INTRODUCTION

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Strained revenue growth, low interest rates, rise of the digital consumer, and growing pressure of regulatory compliance continued to adversely affect the profitability of banks in 2013. This forced global banks to rethink and reinvent their business models as well as technological priorities. As a result, 2013 saw strong return of discretionary spend – led by investments in development of specific applications for regulatory compliance, risk management, channel-specific initiatives (social, mobile, etc.), and customer analytics.

Consequently, the service provider competitive landscape is also intensifying. Service providers continue to ramp up their capabilities, invest in innovative technologies, form alliances, and acquire strategic targets to address the growing and complex technology needs of banks and financial institutions.

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 activity for large AO relationships in banking
• Emerging priorities for buyers and key investment themes in banking AO
• Future outlook for 2014-15

The research also captures 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, 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:
• Transaction 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:
• Market dynamics and emerging priorities across the banking ecosystem
• Key investment themes
• Outlook for 2014-15

Some of the findings in this report are:

• The BFSI IT market overview:
• The US$105-130 billion BFSI ITO market continues to be the largest industry segment of the global ITO industry. The number of BFSI outsourcing transactions witnessed a significant increase, which was driven by a resurgence in demand; TCV also registered a strong growth
• Majority of the BFSI ITO deals originated from EMEA (Europe, Middle East, and Africa). All the geographies witnessed a strong surge in deal activity
• Banking AO overview:
• Overall, both the number of large application outsourcing deals and their TCV witnessed a strong growth in 2013
• North America was the dominant signing geography (both in terms of number and TCV) for large banking AO deals in 2013
• Mid-sized retail banking firms in North America accounted for the majority of banking AO TCV in 2013
• Structural cost reduction, maintaining a steady risk profile, enhancing customer centricity, and business control were key business priorities for global banking firms in 2013
• Key technology implications of these business priorities were: industrialization of IT solutions, customer analytics and insights, IT transformation, data management, and risk management