Indian banks to aggresively spend on IT services, software

by Sohini Bagchi    Aug 30, 2013

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At a time, when rupee depreciation is having a negative bearing on almost all industries, the Indian banking sector remains optimistic. In fact, they are looking to invest in technology with a renewed focus on profitability and enhancing customer experience. According to a recent Gartner report, the country’s banking sector will spend about Rs 41,700 Crore on IT products and services in 2013, 13% over 2012 where spending touched Rs 36,900 Crore.

Experts believe banks in India are currently going through an exciting time as far as their technology spending is concerned. Vittorio D’Orazio, Research Director at Gartner, said a focus on expansion and increasing market share remains a top priority for banks in India.  According to him, in the past few years IT has acted as a constant enabler in the massive transformation of the sector, helping banks to increase productivity, reduce cost through labor saving and boost profitability. This year too IT investment will remain a top priority for this sector.

In the next one year, the key areas of spends by banks will include IT services, software, data center management, mobile devices, analytics and telecom, says the report.

Focus on modernization

IT services will be the largest segment in the overall spending category that will account for Rs 13,100 Crore, representing an 18% increase driven by a strong focus on the finance sector from IT service providers. Indian banks will increase software spending by 17.1% with desktop software. The increase in the spending of enterprise resource planning (ERP), supply chain management (SCM) and customer relationship management (CRM) will exceed by over 20% this year, according to Gartner.

There will also be an increased interest in security software. “With online and mobile considered to be the future of the banking industry, banks have no other choice but to implement a robust and scalable security system in place to tackle these issues,” says R K Chhattani, DGM – IT at UCO Bank. He also mentions that banks should not only invest in security software, but also spend in training of internal staff as well as customer awareness program to improve online security in banks.

Apart from this, the need for modernization and optimizing legacy processes and infrastructure that support core banking functions will remain a priority. According to D’Orazio, the demand for banking specific software will continue to rise. “We also see increasing adoption of packages, especially for ‘lite’ core banking systems to address modernization and replacement,” he says.

Use of emerging technologies

Banks are currently focusing on emerging technologies such as cloud, mobility and analytics and the trend will be even more prominent in the coming months. According to Shrawan Kumar, General Manager – IT, Allahabad Bank, Indian banks are currently undergoing a lot of pressure to become more competitive and gain large customer bases, especially with The Reserve Bank of India laying new norms on the bank’s competitiveness with the use of strategic technology. “The increased competition alongside the increasing penetration of broadband and the growth in smartphone usage are driving the adoption of emerging technologies such as mobile and big data,” he says.

Research firm Forrester noted that mobile banking is a key focus area for Indian banks and that spending on banks on mobile-related services will grow by more than 25% in 2013. “Banks have to invest in mobile banking just to stay relevant to their customers, as customer retention, new revenues and brand differentiation are at stake, as mobile is increasingly becoming the de-facto standard of building relationships between banks and their customers,” says Manish Bahl, country manager at Forrester Research in a statement.

Finally, more banks will invest in big data and analytics technologies to make better use of the customer data available. Anil Kuril, Deputy General Manager-IT, Union Bank of India, believes big data will become a key basis of competition, underpinning new waves of growth and innovation. “The increasing volume and velocity of information captured by enterprises, the rise of multimedia as well as social media will fuel exponential growth in data for the foreseeable future. With the strategic use of big data analytics we can turn data into actionable insights,” he says.

Many believe, even though the sector is a little wary about big data adoption, as technologies keep advancing, banks will show a greater interest in this technology.