An increasing number of technology roles within banks are likely to be outsourced in 2009, as banks look for ways to slash costs.
Outsourcing of technology by financial firms will surge by 8% globally in 2009, according to forecasts from consultancy IDC Financial Insights.
The prediction forms part of its annual industry overview, which also suggests that banks will spend by 3.2% less on IT this year – the first contraction since Financial Insights began tracking budgets in 2002. To make matters worse, it predicts spending in the securities industry will experience the sharpest fall – slumping by 9.9% in the next 12 months.
Jeanne Capachin, VP banking at Financial Insights, says: “As financial institutions renegotiate contracts and vendors become more competitive to win new business, overall prices will decline, but volumes of new business in outsourcing will increase.”
Financial Insights says that business process outsourcing (BPO) and transactions processing outsourcing are on the agenda this year, but this could just be the tip of the iceberg.
Nick Mayes, senior consultant at Pierre Audoin Consultants, reckons banks will look to outsource IT infrastructure and that any expansion of data centres is likely to be taken on by third-party suppliers.
He adds: “Banks are looking more and more at packaged applications rather than customised in-house developed systems, and we’ll see an increased use of application management and maintenance from third-party organisations.”
In December, IBM signed a big ticket deal with Friends Provident, worth 200m, to provide infrastructure services over ten years. Friends Provident expects to save 6m a year.
Citigroup, meanwhile, last week sold its BPO unit to Indian software services provider Tata Consultancy Services for $512m. Fidelity made a similar move in mid-December.
Financial Insights says a growing number of financial firms will follow in their footsteps this year due to the increasing costs of running these functions.