, and P&C), and healthcare payers
• 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 capital markets 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)
• Capital markets AO overview: Analysis specific to the capital markets AO industry with a focus on large transactions:
  • Transactions activity and growth trends
  • Demand characteristics for capital markets AO services by:
    • Geography
    • Line of business: Capital markets (investment banking, asset management custody and funds administration, and brokerage services); excludes retail and commercial banking, insurance (life, annuity, pensions, and P&C), and healthcare payers
    • AO subfunctions
    • Buyer size
  • Offshore leverage
  • Global delivery locations
  • Renewal activity
  • Pricing trends
• Emerging priorities of buyers and key investment themes in capital markets AO:
  • Factors altering the demand profile for capital markets AO services
  • Major technology investment themes in the capital markets sector
• Outlook for 2013

Some of the findings in this report are:

• The BFSI IT market overview:
  • o The US$90 to 100 billion global BFSI ITO industry continued to grapple with a challenging business environment. While the number of BFSI outsourcing transactions remained almost flat, TCV declined 25% as compared to last year
  • o Capital markets is the smallest vertical in the BFSI ITO space but is witnessing increased adoption of outsourcing as it faces challenges related to evolving regulatory requirements and profitability pressures
• Capital Markets AO overview:
  • Overall, the capital markets industry saw the highest growth within BFSI in 2012. However, IT spending for large capital markets firms fell drastically during the year
  • Europe and APAC gained market share in terms of TCV for large capital markets AO deals. TCV share of North America and MEA declined during 2012
  • Fixed price and outcome-based pricing continue to gain prominence driven by buyers’ increased focus on effectiveness and search for new value levers
• Increasing operational efficiency, complying with regulations, enhancing/growing customer base, and expanding in emerging geographies are the key priorities outlined by capital market firms
• Social media, mobility, analytics, and cloud computing emerged as key technological themes for capital markets firms for the next 12-18 months