IT spend in BFSI vertical is expected to reach USD 3.5 billion by FY 2014: Study by Zinnov

Top Quote The study provides a detailed analysis of the different opportunities, challenges and scope related to IT spending and technology adoption in the BFSI sector that is contributing to 8% in Indian GDP. End Quote
    Quote IT spend in BFSI vertical is expected to reach USD 3.5 billion by FY 2014, growing at a CAGR of 13% Quote
  • (1888PressRelease) June 14, 2012 - New Delhi, Zinnov, a leading Globalization and Market Expansion Advisory firm, today released its latest study on 'IT adoption in BFSI sector in India', which covers market conditions and sentiments that drove IT spending in the Banking, Financial Services and Insurance (BFSI) sector in FY2012 and predictions on the trends moving forward. The study highlighted the growing maturity of Indian BFSI organizations in IT adoption, as technology is seen as a driver of business value. Technology firms have great potential to explore in the BFSI sector, which contributes to eight per cent of India's Gross Domestic Product.

    Key findings:
    - India's domestic IT spends is valued at USD 30.4 billion, out of which BFSI sector contributes to 11.1% share: the sector is fast growing in terms of IT investment
    - IT budgets as a percent of revenues for BFSI is estimated at 1.5%- 2%; regulatory compliance a key driver

    India is a fast growing IT market and the BFSI vertical contributes to 11.1 per cent of the overall 30.4 billion domestic IT spend, according to the Zinnov report. Indian firms made the maximum investment in hardware products, with 53 per cent spend set aside for this category, followed by IT services (32%) and software (15%).

    The Indian banking industry is returning to rapid growth after a slow growth phase during the economic downturn, with aggregate deposits and bank credit demonstrating linear growth. In addition, innovative products and platforms such as virtual debit cards and mobile banking, rapid geographic expansion plans, centre's focus on financial inclusion and the entry of foreign banks are spurring renewed investments in India by the BFSI sector.

    Regulatory compliance foremost driver in IT adoption
    The Zinnov report found that growing business requirements are driving rapid adoption of IT in the BFSI sector. According to the study, the key growth drivers include regulatory compliance needs, desire to improve internal/operational efficiencies to better align business processes, support for growth strategies as internet and mobile banking gain focus, enhanced customer experience for competitive differentiation and creation of new business opportunities by extending reach to the unbanked population.

    In particular, changes in the regulatory environment, including guidelines and frameworks from the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI) and Insurance Regulatory and Development Authority (IRDA) aimed at enhancing security while ensuring transparency and encouraging transaction modes such as mobile and electronic transactions, have been an important factor in driving Indian BFSI institutions to adopt IT solutions.

    BFSI segment maturing from core banking to business-related technology needs
    Furthermore, BFSI segment is fast gaining maturity in IT adoption. The Zinnov study found that while just 10 per cent of IT spend was on modern IT solutions before 2008, the share has moved up to a significant 35 per cent at present. While large firms are moving up the growth curve from core banking applications to mobility/electronic payment solutions and targeted business-focused solutions today (such as loan management and treasury solutions), regional or smaller organizations in the sector who demonstrated minimal IT adoption in 2008 are increasing investments in core banking solutions and showing increased interest in cloud computing, revealed the study.

    Commenting on the study, Mr. Praveen Bhadada, Director- Market Expansion, Zinnov, said, "The number of BFSI specific IT deals in India has increased 600% cumulatively in the last 4 years and nearly 1/3rd of those deals are focused on modern technologies. The BFSI segment in India is demonstrating a definite inclination towards leveraging information technology to add real business value, as it moves up the IT value chain. Social, mobile and cloud computing have emerged as essential for next-generation services in the vertical and we are seeing increased traction for cloud/virtualization and business intelligence solutions. The gross margins for new IT implementation are as high as 25-40% for IT service providers. In this scenario, IT services providers in India have a huge opportunity, with potential to upsell, upgrade, customize and take advantage of the limited internal expertise within these organizations."

    However, technology adoption in the BFSI sector continues to face some challenges that need to be overcome to sustain the growth rate. The main roadblocks in IT adoption in BFSI sector in India are the lack of standardization of process and change management in public sector banks, limited internal IT talent and constrained budgets for smaller BFSI players, lack of success stories for emerging technologies like Cloud computing and increasing security threats with consumerization of IT.

    IT vendors have played a key role in maturing the banking sector through efficient and innovative technology solutions. Foreign companies continue to dominate the domestic IT market, with a 63% share as compared to 37% share of domestic companies in terms of overall IT service offerings to BFSI sector.

    About Zinnov
    Founded in 2002, Zinnov - meaning Zeal in Innovation - is a leading Globalization and Market Expansion Advisory firm, with specialization in areas like Global Sourcing, Emerging Markets Expansion, Human Capital Optimization, Small & Medium Businesses, Innovation, Cloud Computing and Enterprise Mobility. Zinnov provides advice to global leaders in business and technology and works collectively with them to tackle prevailing organizational challenges by analyzing changing dynamics, improving performance, and building institutional capability. The services delivered to its clients through advanced reasoning and analytical techniques, provides solutions that help in integrating organizational vision, business definition and processes.

    For further details, please contact:

    Dimple Mehta/ Nikunj Kewalramani
    20:20 MSL
    dimple.mehta ( @ ) 2020msl dot com/ nikunj dot kewalramani ( @ ) 2020msl dot com

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