Technology will help improve the health of the banking sector

Thursday, 6 May 2010

The banking and financial landscape has changed unreservedly over the past 18 months. For the banks that did survive, the pressure to cut costs further and drive through greater efficiencies in order to keep surviving is more intense now than ever before. Change is still afoot for many companies in the financial sector and for many this will mean an internal restructuring of systems, processes and infrastructure.

However, banks and financial firms will want to ensure their portfolios are healthy and their customers needs are met. For many companies, technology spend will not be at the top of the list. For this reason, it’s important for the sector to understand which technology options do not require significant capital investment, but will deliver real benefits in terms of cost savings and efficiencies. Prudent investments in efficient technologies will help banking and finance companies to focus on their business. Independent IT analysts at Gartner are forecasting that worldwide IT services funding will see a 4.5 per cent increase from 2009, with managed services set to be a strong recipient of this increase. Gartner reports that the prospect of greater economic stability and possible recovery will likely drive an uneven pace of advancement by vertical market. So far in 2010, IT spend in financial services has seen the most dramatic increase of any sector compared with 2009 IT budgets.

But more and more companies are realising that new technology models such as managed services will help them survive and grow in tough economic conditions.

Leading industry analysts at Forrester Research predict that in addition to the recent crisis, macro-economic factors, including rapid technology evolutions, a coming investment wave in information technology, and market constraints on capital, managed services is expected to have a bigger take up for companies operating in this sector.

Ravi Pandey, Senior Vice President and UK Head of NIIT Technologies says: “Companies are rapidly becoming aware of the commercial empowerment offered by the opportunity to release the cost burden of managing their IT operations internally, the added headache of investing in equipment and facilities, and the pressure of managing these rapidly evolving capabilities.” Companies are using managed services to manage these risks more efficiently and cost-effectively to safeguard against these rapid changes. The focus is on agreeing beforehand with the supply partner the efficiencies required for a smooth functioning of the business and then devising a contract to ensure those efficiencies are delivered. There is evidence that the nature of contracts is moving towards ‘transaction based pricing’ models with a greater share of ‘risk-reward’ element in the contract itself.

Pandey predicts: “We are sitting on the cusp of a technological investment cycle; despite the current economic crisis, as the IT industry enters a growth and innovation cycle, the challenges faced by the sector will place serious capital constraints on companies, which could potentially inhibit growth. Managed services allow businesses to concentrate on business decision and increasing revenue, not on IT management. Companies using managed services are reporting simplified operational management, improved quality and reliability, cost reductions and greater efficiency.”

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